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3. Intermodal freight transport in the United States Lata Chatterjee and T.R. Lakshmanan

3.1 INTRODUCTION AND OVERVIEW

A variety of interrelated factors have converged in the last quarter of the twentieth century to alter, in significant and pervasive ways, the nature and scope of the US freight transportation enterprise – what is being trans- ported, how it is transported, where from and where to (origins and destin- ations of goods). There have been major changes in the volume and composition of goods, which are moved over longer distances in both domestic and global markets; freight is moved more frequently in smaller shipments, and, on average, is of higher value than before (Figure 3.1). Major freight routes (domestically and globally) are evolving, in short order, in response to changes in the global economy and in the geography of emerging production centres (US DOT 2000).

A major factor underlying this transformation of freight transport is rep- resented by the changes in the scale, in the composition, and in the structure of the American and global economies. The demand for transportation ser- vices has grown in response to the generally brisk performance of the US and global economies in this period. The US economy is becoming domin- antly services-oriented, and shifting from mass manufacturing to high value-added custom manufacturing. The resulting combination of increas- ing information content and decreasing material intensity of goods changes the character and value of goods being moved. Further, the US and other Organisation for Economic Co-operation and Development (OECD) coun- tries, in search of lower overall factor costs, have created global and regional free trade regimes, and globally organized production systems and value chains, which require speedy and timely movements of goods. These flows of goods are coordinated across national and global transport nodes and links in order to support the smooth functioning of the globalized economy.

Technological changes in the transport sector in the US have arrived in the form of the Interstate Highway System, the jet aircraft, the container and container ships, roll-on/roll-off vessels, and a variety of micro infrastructure

Konings, R., et al. The Future of Intermodal Freight Transport : Operations, Design and Policy, Edward Elgar Publishing, Incorporated, 2008. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=338815. Created from apus on 2019-04-05 14:39:40.

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to facilitate operations at seaports and airports. The use of information tech- nology (IT) greatly enhances transport operator and system efficiency, offering not only speedier goods transport at declining costs but also the ability to ‘integrate’ goods supply chains regionally and globally, while main- taining lean inventories.

The third factor underlying the major changes in the freight system is the institutional and organizational restructuring of the transport system since the 1980s. Public policies to reform economic institutions by deregulating and privatizing the transport sector have stimulated technical innovations and enhanced productivity in that sector – in the process lowering costs and improving speed and reliability. At the same time, two organizational innovations – business logistical systems and intermodalism – provide major sources of change in the freight sector.

Business logistical systems, aimed at minimizing total logistical costs (transportation, warehousing and inventories, insurance, administration, and so on), are providing customers with a number of additional valuable services such as global time-definite delivery, lean inventories, strategic out- sourcing of the distribution function, flexibility of destination choices, and so on. Such services from freight transport companies add value to the operations of their customers, thereby conferring strategic competitive advantages on customer US firms operating in the global economy.

Intermodalism is defined as the fully coordinated door-to-door efficient delivery of freight using two or more dissimilar modes of transport. While it has faced complex problems in the US with its history of mode-based development of infrastructure and public policies, three recent develop- ments are, however, promoting intermodalism.

Intermodal freight transport in the United States 35

Source: US DOT (2000), pp. 2–55.

Figure 3.1 Freight shipments by value and tonnage: 1977, 1993 and 1997

19971977 1993 19971977 1996

By value By tonnage

100%

% o

f sh

ip m

en ts

90%

80%

70% >50

Pounds per shipment

10 – 49.9 1 – 9.9 <1

60%

50%

40%

30%

20%

10%

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First, transport logistics goals are performance-based (for example min- imizing time and cost, improving reliability), rather than modally based. The capacity to connect origins and destinations is vital, and individual modes can fill niches (for example low cost or high speed) in an intermodal framework. Consequently, improving logistical practices stimulates inter- modalism. Second, the arrival of supporting technologies (for example containers) enables intermodalism. Third, the rising congestion in major US freight corridors, characterized by poor intermodal cooperation, is yet another stimulus to intermodal development.

