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Capacity—too much of it, or too little—is a top concern in the freight industry, according to speakers at the 17th Annual Freight and Logistics Symposium in December.

In the keynote presentation, Rosalyn Wilson, senior 
business analyst with Delcan Corporation, said both ocean and air cargo have too much capacity. Throughout the recent recession, ocean carriers continued to order and float new megaships, creating problems with overcapacity and low pricing, thus raising solvency concerns and uncertainty for shippers.

On the air cargo side, 
overcapacity is due in part from
 airline passengers choosing to carry on their luggage rather than pay to have it checked. As a result, the cargo holds of passenger planes have extra space for premium air cargo— which is estimated to have about a 65 percent profit margin for passenger airlines, she noted.

On the flip side, trucking, which is the largest component of the supply chain industry, has operated at 95 to 97 percent capacity for the past three years. Wilson believes this capacity crunch will create major problems for the industry by 2016 and 2017.

Other speakers also noted capacity issues—whether a shortage of drivers or an abundance of data. Chip Smith, CEO of Bay and Bay Transportation, said a major issue is the ability to find and keep enough qualified drivers.

Jason Craig, government affairs manager with C.H. Robinson, said a particular challenge his firm faces is what to do with the massive amount of data available in the supply chain—and how to get more out of it.

Cargill’s Randy Brown, vice president of transportation and logistics, said Cargill is rolling out an improved global analytics capability to make use of its data.

Summaries of the presentations are in the symposium proceedings, available on the event web page.

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With freight traffic increasing on U.S. roadways, commercial truck drivers often struggle to find safe and legal places to park. If parking spaces are not available at a nearby rest area or truck stop, drivers may be forced to pull over in unsafe locations or continue driving and become dangerously fatigued. Drivers may also risk violating federal hours-of-service rules, which require them to rest after 11 hours of driving.

In response to this issue, a team from the Minnesota Department of Transportation (MnDOT), University of Minnesota, and American Transportation Research Institute
 is developing a system that can identify available truck parking spaces and communicate the information to drivers—helping them determine when and where to stop. System benefits include improved safety, reduced driver fatigue, and better trip management.

The system uses a network of digital cameras suspended above a parking area to monitor space availability. Image processing software developed by researchers at the U of M’s computer science and engineering (CS&E) department analyzes the video frames and determines the number of available spaces.

As part of a demonstration project funded by MnDOT and the Federal Highway Administration, the project team is installing the system at three MnDOT rest areas and one private truck stop on I-94 west and northwest of the Twin Cities.

The U of M research team first installed the system in late 2012 at the the Elm Creek Rest Area, two miles north of Interstate 494 on I-94. As of early 2014, the system has been installed at an additional rest area, and a third site is in progress. 

Next steps for the project include implementing several mechanisms that will communicate parking information to truck drivers. First, the team plans to install variable message signs along I-94 this spring. Also in the works are an in-cab messaging system and a website.

Overall results of the demonstration project will help the team determine whether this technology holds promise for use in other corridors throughout the nation.

Read the full article in the February issue of Catalyst.

Fuel taxes: a competitive advantage for Minnesota's economy

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By Kevin McCarthy

Currently the topic of roads and infrastructure is being scrutinized more than ever. MnDOT has just released their 20-year Minnesota State Highway Investment Plan, known as MnSHIP. According to the Star Tribune, the plan calls for $30 billion in spending over the next 20 years, but estimates funding of only $18 billion, a shortfall of $12 billion, or about $600 million a year. While most of us think about how congestion and roads affect our daily commute, I think it’s important to also understand how they affect our competitiveness. Simply put, the more expensive it is to move product in or out of a manufacturing facility, the less competitive that facility is. When a facility is less competitive, there are fewer jobs, which can in turn reduce our growth as a state. So do we have a real need to invest in roads?

First, it may help to understand just how much of what we consume moves on roads. In 2012, according to a federal report, 73% of all goods moved by value and 70% by weight were moved by truck. This number has held relatively constant over the years and is similar to the numbers that the Council of Supply Chain Management Professionals (CSCMP) has put out in its annual state of logistics report for the last 20 years. Not only is trucking the dominant way goods are moved, but with 84.9% of all truck movements traveling less than 500 miles, road quality becomes an inherently local and regional problem. So clearly roads do and will play a significant role in the movement of goods.

How does our spending compare with the rest of the world?

