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10 What Is Freight Transportation? Simply defined, freight transportation is the movement of goods from one area to another. Freight transportation allows production and consumption to occur at different locations. Transportation is necessary for economic specialization. Freight transportation allows companies to (1) specialize in produc- ing the products for which they are best suited and (2) trade with other companies to obtain products that can be made more efficiently by others. Freight transportation can be considered from the perspec- tives of both supply and demand. Demand comes from busi- nesses that need to move raw materials, supplies, and finished products. These businesses, called shippers, are the purchasers of freight transportation. The supply of freight transportation is provided by the infrastructure and the companies that move the goods, called carriers. Freight infrastructure includes the roadway system, railroads, airports, marine ports, locks and dams on rivers, and pipelines. Freight carriers are the owners or operators of the trucks, trains, ships, and airplanes that provides trans- portation to shippers. Other important private players in freight transportation include freight brokers, freight forwarders, and third-party logistics providers. Freight brokers assist shippers and carriers in assembling paperwork for international or complicated shipments. Freight forwarders consolidate multiple small ship- ments into larger shipments for transport. (This often involves preparing shipping and customs documents as well.) Third- party logistics providers (3PLs) are companies employed to assume freight/logistics tasks previously performed in house by shippers. The Freight Transportation Modes The primary modes of freight transportation are truck, rail, marine, air, and pipeline. Each of these modes tends to pro- vide different types of services and move different cargo types. One can think of freight transportation modes as providing a continuum of speed and service types (see Figure 2-1). One end of the freight service continuum is characterized by fast and reliable delivery, but these high levels of service also cost the most. Air transportation is the most expensive and fastest. Truck transportation provides rapid and flexible service for shippers, but at higher cost than rail transport. Marine and pipeline transportation are the least expensive in terms of cost per ton-mile, but they provide less rapid and flexible freight service. Cargo characteristics determine the type of transportation service demanded by shippers. Companies shipping high- value or perishable cargo tend to select truck or air transport to reduce transit time and gain higher levels of reliability. Air freight carries high-value goods for which delivery within a few hours is often critical, such as express parcels and fresh flowers. Trucks move a range of products, but they move a greater per- cent of higher value commodities like finished consumer prod- ucts, computers, and pharmaceuticals. Railroads tend to carry lower value, slow-moving bulk traffic (e.g., coal and grain), although they also move some higher value products (e.g., auto parts and finished vehicles). Domestic marine transport tends to carry low-value bulk cargo (e.g., coal and grain) for which speed does not matter. Pipelines are used primarily for petro- leum products and natural gas. Overall, more expensive trans- portation services provide shippers greater visibility in terms of where their shipment is and when it will be delivered. The length of haul is also an important shipment character- istic that determines mode choice. Trucks tend to capture a greater percentage of short-haul freight movements. Rail, marine, and air shipments tend to have a longer average ship- ment distance. Freight shipments often use more than one mode of trans- portation. Trucks connect shippers to rail or marine transporta- tion modes or provide the âlast mileâ of freight transportation to the customer. âIntermodalâ freight typically refers to freight moving in containers or trailers that can easily be transferred C H A P T E R 2 Overview of the Freight Transportation System
11 between ships, railroads, and trucks. By reducing the cost of using multiple modes of transportation, intermodal freight movement allows shippers to use lower cost modes (such as rail or marine) for long-haul movements and then switch to truck carriers to reach a final destination. Figure 2-2 shows the modal shares of U.S. freight trans- portation in terms of value, tons shipped, and ton-miles. (One ton-mile is a ton of freight moving one mile.) Trucking, mea- sured by value and tonnage, is the dominant freight mode. Freight in the âmultiple modesâ category includes parcels and U.S. mail, most of which involves trucking as well. Rail accounts for a large portion of ton-miles in part because it involves some very long hauls. The following sections provide a brief overview of each of the different freight modes. The Air Cargo System Air cargo traffic is dominated by large hub airports, such as Los Angeles International, Miami International, and Anchor- age International Airports, and the hub airports for Federal Express and UPS (Memphis and Louisville, respectively). Sev- eral dozen smaller freight-only airports have an important role in the air cargo system. Virtually every airport handles at least