ucirvinepresentation

The Flow of Imports Into the US and the Supporting Movement Infrastructure: 

The Flow of Imports Into the US and the Supporting Movement Infrastructure Good Moves Consulting Livi Kerszenbaum, Jeff Cooper, Kelly Hart, Jerry Chen, David Tam, and Sal Ceballos UC Irvine Paul Merage School of Business June 7th, 2006

Our Role and Objective: 

Our Role and Objective OUR ROLE: As the UC Irvine MBA student team, we researched and provided data and recommendations regarding the movement of imported goods within the scope agreed upon by the team and the NAIOP. OUR OBJECTIVE: To provide this data and recommendations to the NAIOP to help raise awareness of the issue and contribute to the search of viable solutions. NOTES: Work is cited in written documentation. Analysis is representative of our conclusions.

Agenda: 

Agenda PART I Current Issue & Trends Descriptions Waterways Railways Freeways PART II Analysis The Future… And how we get there

Current Issue: 

Current Issue RESULTS Congestion causes a ripple effect and businesses can lose millions in revenue.

Goods Statistics: 

Goods Statistics 80% of foreign freight arrives by ship to U.S. west coast 60% transferred by rail or truck to U.S. eastern region Container traffic has more than tripled in last 20 years Double again in the next 10 years

Slide6: 

Major Areas of Global Goods Movement Activity Singapore Kuala Lumpur, Malaysia Suez Canal, Egypt Mexico Beijing, China Shanghai, China California Panama Canal, Panama New York/New Jersey Washington

National Port Overview: 

National Port Overview PACIFIC REGION Seattle Los Angeles Long Beach SOUTHERN REGION New Orleans Georgia Miami EASTERN REGION New Jersey New York North Carolina Philadelphia INTERNATIONAL Mexico, Panama Canal, Suez Canal

Growth Trend Reflected in TEU’s: 

Growth Trend Reflected in TEU’s Shows trend that quantity of imports to the US are increasing.

Current Million of TEU Throughput, 2005: 

Current Million of TEU Throughput, 2005

Future Expected Growth in Millions of TEU’s: 

Future Expected Growth in Millions of TEU’s Over the next 15 years, the top ten U.S. ports will experience a growth of 33% in millions of TEU’s.

Example of Expected Growth: Los Angeles : 

Example of Expected Growth: Los Angeles 8 major container terminals 4 dockside intermodal rail yards with direct access to the Alameda Corridor 20-mile express railway connecting the Port to the rail hubs in downtown Los Angeles 7500 acres, 43 miles of waterfront and features 26 cargo terminals, Combined - $162 million revenue 15B tons 25B tons 5B tons 1995 2006 2020

Overview of U.S. Ports: 

Overview of U.S. Ports There are 355 ports in the U.S. West Coast Ports Ports of Los Angeles/Long Beach reaching transportation gridlock Ports of Oakland & Seattle do not have necessary infrastructure to keep up with demand of larger ship use Seattle/Tacoma has environmental concerns which limits expansion All Low-cost solutions have been implemented: Pier Pass (night operations) Rail yards operating at capacity East Coast Ports Planned expansion of ports, but aging and congested off-port infrastructure creates challenges to goods movement Gulf Coast Will benefit from west coast port congestion Limiting factor is access

Port Expansion Projects: 

Port Expansion Projects All ports are undergoing projects to expand capacity and increase efficiency via: Dredging Constructing additional berths/terminals Purchasing of new equipment Specific expansionary projects include the construction of: On-dock rail facility (Los Angeles) Intermodal warehouse (Philadelphia) Distribution center (North Carolina) Across the country, billions of dollars are being spent to expand capacity at the ports! Impact on US Economy The U.S. consumer may be impacted through higher prices, fewer choices and lower inventories on goods The US ports may lose business and jobs to foreign ports because of inability to handle demand Cranes transported from China to LA/LB port

Suez Canal: 

Suez Canal Two way north-south transport between Europe and Asia 163 miles long, 984 ft wide at narrowest point Passage takes 11-16 hours Capacity to accept ships displacing 150,000 tons, 53ft draft Plan to increase draft allowance to 72ft by 2010

Panama Canal: 

Panama Canal Connects the Atlantic and Pacific oceans Cut trips NY to SF trip 14000 to 6000 miles Estimated usage 80M tons 2005 saw 278M tons Estimated by 2011 37% of world’s container ships will be too large for the present canal Third Set of Locks Project $5.25B, open for traffic 2015

Overview of U.S. Railway: 

Overview of U.S. Railway 6 main freight lines, privately owned LA / Chicago hubs Profitable w/ $36.9 billion in revenues Approximately 159,000 miles of railroad track in the U.S. 1.7 trillion ton-miles of traffic per year, covered by 692,602 freight cars 1.95B tons of goods valued at $530B shipped via rail

Railway Solutions: 

Problems: Traditionally poor customer service Losing business to trucking Regional segregation Traditionally seen as a slower, less convenient mode of goods transportation Solutions: Using technology to upgrade scheduling, tracking, and routes Investing in additional rails and yards Improving customer service Attraction: As gas prices increase, rail becomes a more attractive, ‘cheaper’ shipping mode Rail infrastructure development costs less than freeway development Railway Solutions 1 gallon of fuel takes 1 ton of goods: 410 miles by train 59 miles by truck

Overview of U.S. Freeways: 

Overview of U.S. Freeways Influence of the pull system Increase of truck travel and freeway usage VMT growth versus lane miles growth Time and cost measures

Freeway Congestion 1998: 

Freeway Congestion 1998

Freeway Congestion 2020 (projected): 

Freeway Congestion 2020 (projected) Shows the trend that infrastructure will not be able to accommodate increases.