The Economist reported that the U.S. spends 2.4% of GDP on transportation. This compares to Europe’s investment of 5% and China's investment of 9% of GDP. Our current level of funding for transportation infrastructure is significantly below its peak of 5% in the early 1960s. If we wish to continue to have the transportation infrastructure we need to stay competitive in a world market, we must address our inability to fund transportation infrastructure. This lack of funding is directly related to the lack of growth in user fees—most notably, the federal fuel tax, which has not changed in 20 years. In Minnesota, we have increased our user fees, but not at a rate that keeps up with inflation. But why user fees? Why not just pay for infrastructure out of the general tax base? There are several reasons:

  • Using the general tax base is likely not fair. It could force competitors of trucking companies to invest in infrastructure that would make them less competitive.
  • If you don’t use it, you don’t pay for it. Unlike a general tax, you can avoid paying a user fee by simply not using the roads.
  •  It could discourage road use. That’s right. By making road use more expensive, it gives shippers an incentive to be more efficient in their movement of goods. It could also discourage personal travel and make mass transit a more viable option.
  • It’s green. The better the mileage a vehicle gets, the less tax you pay.
  • It’s extremely efficient.
  • It’s acceptable to the business community and to the trucking community. When was the last time you heard the Chamber of Commerce suggest that increasing a tax or user fee was a good thing?

Want to learn more about how fuel taxes work? I’d suggest checking out the Institute on Taxation and Economic Policy. Want to learn more about our transportation infrastructure needs? Visit the U. S. Chamber of Commerce’s site on the transportation performance index.

Kevin McCarthy is Director of Consulting Services at C.H. Robinson, and a member of the CTS Executive Committee.

Uncovering manufacturers’ perspectives on the transportation system

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manufacturing.jpgIt’s no secret that manufacturing plays a key role in driving economic growth, or that transportation is essential for the success of any manufacturing operation.

While the relationships among manufacturing, transportation, and economic growth have been studied on a large scale, there is often little dialogue between transportation organizations and the manufacturers themselves.

A recently completed pilot study conducted jointly by the Minnesota Department of Transportation (MnDOT), the University of Minnesota Humphrey School of Public Affairs, and University of Minnesota Extension aims to address this communication gap.

The pilot project focused on 12 counties in southwest Minnesota. The research team began by identifying key industry clusters within the region; industry clusters are driving economic forces that sell outside the local, state, and national market—bringing money into the region and creating jobs in other economically dependent industries such as retail and food service.

Ultimately, more than 172 regional businesses were contacted for participation in this project, and 75 in-person interviews were completed with manufacturers, shippers, and carriers. During the interviews, participants were encouraged to focus their comments on high-value, low-cost improvements that MnDOT can address in the short term without over-promising projects that currently cannot be funded.

Participants identified the need for smooth pavements and wide shoulders, the value of advance warning lights at intersections with traffic signals, the importance of highway safety, and the challenges of maneuvering oversized vehicles through roundabouts, among others.

The research team is compiling the pilot study’s findings into a final report. In the meantime, MnDOT is working to address a number of the challenges and suggestions uncovered through the pilot program.

Read the full article in the December issue of Catalyst.

Top three Catalyst stories of 2013

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The CTS Catalyst's most popular stories of 2013 reflected the wide range of transportation research conducted at the University of Minnesota:

Photo courtesy Carissa Schively Slotterback

  1. New Complete Streets materials highlight best practices, assist practitioners

  2. Complete Streets—roads that are designed and operated to enable safe access for all users—offer many benefits, including improved safety, mobility, accessibility, public health, and quality of life. However, much of the work surrounding Complete Streets to date has focused on creating policies and guidelines rather than investigating the processes and action steps needed to successfully implement projects. In an effort to fill this knowledge gap, researchers from the Humphrey School of Public Affairs have conducted a study on the planning and implementation of successful Complete Streets projects. The study includes the development of 11 case studies highlighting best practices and a practitioner-oriented guidebook.

  3. Highly obese truck drivers have higher crash risk, according to new research

  4. Highly obese commercial truck drivers have a much higher crash rate in their first two years on the job than their normal-weight counterparts, according to research from the University of Minnesota Morris. The findings come from a multi-year study led by Stephen Burks, an associate professor of economics and management at Morris and a former truck driver.

  5. New SMART Signal installation helps MnDOT monitor timing plans

  6. Researchers from the U of M recently developed a new version of software for the SMART Signal system, and deployments at more than 50 intersections managed by the Minnesota Department of Transportation (MnDOT) are already under way. SMART Signal automatically collects and processes data from traffic signal controllers at multiple intersections and creates performance measures, including information on the times and locations congestion occurs on a roadway. In addition to these new implementations, a new MnDOT-funded study investigated how SMART Signal could be used as part of an integrated corridor management system.

Swimming against the congestion current

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By Jason Craig

This blog post originally appeared on the Connect Blog by TMC, a division of C.H. Robinson.

Idling trucks in traffic goes against fuel efficiencies

If we could eavesdrop on the freight industry’s water cooler conversations the chances are that we’d hear a lot about traffic congestion. Transportation managers deal with it and talk about it all the time, yet there is one vital aspect of this topic that they tend to overlook: how trucks idled by traffic snarls work against the fuel efficiencies that the industry is working hard to achieve.

More awareness of this conflict and the associated costs might help to persuade the industry to address infrastructure investment needs that are at the root of these delays.