some air cargo. The U.S. air freight industry has four basic types of carriers: â¢ Express consignment air carriers, such as Federal Express and UPS, run scheduled flights and use a hub-and-spoke system, where cargo is flown to a limited number of hub airports before being sent on to its ultimate destination. Express carriers operate as integrated carriers, meaning they provide door-to-door transportation using their own or contracted airplanes and trucks. â¢ Most passenger airlines carry freight in the belly of passen- ger planes. Cargo is carried to maximize the use of the air- craft, but cannot be completely loaded until the air carrier knows how many passengers and how much luggage a flight will be carrying. â¢ Cargo-only carriers operate aircraft (freighters) that carry only cargo on fixed schedules. Express carriers and some passenger carriers may operate some cargo-only planes as well. These operators receive cargo directly from shippers and from freight forwarders. Large cargo-only carriers include Atlas Air, ASTAR Air Cargo, and Polar Air Cargo. â¢ A number of air carriers provide only charter air cargo ser- vice. Charter operators are generally small. A single cus- tomer, such as a consolidator, may hire the aircraft for a specific trip. As shown in Figure 2-3, the express carriers transport 70 percent of all domestic air cargo tonnage. The Trucking System The roadway network is the infrastructure for freight trucks. The National Highway System (NHS) consists of 160,000 miles of roadway important to the nationâs economy and mobility, including the Interstate Highway System, many state highways, and key intermodal connectors. Figure 2-4 shows the major highways on which freight truck activity is concentrated. High- way segments shown in red and orange carry the highest truck volumesâmore than 10,000 trucks on a typical day. On the red segments, at least 25 percent of all vehicles are freight trucks; on the orange segments, trucks are less than 25 percent of the total. Highway segments in green and black carry fewer than 10,000 trucks per day; trucks make up at least 25 percent of the traffic volume on the green segments. Air Truck Rail Water Pipeline Higher Service, Cost Continuum Lower Fastest, most reliable, most visible, most expensive service Lowest weight, highest value, most time-sensitive cargo Slower less reliable, less visible, less expensive service Highest weight, lowest value, least time-sensitive cargo Freight service characteristics Cargo characteristics â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ Source: Adapted from National Highway Institute Course 139001, âIntegrating Freight in the Transportation Planning Process.â Figure 2-1. Freight service and cost continuum across modes.
12 Nearly all long-haul, intercity trucking is done by combina- tion trucks (i.e., tractor-trailer rigs, typically with five axles), while urban trucking is dominated by single-unit trucks. Inter- city trucking comes in three basic forms: truckload, less-than- truckload, and private. â¢ Truckload (TL) service provides shippers who can fill an entire truck with direct point-to-point service. The largest truckload carriers include Schneider National, J. B. Hunt, Swift, Werner, and US Xpress. â¢ Less-than-truckload (LTL) service is used by shippers with smaller shipments that do not require a whole trailer. LTL carriers provide local pick-ups, consolidate shipments into full truckloads at a terminal, carry shipments to a destina- tion terminal, and then provide local delivery from there. Yellow Roadway, ABF, Con-way, Old Dominion Freight, FedEx Freight, and UPS Freight are the largest national LTL carriers. â¢ Private trucking comprises shippers that carry their own cargoes, usually because they believe it gets them the high- est level of reliability. Private carriage is often used by major retailers with large and elaborate supply-chain networks. Large private truck carriers include Coca Cola, Sysco, Walmart, Tyson Foods, and Safeway. The LTL and TL sectors are completely different in terms of number of firms. An LTL operation of any size requires a net- work of terminals. The large national carriers each have 200 to 300 terminals. In truckload service, by contrast, there are vir- tually no barriers to entry. If an individual can afford a tractor and trailer and find a few customers, he or she can get in the business. Including single-truck âowner operators,â there are hundreds of thousands of truckload motor carriers in busi- ness. There is a high degree of competition in the trucking business. Virtually all shippers have access to more than one trucking firm. The Railroad System The railroad network in the United States consists of approximately 171,000 miles of track and numerous switch- ing yards where trains are assembled and disassembled.1 Rail- roads provide three basic services: Figure 2-2. U.S. freight transportation by mode, 2007. Figure 2-3. U.S. air cargo tonnage by carrier type, 2007. Value Multiple Modes 16% Rail 3% Rail 15% Rail 38% Water 1% Water 3% Air 2% Air 0.03% Pipeline 4% Pipeline 6% Truck 71% Truck 69% Truck 42% Other/ Unknown 3% Multiple Modes 5% Other/ Unknown 2% Water 5% Air 0.12% Multiple Modes 14% Other/ Unknown 1% Tons Ton-Miles Source: BTS, National Transportation Statistics 2009. Charter 3% Passenger 12% Cargo-Only 15% Express 70% Source: FAA, T-100 data. 1BTS, Miles of Freight Railroad Operated by Class of Railroad: 2007.