Freeway Solutions: 

Freeway Solutions Managed Lanes concept to relieve congestion HOV and HOT lanes Reversible Lanes (I-15 San Diego) Improves efficiency and throughput Goal: To move traffic smoothly and efficiently.

Agenda: PART II: 

Agenda: PART II Analysis China Business Solution Example Emerging Trends Risk management by diversifying port docking locations Short Sea Shipping Greater use of Automation Moving Forward Intermodal Freight Technology Working Group

Cargo Transit from China to US: 

Cargo Transit from China to US Determinants of Transit Time Number of Port Calls Carrier’s Schedule Access to Suez and Panama Canal Effective Goods Movement depends on port usage West Coast ports congested East Coast ports are less congested but longer transits Determinants of Shipping cost to consumers Number of TEUs Type of Cargo Who is the customer?

Cargo Transit from China to US: 

Cargo Transit from China to US

Shanghai to North American Port Destinations: 

Shanghai to North American Port Destinations Shanghai to NY by sea = 29 days Shanghai to NY through LA = 15+8 = 23 + Risk of up to 7 day delay DECISION: Convenient LA route with risk of delay?

Business Solution Example: 

Business Solution Example International Retailer Manufactures in China GOAL: 2010 “We will be shipping product more efficiently and at a lower cost than any other retail company (in their industry) in the world and will have saved $10 million over five years.” Changed from carrier volume percentage awarded relationships with specific shipping companies Highlighted hidden costs Consolidating containers with three core partners Leverage multi-year contracts Placing a dedicated company person Buy-in at all levels Visit them onsite face-to-face

Emerging Trend: Short Sea Shipping: 

Emerging Trend: Short Sea Shipping Current situation: Aging infrastructure Very high costs for infrastructure expansion Increasing pollution Low efficiency due to congested traffic Low fuel efficiency SSS is a good option: 25,000 miles of inland and coastal waterways Promotion of intestate and international (with NAFTA partners) commerce Creation of new jobs

Emerging Trend: Short Sea Shipping: 

Emerging Trend: Short Sea Shipping Movement of freight along coasts and inland waterways: Popular in Europe since 1995 Environmentally friendly Cheaper than road transport Reliable Represents more than 40% of all freight moved today in Europe (reducing road transport to 45%)

Slide29: 

Maritime Administration – Short Sea Shipping

Emerging Trend: Port Automation: 

Emerging Trend: Port Automation Leading Innovator: International Terminal Solutions System Improvements: Container position determination, Radio data, Truck identification, Truck/carrier positioning Automation Benefits: Real-time monitoring/reporting of data, Automatic identification of the terminal truck providing automated container identification for the container handling equipment Overall: Increased Efficiency thru increased access to container and trucking data

It is only a matter of time…: 

Before the current logistics system will topple. Processes will come to a halt, time and money will be lost. The balance will shift and businesses will be the losers. It is only a matter of time…

Bridging the Communication Gap: 

Bridging the Communication Gap Awareness amongst key stakeholders Coordination of private and public entities Need to collaborate industry and government priorities to leverage collective knowledge and financial investment Impact of technology on system improvements

Intermodal Freight Technology Working Group (IFTWG): 

Intermodal Freight Technology Working Group (IFTWG)

What is the IFTWG?: 

What is the IFTWG? Existing group formed by the US Department of Transportation Goal is to improve the efficiency of intermodal freight movement through technology-based options Public-Private partnership Requirements for participation

IFTWG Latest Project Proposals: 

IFTWG Latest Project Proposals Encouraging private sector involvement Sharing data via the Electronic Freight Management Initiative (EFM) Centralized database for private sector proprietary information Cross Town Improvement Project (C-TIP)

Challenges for IFTWG : 

Challenges for IFTWG Inability to strictly regulate initiatives Lack of consistent communication between participants Private sector involvement- How does it affect profitability? Limited funding sources

Recommendations for IFTWG : 

Recommendations for IFTWG Increase participation through change in perceptions Raise awareness of IFTWG efforts and membership opportunities with key stakeholders Enforcement of project proposals Involve Members of U.S. House and Senate in enforcement procedures Seek further funding opportunities

Slide38: 

? Questions C A S T & C R E W Sal Ceballos Jerry Chen Jeff Cooper Kelly Hart Livi Kerszenbaum David Tam S U P P O R T Emile Pilafidis Al Beaudette ORGANIZATIONS UCI Paul Merage School of Business Lowe Enterprise Real Estate NAIOP

Facts & Figures: 

Facts & Figures Railway LA / Chicago hubs – 50 hours from LA to Chicago and 4-5 days from Chicago to New York Freeway Most frequent freight transport method (67% of domestic shipments) 2020 – Freeways congestion projected increase from 10 to 29% Time 240+ million hours lost from truck delays annually 47 annual hours of delay/person in 2003 (urban) Money Truck delays costs $32.15 per hour, which amounts to $8 billion annually. Annual cost per person is $794 SSS There are 25-thousand miles of Inland and Coastal Waterways in the United States; they connect to: 45-thousand miles of interstate highways, 152-thousand miles of rail, and 460-thousand miles of pipelines