The objective of this chapter is to describe the origin, development and prospects of intermodalism in the US. Section 3.2 traces the origin and evo- lution of intermodalism in the US, describing the interplay of broader forces of economic evolution, technological changes, institutional and organizational developments and the specific conditions of the US trans- port system and its adaptation. The next section outlines the recent trends in intermodalism in the US, offering an interpretive statistical portrait of developments. The chapter proceeds to an analysis of emerging develop- ments in US intermodalism in the context of observed and emerging technological, institutional and organizational factors. Next, policy and strategic issues related to the future of intermodalism are explored, attempting to identify the public sector’s enabling role. The final section concludes the chapter, sketching out future prospects for intermodalism.

3.2 EVOLUTION OF INTERMODAL TRANSPORT IN THE US

Definition and Elaboration

Intermodalism, as noted, is the fully coordinated door-to-door delivery of freight using two or more dissimilar modes of transport. Often the term ‘seamless’ is appended to this definition. This, in our view, is premature. It can be only a long-term goal as we are far from seamless transport. As noted below, there are many rigidities and inefficiencies in the system – a legacy of a freight system with a history of modal competition and mode- oriented infrastructure and other public policies. The current issue is how to bind the seams, that is, reduce transaction costs at transfer points. The aim of the ongoing institutional and technological innovations in inter- modalism is to minimize these transaction costs.

At this juncture it may be useful to differentiate between two concepts – multimodalism and intermodalism – occasionally used interchangeably in the literature. Multimodalism is not a new phenomenon in the US or

36 Intermodal transport operations

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elsewhere. Cargo shipment using two or more dissimilar modes has existed for hundreds of years. From early times trade and passenger movement across water necessitated integration of land and water modes at sea and river ports. Railway terminals in the nineteenth century and airports or ter- minals of pipelines in the twentieth century also involved freight movement across multiple modes. As detailed in Table 3.1, integration of dissimi- lar modes always occurred when transport across two or more media – land, water and air – were involved in cargo and passenger movements. Multimodalism prevailed in the pre-1950 era (from pre-industrial times to 1950) with an increasing number of transport modes being linked with the use of new technologies identified in Table 3.1. In the pre-industrial era, cargo was transferred from ships and barges to wheeled vehicles on land, the process facilitated by the development of ports and locks. In the rail- road period, the multimodal exchanges expanded beyond ship and road vehicles to include the railroad.

What distinguishes the post-1950 period from the earlier pattern? We can distinguish between the multimodal character of the pre-1950 era, the incip- ient and early stages of intermodality of the 1950–80 period, and the more robust intermodalism of the period after 1980. In the latter period, there is a revolution in the manner in which freight shipment is conceptualized. Not only are two or more modes involved, but the cargo moves in unitized form. Intermodalism is qualitatively different from multimodalism.

Intermodalism is desirable since inefficiencies in the freight sector impact upon the competitiveness of US firms in the transport and transport-using sectors. Intermodalism seeks to enhance the performance of the trans- portation system by increasing safety, reducing congestion and decreasing delays, thereby enabling more efficient freight and passenger trips (Hickling 1995). Greater efficiency translates into lower costs and an increase in the competitiveness of US firms in the global marketplace. The Intermodal Surface Transportation Act (ISTEA) emphasizes the importance of inter- modalism and challenged the transportation authorities, at the federal, state and local levels in the US, to increase interconnectivity between the maritime, air and land transport modes, and thereby enhances the effectiveness of the total network.

It is widely recognized in the US, in both industry and policy circles, that cooperation between transport modes has the potential to reduce conges- tion, especially in major freight corridors. While congestion problems result from a variety of factors, the concentration of production and trade in a rela- tively small number of metropolitan gateway cities, the increased dominance of a few ports, and the intermodal competition for the same freight, adds to the congestion. The traditional attitude toward infrastructure investment, namely building one’s way out of congestion, has not been helpful since

Intermodal freight transport in the United States 37

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38 Intermodal transport operations

Table 3.1 History of intermodalism in the United States

Period Point of Modes Technological Institutional interchange developments issues

Up to Water–land Ship and barges Locks and port – mid- with wheeled improvement 1800s vehicles

1847– Water–land Ship–rail–road Early types of Cooperation 1920s containers for between modes

LCL service at terminals Ship to rail at port. Rail to truck at rail–road terminals

1920s– Water–land Ship–rail–road. Heavy lift Sea Train Lines 1950s Land–land Railroad–road cranes Inc.