13 able regional operation roughly in the middle of the United States. These three carriers together have 8 percent of the com- bined revenue of the big four. After that, there are a few hun- dred small regional carriers and short lines. Clearly, there is a high degree of concentration in this sec- tor. This reflects the enormous investment in infrastructure required to be in the railroad business on a large scale. The degree of competition varies with individual markets. As noted, rail intermodal service is in direct competition with truckload service in many markets. Truckload is also a competitor in most other rail markets, except long movements (more than 200 to 300 miles) of coal and grain. There is significant competition among railroads in most, but not all, markets. Some coal and grain shippers have access to only one rail carrier. The Ports and Inland Waterway System The U.S. marine freight system consists of waterways and ports, including inland ports and ocean ports. Ocean port infrastructure is managed by various public and private port authorities funded primarily through user fees. Measured by tonnage, the two largest U.S. ports are the Port of New Orleans and the Port of Houston, both of which handle more than â¢ Unit trains move bulk goods for shippers who can load an entire train at one time. This usually involves 100 or more cars. Unit trains are typically loaded with coal or grain; coal trains originating in Wyomingâs Powder River Basin account for a large portion of rail network tonnage (see Figure 2-5). â¢ Railroads also provide intermodal service. This involves loading trailers and containers onto railcars. Shippers tend to use intermodal service for higher value goods. Using rail intermodal service can lower rates for shippers for long hauls as compared to all-truck transportation. Rail lines between West Coast ports and Midwestern distribution hubs (e.g., Chicago) carry heavy intermodal traffic. â¢ Last, railroads also provide carload service. This is for ship- pers who load one or a few cars at a time and can tolerate long transit times in exchange for low rates. The rail sector is dominated by four mega-carriers: Union Pacific (UP) and Burlington Northern Santa Fe (BNSF) in the West and CSX and Norfolk Southern in the East. These four carriers move more than 90 percent of U.S. rail ton-miles. Three other carriers of significant size are the U.S. subsidiaries of the two major Canadian railroads, Canadian National and Canadian Pacific, and Kansas City Southern, which has a siz- Figure 2-4. Major truck routes on the national highway system, 2002. Note: AADTT is annual average daily truck traffic; AADT is annual average daily traffic (all vehicles). Source: FHWA, Freight Story 2008. Developed from Freight Analysis Framework, version 2.2.
14 200 million tons of freight (much of it bulk petroleum prod- ucts). Measured by value, Los Angeles is the largest U.S. port. The neighboring ports of Los Angeles and Long Beach are the major gateway for imported freight from Asia; together they handle one-third of all U.S. marine container traffic. On the East Coast, New York/New Jersey, Savannah, Norfolk, and Charleston are major container ports. The top U.S. container ports are illustrated in Figure 2-6. The inland and intracoastal waterway network is also an important component of marine transportation infrastruc- ture in the United States. This network includes the Missis- sippi River and its tributaries, the Gulf Intracoastal Waterway, the Atlantic Intracoastal Waterway, and the Columbia-Snake Waterway in the Pacific Northwest. The system includes 191 commercially active lock sites, which allow barges to reach inland ports such as Memphis, Chicago, Minneapolis, Pittsburgh, and Lewiston, ID. The Saint Lawrence Seaway is another important waterway, providing ocean-going vessels access to the Great Lakes. As shown in Figure 2-7, the bulk of domestic marine freight transport occurs on the Mississippi and Ohio Rivers, and to a lesser extent, the Great Lakes. The Pipeline System Pipelines are used primarily to move petroleum products and natural gas, as well as some other chemicals. The pipeline system consists of several different components. â¢ Collection pipelines move products from sources such as wells on land or offshore or from oil tankers or liquefied natural gas (LNG) tankers. These pipelines move products to storage, refineries, or other processing centers. â¢ Transmission pipelines transport large quantities over longer distances. Transmission lines deliver natural gas to distant power plants, large industrial customers, and munici- palities for further distribution. Petroleum transmission lines deliver crude oil to distant refineries. Transmission lines also deliver refined products to distant markets, such as airports, or to depots, where fuel oils and gasoline are loaded into trucks for local delivery. â¢ Distribution lines move natural gas and consist of main lines, which move gas to industrial customers, and smaller service lines that connect to businesses and homes. In total, the United States has more than 2.3 million miles of pipeline; roughly 450,000 miles of which are collection and transmission lines. Approximately 900 billion ton-miles of petroleum and natural gas are moved in pipelines annually.2 See Figure 2-8 for an illustration. Figure 2-5. Tonnage on the railroad network, 2005. Source: FHWA, Freight Facts and Figures 2007. 2Dennis, Scott, âImproved Estimates of Ton-Miles,â Journal of Transportation Statistics, Volume 8, Number 1, 2005.