It is no revelation that trucks sitting in traffic burn diesel needlessly and inflate fuel bills. But the problem goes deeper than that. The industry is rightly proud of the innovative programs being developed to improve fuel efficiency. However, as we take a step forward with leaner vehicles, better load plans, and other fuel saving strategies, traffic congestion tugs us back a step by reducing the number of miles per gallon traveled. In effect, infrastructure deficiencies are driving this zero sum game.

Still unconvinced? Let’s take a look at some figures.

A hypothetical shipper has an annual freight spend of $ 10 million (see below). The company’s fuel costs amount to an estimated 30% of this expenditure or $ 3 million. Diesel is priced at $ 3.90 per gallon, so the organization consumes just over 769,000 gallons of fuel annually. Assuming that the average fuel consumption of a truck is 6 miles per gallon, the shipper clocks 4, 615, 385 miles each year. If we reduce the miles per gallon rate by just one percentage point to account for idle time in traffic, the adjusted mpg is 5.94. The change increases the amount of diesel consumed to slightly over 777,000 gallons, and adds $ 30,303 to Shipper A’s fuel bill.

These figures are for demonstration purposes only, but the fact that a mere one percentage point fall in fuel efficiency translates into a $30,000 cost should ring alarm bells. Fuel is a pass-through cost and represents approximately 30% of total costs (for more on this see Leveling the Surcharge Playing Field post), so real money is disappearing from the bottom line. The charge becomes even more of an eye opener when the same reasoning is applied to a bigger freight operation where traffic-related delays are longer. Moreover, this calculation underestimates the actual cost since items such as the time spent dealing with late shipments and building extra safety stock are not included. Also keep in mind that despite today’s sagging economy, freight volumes are expected to increase over the next decade or so, potentially introducing more congestion on the roads.

We need across-the-board investments in infrastructure to counter this trend, and allow the fuel economies now being introduced to take full effect. But first we need to raise awareness levels, and that requires the industry to come together and communicate to legislators just how urgent the need is for infrastructure investments.

How can we do this?

Transportation practitioners could be more diligent about bringing congestion issues - and particularly the cost of congestion - to the attention of their government affairs professionals. These people may or may not be aware of the implications; they are often more concerned with other matters such as environmental regulation, tax issues, and labor rules. To some extent this is a function of the way freight management has evolved over recent years. As operations are outsourced to third-party providers, there tends to be less internal focus on transportation, particularly in other departments such as government affairs. If you’d like to learn about ways to participate and have your voice heard in Washington, check out C.H. Robinson’s recent blog post, How to Advocate for Your Interests in Washington.

In addition, the freight industry needs to become more engaged in the debate. C. H. Robinson Worldwide is a founding sponsor of the U.S. Chamber of Commerce’s Transportation Performance Index, for example. The index correlates the way infrastructure performs to economic growth.

If the nation’s transportation infrastructure continues to deteriorate, traffic congestion will worsen and supply chain costs will rise further - even as our equipment and supply chain processes becomes more fuel efficient. Stationary trucks is not the only problem; even slowing traffic down racks up additional expense. As Kevin McCarthy argues in his post Why Slow Driving is Not a Viable Route to Lower Fuel Bills, reducing the speed of trucks adds cost in several ways, for instance by reducing vehicle utilization rates.

Let’s emphasize that these costs are not theoretical; companies pay every time a truck becomes ensnared in traffic, and our efforts to improve fuel economy are undermined.

So the next time you are at the water cooler take the traffic congestion conversation to unfamiliar ground and make people aware of the true costs.

- Manager, Government Affairs 

Jason Craig is Manager, Government Affairs, at C.H. Robinson. Jason will be a panelist at CTS' 17th Annual Freight and Logistics Symposium December 6, 2013.


17th annual Freight and Logistics Symposium: The Gravity of Logistics

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Photo courtesy Dave Gonzalez, MnDOT

December 6, 2013
7:30 a.m. - noon
Ramada Plaza, Minneapolis, MN

Join us at the 17th annual Freight and Logistics Symposium to learn about the "gravity" of logistics—the seamless and uninhibited flow of goods from manufacturers and markets toward demand—and how it depends on infrastructure that can support and sustain economic growth.

The event will include a keynote presentation by Rosalyn Wilson, senior business analyst at Delcan Corporation and author of the 24th annual State of Logistics Report® presented by Penske Logistics and published by the Council of Supply Chain Management Professionals. This annual report is widely used by supply chain management professionals as the premier benchmark for logistics activity in the United States.

In addition, public, private, and academic professionals will discuss strategies to maintain the existing transportation infrastructure in Minnesota and the region. They also will discuss private- and public-sector perspectives on successes and challenges to the current supply chain.

To register, please visit the CTS website.


CTS fall research seminars begin September 26

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This fall, CTS will offer five research seminars on transportation topics ranging from resilient communities to asphalt at low temperatures.

Seminars will be held every Thursday from September 26 through October 31 (except Oct. 17) on the U of M campus in Minneapolis. You can either attend in person or watch the live webcast of each seminar. Additional information is available on the CTS website.

Seminar schedule:

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E-mail: cts@umn.edu

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