Air–land Air–road Elevator Cooperation carriages for between ship, railway. Rail rail and truck tracks on Air cargo multiple decks operations of ships Fastening and clamps

1950– Air–land Air–truck Containerization Regulatory 80 Water–land Container ships– of ocean cargo. barrier

Land–land railways. Trucks, Port removal. Rail trains, rail flatcar infrastructure and road

including modal gantry cranes competition Trailers on Land bridge flatcars and system with chassis on micro and mini flatcars. Roll-on/ bridges. Piggy- roll-off. Terminal back plans for infrastructure rail–road

After Air–land Double-stack Dedicated 1980 Water–land trains. Road intermodal

Land–land railer technology trains Communications Container technologies pools of North ITS American GPS

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increased road capacity induces more traffic. Moreover, technological and institutional advances in a variety of related sectors have made intermodal cooperation more feasible since the 1980s. Thus the policy focus is shifting towards addressing the unbalanced distribution of freight shipment across modes.

Until recently, the competitiveness between different freight transport modes for the same shipments gave rise to independent infrastructure deci- sions taken in the optimal interest of different modes. As these infrastruc- ture decisions have given rise to facilities and terminals locked into specific locations, adapting them to intermodalism requires not only major invest- ments but also changes in attitudes and behaviour of modal actors. Basically, intermodalism requires refocusing the attention of the transport system on maximizing efficient goods movement and the quality of trans- port services across the total supply chain rather than on maximizing the efficiency of each individual mode.

Transport integration across modes faces additional complex problems rising from institutional and regulatory choices made at several levels of the government, that is, federal, state and local. These choices, legacies of the past, currently impact upon the costs and the quality of service of freight movement, aspects particularly important during the current phase of increasing globalization. A more complete definition of intermodalism needs to incorporate the physical, institutional and informational elements that facilitate cargo shipments in a ‘seamless’ manner across different modes. Thus, intermodalism can be more accurately defined as movement of cargo across a transportation network in which the physical, institu- tional and information infrastructures are integrated to reduce transaction costs and maximize operational efficiencies. Since seamless transport across modes is a major objective, this chapter discusses some of the obsta- cles to and many of the advances made towards furthering intermodalism in freight transport in the US.

Intermodal freight transport in the United States 39

Table 3.1 (continued)

Period Point of Modes Technological Institutional interchange developments issues

Container System Intermodal hubs and spokes Logistic firms

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Forces Propelling Intermodalism

The major factor underlying the increasing demand for intermodalism is the globalization of the American economy. North America, Europe and other countries have built on the Bretton Woods system, the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) to create a global free trade regime, including regional Preferential Trading Areas such as the North American Free Trade Agreement (NAFTA), the EU and Mercosur. The industrialized countries, driven by the pressure to reduce overall factor costs in the competitive global economy, are using these open trading regimes to erect a globally distributed production system. There is increasing division of labour in the production processes as component activities are further disaggregated and spatially reallocated. This partition of the production process – the slicing of the ‘production value chain’ – across national borders leads to different stages of production being carried out across several countries. Raw mate- rials and components may come from two different countries, with assem- bly in a third, and marketing from yet another country, in response to market signals from around the world. Since parts and components are ‘sourced’ internationally, they need to be transported cheaply, speedily and reliably at specific times required in the production process. The resulting supply chain – defined as a set of three or more organizations directly linked by one or more of the upstream and downstream flows of products, services, finances and information from a source to a customer – needs to be managed (DeWitt and Clinger 2000). Intermodal transportation, with the potential for integrating multiple modes, offers a flexible response to the supply chain requirements in the global production and distribution system. Integrating modes requires a systems approach and a high level of knowledge and competence in information, equipment and infrastructure, which together coordinate transport and supply chains.

