Trends—May 2015

U.S. Ports Critical to Sustained Economic Growth

Transportation budgeting at the state and federal levels has become a contentious battleground as politicians and private sector lobbyists search for new funding mechanisms to execute much-needed infrastructure upgrades. One point of consensus is that U.S. ports are key to sustained economic growth—and therefore should be a priority on a very long legislative to-do list.

Martin Associates’ latest report, the 2014 National Economic Impact of the U.S. Coastal Port System, documents the contributions of America’s seaports to the nation’s economy over the past seven years.

From 2007 to 2014, the total economic value that U.S. coastal ports provided in terms of revenue to businesses, personal income, and economic output rose 43 percent to $4.6 trillion. This accounts for 26 percent of the nation’s $17.4-trillion economy in 2014, up from 20 percent of its $16.1-trillion economy in 2007. Growth was robust in spite of the global recession, which dampened cargo volumes between 2008 and 2012.

Among other notable gains since 2007:

• Federal, state, and local tax revenues generated by the port sector and importer/exporter revenues rose 51 percent to $321.1 billion.
• Jobs generated by port-related activity jumped 74 percent to 23.1 million.
• Personal wages and local consumption related to the port sector doubled to more than $1.1 trillion, with the average annual salary of those directly employed by port-related businesses equaling $53,723.

"The growth in jobs and economic importance of America’s seaports reflects the fact that the value of international cargo handled at these ports increased by $400 billion since 2007, reaching about $1.8 trillion in 2014," says John Martin, president of the transportation consultancy.

"It’s important to emphasize that the key growth in our international trade is in U.S. exports, which saw a 60-percent increase in value over the past seven years," he adds.

Each dollar increase in the value of export cargo supports significantly more jobs in the United States than does a dollar value of growth in imports.

"The growth in the contributions of our ports to the nation’s economy underscores the need to invest in infrastructure and technology to support and foster good jobs, national security, international trade, and our standard of living," adds Martin.

To that end, the American Association of Port Authorities forecasts that ports need to invest upwards of $30 billion by 2025 to maintain U.S. competiveness on today’s global stage.

CAG&T: Freight Can’t Wait

The U.S. transportation and logistics sector, and business interests in general, have long been challenged by a public sector that continues to siphon transportation revenues for other purposes. While some states are cracking down on wandering funds and specifically earmarking capital for infrastructure projects, others remain mired in pork barrel wheeling and dealing, even as gas-tax revenues dry up.

To raise awareness of this problem, the Washington, D.C.-based Coalition for America’s Gateways & Trade Corridors (CAG&T) has introduced a "Freight Can’t Wait" campaign to encourage Congress to pass a surface transportation law that contains a fully funded freight grant program.

"Freight infrastructure needs dedicated funding. Establishing a competitive grant program with broad, multimodal project eligibility throughout the United States is a priority for our coalition, and should be for our country also," explains Leslie Blakey, the coalition’s executive director.

The campaign features 36 gateway and corridor projects of national significance that would improve freight hubs, and sea and land gateways, and augment roadway capacity to ease freight chokepoints.

As part of this call to action, coalition members are voicing their support for the Economy in Motion: The National Multimodal and Sustainable Freight Infrastructure Act (H.R. 1308), a bill introduced by U.S. Rep. Alan Lowenthal (D-Calif.) that would dedicate $8 billion per year to freight-related infrastructure projects.

The legislation prioritizes multimodal projects, in addition to projects that help relieve bottlenecks in the freight transportation system.

Henry Ford College Produces Supply Chain Professionals

The past decade has seen a renaissance in supply chain and logistics curriculum—a trend that continues today unabated. But as the manufacturing and supply chain sectors encounter a growing labor shortage, a widening gap is looming on the logistics frontline.

Increasingly, there is a move to bring supply chain education and career development to high schools, vocational schools, and community colleges—introducing a new generation of students and workers to an industry brimming with job opportunities.

Henry Ford College, a public two-year college in Dearborn, Mich., is seizing upon the legacy of its namesake to create an associate degree program in supply chain management, as well as a new SCM technician certificate through its business and computer technology division. The new curriculum will begin during the fall 2015 semester.

True to its mission, the college has traditionally offered training and apprenticeship programs for students involved in skilled trades. The supply chain program will expand upon this foundation, as well as augment the scope of its career development offerings.

"The purpose of this supply chain management program is to create job opportunities for our students," says Henry Ford College business instructor Douglas Langs, a 22-year veteran of General Motors. "It prepares students to obtain a job once they graduate with either their associate degree or certificate."

Alternatively, it also provides a pathway for associate degree graduates to continue their supply chain education elsewhere.

Case in point: Henry Ford College alumnus Ben Topping is currently studying supply chain management at Wayne State University. Topping’s interest was sparked by Langs’ capstone business course, which featured supply chain management.

