Freight Facility Location Selection: A Guide for Public Officials (2001) / Chapter Skim
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From page 55... ...
Thischapterhighlightsforpublicofficialssomeoftheaspectsofthat changing landscape that they need to consider, or of which they shouldatleastbeaware. Changing role of the freight facility Transportationandlogisticsaredynamicbytheirverynature.Freight isalways inmotion,and themeansofaccommodating thismotion evolve constantly. Changes in modes, connections betweenmodes, andthesize,function,andlocationofthoseconnectionsareallpart ofthechanginglandscapeoffreightmovement.
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From page 56... ...
However,congestionattheseportsandriskmanagementbysupply chainoperatorsforcedsometraffictocometoNorthAmericafrom theoppositedirection,bywayoftheSuezCanal,ortocontinuetothe AtlanticCoastthroughthePanamaCanal.Thissubsequentlyresulted in newexpansion inNorfolk,VA, andSavannah,GA,which those facilitiestookparticularstepstoencourage.GrowthoftheGulfand Atlanticportsisexpectedtocontinue.ThecompletionofthePanama The trend towards freer trade and the corresponding global sourcing of products has arguably had the largest single impact on freight facilities and distribution networks in recent times.
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From page 57... ...
Freight Facility Location Selection: A Guide for Public Officials 57 Canalexpansion in2014willallow fast,all-water routes tomore majorconsumptionzones. Sourcingdecisionsintoday'seconomicandpoliticalenvironmentare influx.Overseasproductionseemsunlikelytodiminish.Infact,itcould be speculated that the American transformation to a "knowledge economy"necessarilyresultsinknowledgeableworkerswhodemand high-quality, low-cost products fromglobal sources. Nevertheless, the growing concern regarding fuel and carbon costs (discussed below) couldsuggest"nearshoring"(productioninlowercostareasof MexicoorCanadatoreducebothlaborandtransportationcosts)
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From page 58... ...
Freight Facility Location Selection: A Guide for Public Officials58 Fuel costs and environmental factors Startingintheearly2000s,fuelcostsgrewsignificantlyfasterthan the overall rate of inflation (as measured by the consumer price index) .Gasolineanddieselpricespeakedinthe$4.50pergallon range,and,in2008,manytruck-reliantfreightbusinessesfoundthat theyhadspenttheirentireannualfuelbudgetsbymidyear.
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From page 59... ...
Freight Facility Location Selection: A Guide for Public Officials 59 goodslongerdistances.Putanotherway,itbecomesmoreefficient toconsolidatewarehouseanddistributionoperationswhenfuelcosts arelowandthecosttoshipgoodslongdistancebytruckisrelatively inexpensive.However,higherfuelcostshavepushedsomefreightdependent companies to investigate more dispersed distribution networks,with largernumbersof smaller facilities. Thesefacilities reducedistancesfromthecenterstothefinaldeliverypoints,which arethemostdispersedandtruckdependent,andallowconsolidated carriageinboundtothedistributioncentersbyarelativelysmaller numberoflong-haultrucks,orbyrail.Thismethodtrimstransportation costswhileboostingfacilityexpenses.Duringthefuelspikein2008, supply chain designers began considering a larger number of smaller-footprintfacilitiessituatedclosetobigcities,preferablywith highdegreesofautomation,offeringshortcommutesforlaborand shortdistancestoproductdelivery. The same set of behaviors also tends to reduce environmental impacts,becausefuelefficiencyandcarbonefficiencyarepositively correlated.Thisisimportantascurrenttrendsarebeginningtoplace moreweightongreen/carbonevaluationcriteria. Accordingtoonelogisticsmanager,approximatelyone-thirdtoonehalfofhiscustomersarerequestingmeasurementofgreenand/or carbonfootprintdata.RailcompaniessuchasBNSFandintermodal operatorslikeJBHuntnowprovidetheirclientswithinternet-based "carbon calculators" to estimate the impact of specific shipping decisions, underscoring the fuel consumption and carbon emission advantageoflong-haulrail.Whileadifferentlogisticsprofessional describedcustomerattitudestogreeningasmostly"waitandsee," the fact that an influential company like Wal-Mart now expects carbonreductions from itsvendorswould tend to indicate that the requirementislikelytospread. Theeffectofcarbonmonetizationonsupplychaindesignwouldbe identicaltothatofhigherfuelprices.Monetizationisessential,so thatacarbonfootprintcanthenbeconsidereda"realcost."