Technological innovations in transport and information sectors in recent decades have made possible intermodal transportation and supply chains. These enabling and space-shrinking transport and information technologies (IT) are fundamentally transforming space–time relationships worldwide. Specifically, containerization has enabled interchange of goods between modes in a timely, cost-effective manner. US shipbuilding innovations in advanced containerships and roll-on/roll-off vessels, and companion inven- tions like double-stack trains, have revolutionized intermodal transport. The performance of transport vehicles and infrastructure is greatly increased by developments in the complementary IT. Information technologies, which represent a confluence of computer and communication technologies, are improving the responsiveness and efficiency of vehicles and their operators

40 Intermodal transport operations

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and making possible numerous transport innovations – in the process trans- forming both the technologies of transport and communications and the technologies of products and processes. Containers and cargoes are contin- ually ‘visible’ in transit to shippers and carriers, as the use of intelligent trans- portation systems (ITS) and global positioning systems (GPS) increases.

Institutional and organizational reform in the transport sector has been the third force propelling intermodalism in the US. The deregulation of the US transport sector since 1978–80 has not only improved the performance of the various modes, but has also stimulated intermodalism. First, major changes occurred in the US in the conduct, performance and structure of airlines, trucking and railroads after deregulation: more competition among all modal carriers, lower prices, a wider set of service offerings, and new entry into most geographic and product markets. Carriers have been able to rationalize their networks, improve the efficiency of their opera- tions, and set rates in line with competitive market conditions. There was a significant change in the cost structure of the railroad industry following deregulation, with productivity growing at well over 2 per cent a year (Bereskin 1996). Figure 3.2 shows the distinct progress of productivity in the various modes following deregulation.

The logistics system was a ‘push’ system in the pre-1980 era, when manufacturing, retailing and distribution were organized to support mass

Intermodal freight transport in the United States 41

Source: US DOT (2000).

Figure 3.2 Productivity trends for transportation industries: 1955–97

100

120

140

160

180

200

1955 1965 1975 1985 1995 1997

19 87

= 10

Trucking, except local (SIC 4213) Petroleum Piplines Air Transportation Railroad (SIC 4011)

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production, warehousing and retailing. Centralized design, production, marketing and long production lines to achieve scale economies were the rule. Large costly inventories were kept to buffer against supply–demand variations. Transportation moved goods from supplier to manufacturer, to distributor, to retailer – each link managed and priced independently.

Today, it is increasingly a ‘pull’ logistical system, made possible by IT. Here customer demand is tracked daily or more often by suppliers, manu- facturers, retailers and distributors. Orders and sales patterns pull goods through the supply chain. Production follows the order, leading to just-in- time (JIT) manufacturing and retail systems. The risk of over- or under- shooting market needs, through large inventories, is reduced since the ‘pull’ system adjusts production and delivery to consumers’ time trajec- tory of needs. The consequence of the ‘pull’ system is a restructuring of the freight transport sector. Taking advantage of the new IT capabilities of measuring, monitoring, communicating and controlling the supply chain, goods producers and retailers provide smaller, more frequent and longer-distance transport services in order to secure lower costs of labour and supplies. This approach requires the provision of integrated and intermodal transportation services which are timely, reliable, cost- effective and can be tracked from origin to destination. Hence the spurt in intermodalism.

3.3 PATTERNS OF INTERMODALISM IN THE US

Statistical Highlights of the US Freight Sector

The US freight services sector has witnessed significant quantitative and qualitative changes in recent decades. Between 1965 and 1998 total tonnage moved in the US rose from 4.54 billion tons to 6.21 billion tons (an increase of 37 per cent), while ton-miles rose more sharply from 1854 billion ton- miles to 3710 billion ton-miles (an increase of 100 per cent). As noted below, these aggregate changes reflect the interacting effects in this period of several broad economic processes, that is, increasing spatial integration and robust growth of the American economy, increasing shift to less material-intensive service sectors, and a variety of technological and orga- nizational changes in the economy. The qualitative change since the 1980s, as noted above, is in the scope of the freight services being offered to transport-using firms in the form of greater speed and reliability, time- definite global delivery of goods and flexibility in destinations.