Figure 2-6. Top U.S. container ports, 2008. Source: BTS, Americaâs Container Ports: Freight Hubs That Connect Our Nation to Global Markets, June 2009. Source: FHWA, Freight Facts and Figures 2007. Figure 2-7. Tonnage on the domestic waterway network, 2005.
16 The Role of Government Government at all levels has a role in building, operating, maintaining, and regulating the freight system, although the specific government roles vary considerably across the modes. At the Federal level, the two major government roles in freight are (1) funding and related cost-recovery policies and (2) regulation, especially safety and environmental regula- tion. For highways, the Federal government sets overall levels of Federal aid and, through the earmarking process, takes a hand in project selection. Congress must also provide the financing for highway investment through fuel taxes, other user charges, or various credit devices. The Federal govern- ment has a similar role in providing funding for airport infrastructure. (In this regard, both the FHWA and FAA set standards for highway and runway design.) FAA directly funds and operates the air traffic control system. The U.S. Army Corps of Engineers (USACE) is responsible for main- taining and improving the inland waterway system, including building locks and dredging navigation channels. Railroads and pipelines are in a separate category in terms of funding; with limited exceptions, they bear the full financial responsi- bility for their infrastructure. In terms of safety regulation, numerous Federal agencies are involved, including FAA, the Federal Motor Carrier Safety Administration (FMCSA), National Highway Traffic Safety Administration (NHTSA), Federal Railroad Administra- tion (FRA), the Coast Guard, the Maritime Administration (MARAD), and the Pipeline and Hazardous Materials Safety Administration (PHMSA). The Environmental Protection Agency (EPA) establishes many environmental rules that affect freight carriers. The Transportation Security Administration (TSA) makes security-related rules. The U.S. Congress may enact regulatory laws in any of these areas. The Surface Transportation Board (STB) is unique in the extent of its role as a Federal economic regulator. Railroads have monopoly power in some of their markets. STB must decide rate cases in such markets and make rules regarding these issues. The state role in freight system funding is similar to the Fed- eral role. State legislatures set highway funding levels and play a role in project selection; they are also involved in setting fuel taxes and other user charges to finance the system. States may invest in ports and airports as well. State authorities have responsibility to enforce some safety regulations, such as sup- porting FMCSA rules and weight limits. State legislatures set speed limits, subject to Federal constraints. States can impose some environmental regulations, such as requirements for impact analysis and mitigation for transportation projects. California is unique among states in its authority to set motor vehicle emission standards. Source: National Highway Institute Course 139001, âIntegrating Freight in the Transportation Planning Process.â Figure 2-8. U.S. pipeline network.
17 Local government roles tend to be similar for all modes, mostly relating to land use planning and local rules to mini- mize the adverse effects of freight facilities, such as noise, traffic, and lighting. Decisions in these areas primarily affect trucking and rail, but they can also affect barge and aviation operations. Many seaports and airports are owned and man- aged by a public port authority, sometimes created by a local government and sometimes created by a state. Table 2-1 shows the principal Federal and state agencies with direct policy responsibilities for the freight system. Funding Agencies Regulating Agencies Mode Federal State Federal State Air Congress FAA (traffic control, airports) Legislatures DOTs (airports) FAA EPA TSA PHMSA N/A Truck Congress FHWA Legislatures DOTs FMCSA (operations) NHTSA (vehicles) EPA TSA PHMSA Legislatures DOT Law enforcement DMV Rail minimal minimal STB (economic) FRA EPA TSA PHMSA Environmental agencies Water Congress Corps of Engineers Legislatures Coast Guard MARAD Fed. Maritime Commission TSA PHMSA Legislatures Environmental agencies Pipeline minimal minimal PHMSA FERC (economic) Environmental agencies Offices of pipeline safety Table 2-1. Summary of major government roles in freight systems.