"During the first day of class, Professor Langs placed a small piece of chocolate in front of each student, and we spent the entire 90-minute class discussing where every ingredient of that chocolate—cacao, sugar, milk, aluminum for the wrapper, paper for the tag—originated, as well as how it arrived in Hershey, Pa.," recalls Topping.

"Because I was already familiar with the basics of logistics, purchasing, warehousing, and distribution, I was able to dive deeper into the field, enhancing my learning," he adds.

3D Printing Moving Fast—in 1D

In the world of disruptive technology, 3D printing might be the most unsettling innovation to come down the pipe­line since radio-frequency identification—unsettling in the sense that industry is still debating how much and to what degree additive manufacturing will revolutionize supply chains. Like RFID, 3D printing has a lot of hype to live up to.

Manufacturers are privately toying and tinkering with prototypes they believe will eventually change the way they do business. Many are keeping their progressions close to the vest. Intellectual property rights remain an unexplored minefield for this nascent technology.

But as companies continue to prototype 3D printing technology, some are discovering an unexpected and welcome benefit. They are learning how to engineer improved products, with different materials and less waste.

For example, Fiat Chrysler Automobiles (FCA) is using 3D printing to better understand axle design and development. At the Chrysler Technology Center (CTC) in Auburn Hills, Mich., engineers are using additive manufacturing to print see-through plastic parts exclusively for test purposes. When evaluating oil flow inside axles, engineers traditionally had to cut out two-dimensional windows in components to visually inspect performance—but this process often provided unsatisfactory results.

The CTC is the auto industry’s only headquarters where a vehicle design can go from a napkin sketch to production prototype to advertising campaign under one roof, according to FCA officials.

"The Chrysler Technology Center is a key competitive advantage for FCA US," says John Nigro, vice president, product development. "We have more than 14,000 people under one roof, including 7,900 engineers. That speeds the collaborative process, which is the lifeblood of our business."

Chrysler’s example provides a good idea of how 3D printing is likely to make an initial step-change impact within the manufacturing supply chain—helping to hasten the process from design to the assembly line.

McDonald’s Serves Up New Sustainable Sourcing Commitment

Food safety, quality, and accountability have long been a challenge for restaurant chains—especially those that prioritize economy. Increasing social media exposure, and the threat of product recalls and brand integrity, are shared risks. But some chains are addressing these issues head on to appeal to consumer tastes for sustainability and transparency.

McDonald’s has long touted sustainable sourcing as a core principle within its supply chain. The Oak Brook, Ill.-headquartered restaurant chain recently upped the ante with a pledge to lessen its global impact on deforestation. The effort will cover all McDonald’s products with a specific focus on beef, fiber-based packaging, coffee, palm oil, and poultry.

The company will continue working collaboratively with a broad range of stakeholders, including suppliers, governments, and NGO partners, to develop long-term solutions designed to combat deforestation around the world.

As part of this commitment, McDonald’s will apply several guiding principles and practices across its supply chain:

• No deforestation of primary forests or areas of high conservation value.
• No development of high carbon stock forest areas.
• No development on peatlands, regardless of depth, and the utilization of best management practices for existing commodity production on peatlands.
• Respect human rights.
• Respect the right of all affected communities to give or withhold their free, prior, and informed consent for plantation developments on land they own legally, communally, or by custom.
• Resolve land rights disputes through a balanced and transparent dispute resolution process.
• Verify origin of raw material production.
• Support smallholders, farmers, plantation owners, and suppliers to comply with this commitment.

U.S. Trucking Industry: Keep the Change

Change is accelerating within the U.S. trucking industry, says a new study from TMW Systems. The 2014 TMW Transportation & Logistics Study cites improved asset utilization andfinancial performance among many carriers. Brokerage and non-asset service providers also find greater value leveraging developed carrier networks to achieve stronger grossmargins.

Among other insights:

DriverRetention. Survey responses under­score the clear relationship betweendriver wages and retention. Length of haul and utilization are other important factors in driver turnover.

AssetUtilization. Survey respondents are successfully leveraging newtechnology to achieve gains in utilization. As one example, dedicated fleets thatutilize planning optimization experienced an averageyear-over-year increase of142 revenue miles per seated truck per week.

Rates. Truckload carriers averaged seven-percent netrate increases, a trend of interest for brokerage and third-party logisticsproviders, as well as shippers.

Fleet Maintenance. There is greater difficulty gainingvisibility into equipment maintenance metrics than any other functional area,and most respondents indicate they do not adequately trackmaintenance costs byequipment age group.

OperatingRatios. A majority of participating asset-based businessesreport operating ratios of 96 percent or lower, a healthy increase over 2013’s results.