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From page 60... ...
Freight Facility Location Selection: A Guide for Public Officials60 A complicating factor in the site selection approach described in preceding chapters is the fact that companies approach the locationselectionprocesswithvaryinglevelsofsophistication, comprehensiveness,andcollaboration.Also, insomecasesthe locationprocessmayberunbyeithertherealestatedepartment or the logistics department, with little input from other aspects of the company. Thus, sometimes rent and occupancy might take more precedence in the location selection, while in other cases, transportation costs and logistics may dominate the evaluation of locations. Likewise,thepresenceofaspecificthird-partylogistics(3PL) partner might dictate a location which otherwise does not meet objective strategic goals. Typically, logistics and supply chain departments may report throughoperations to the chiefoperatingofficer,and realestatemayreportthroughfinancetothechieffinancialofficer. Eachdivisionmayhaveindividualperformancemeasurementcriteria thatdonotadequatelyreflectoverallcorporategoals.Integration ofthetwochainsofcommandmaynotoccuruntilhighercorporate levelscompelanoptimumresult.Thesesituationsreflectcorporate culturethatisnotfullyalignedintermsofoverallvisionorgoals.
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From page 61... ...
Freight Facility Location Selection: A Guide for Public Officials 61 Transportation network congestion Networkcongestion forallmodes impacts freight facility location decisions. Most modes have at least one identified trouble point. For example, containerized ocean shippers may view Southern Californiaportsasanareaofconcern.Railfreight experiences difficulty in major urban areas, at the interface point between Class I railroads, or betweenClass I railroadsand short line carriers. Truckcarriersexperiencedifficulty inanynumber ofurbanmarkets. costvis-à-vischangesintheoperatingenvironment.Theyareable to evaluate huge numbers of scenarios, allowing corporations to determinetheidealnumber,size,andlocationfordistributioncenters andcross-dockfacilities. However, while these models are precise and can allow for the manipulation of huge amounts of data, they are limited in that theycan'taccuratelyrepresenton-the-ground localdetails suchas trafficcongestion,inefficienthighwayinterchanges,ordelayrelated to transferpointsbetweenmodes. Additionally, thesemodelsare largely staticand cannoteasily incorporate future changes to the network or its capacity. As an example, a one-hour drivetime analysisforasiteontheoutskirtsofamajormetropolitanareawill usuallyshowthatatruckcantraveljustasfarintoandthroughthe cityasoutwardfromthecity.Anyonewhousesthissameroadway networkduringthemorningoreveningcommutemightsuggestthat travelwillbeeasierinonedirectionandconsiderablymoredifficult intheother. While computer models are powerful, useful, and increasing in sensitivity, theyare not yet (norare they likely tobe)
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From page 62... ...
Freight Facility Location Selection: A Guide for Public Officials62 Competition with other types of development Freight users in some cases are prohibited from locating in ideal freightlocationseitherduetolanduseprohibitionsorconflicts(real oranticipated) withsurroundinguses.Inmanycases,landthathad previouslybeenusedforfreightmovementhasnowbeenconverted to commercial, retail, or even residential use. The remaining developableindustriallandbecomessubjecttoincreasedlimitations duetoconflictwiththenewlanduses. One example of this trend is the federal government's decision to expand military and associated operations at the Aberdeen ProvingGround and Ft. Meade inMaryland as a result of Base RealignmentandClosure(BRAC)
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