Since the 1960s, freight and passenger mobility has increased with the growth of the Gross Domestic Product (GDP). Passenger miles have grown

42 Intermodal transport operations

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more rapidly, relative to freight, in the 1960–90 period, with an income elas- ticity over the entire period of close to 1 (0.94). Ton-miles of freight exhibit a slower relative growth with an income elasticity of 0.50. In the decades of the 1960s and 1970s, however, freight traffic growth kept pace with GDP growth, but has subsequently slackened (Figure 3.3).

In about the same period (1970–95), the growth in tonnage and ton-miles varied, however, by mode (Figure 3.4). Intercity trucking ton-miles grew by 124 per cent, while air freight ton-miles grew by 468 per cent.

The measure of freight intensity, relating freight levels to GDP, tell the same story more sharply. Tons per US dollar 1000 GDP (1992 prices) declined between 1965 and 1998 by 54 per cent from 1.58 to 0.73 tons. Ton- miles per US dollar GDP dropped between 1960 and 1998 by 36 per cent from 0.69 miles to 0.44 miles (Figure 3.5). Clearly, the economy shows a consistent trend towards lower intensity of freight use.

The measures of freight intensity (Figure 3.5) reflect the recent transfor- mation of the US economy, with less and less of the GDP deriving from goods production. The oft-noted increasing shift in the US to a service economy over this period signifies a reduced resource and energy intensity and the consequent lower intensity of goods generation for movement. At the same time in this period, transport technology changes such as the introduction of containers, the Interstate System and jet aircraft continued to lower transport costs sharply. The common measure of shipping costs (the ratio of cost, insurance, freight, c.i.f. trade value – measured as cost to the importing country – to free on board, f.o.b. trade value – measured as it leaves the exporting country) declined from 9.5 per cent in 1950 to about 6 per cent in 1990 (Frankel 2000).

In the American economy, where the transition to knowledge-intensive sectors is advanced, the characterization of the freight sector in terms of

Intermodal freight transport in the United States 43

Source: National Transportation Statistics (2000), BTS, USDOT.

Figure 3.3 Growth of the economy and passenger and freight transport development, 1960–98

0 1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000

19 60

19 65

19 70

19 75

19 80

19 85

19 90

19 91

19 92

19 93

19 94

19 95

19 96

19 97

19 98

b ill

io n

s Chained (1992) $ (billions)

Passenger-miles (billions)

Ton-miles (billions)

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tons and ton-miles is inadequate and somewhat misleading in view of the changes in the value and weight composition of goods. The Commodity Flow Surveys conducted by the US Department of Transportation (DOT) Bureau of Transportation Statistics (BTS) in 1993 and 1997 provide a rare measurement of freight by value (in addition to tons and ton-miles), and a richer view of some of the recent changes in the freight services industry (Lakshmanan and Anderson 2001).

44 Intermodal transport operations

Figure 3.4 Growth of freight traffic by modes, 1970–95

581

1120

500

1000

1500

Tons (billion)

1970 1995

Tons of international waterborne trade

412

921

500

1000

Truck- miles

(billion)

1970 1995

Intercity truck ton-miles

2.2

12.5

Ton-miles (billion)

1970 1995

Air carrier freight ton-miles

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Table 3.2 displays the freight moved measured in value terms in 1993 and 1997. The value of freight moved in the US in this period grew three times as fast as GDP. The value of freight to be moved for a dollar of GDP rose between 1993 and 1997 by 6 cents or 6.6 per cent. High value-added sectors increasingly contributed to freight movements and the growth in size of the economy.

Intermodal Freight Patterns

During this period of robust freight sector growth in the US, technological advances and organizational innovations led the move towards intermodal freight shipments. The intermodal container, which was first introduced in the US in 1956 for domestic ocean–truck services, has become a common denominator across modes, revolutionizing freight movement and ushering

Intermodal freight transport in the United States 45

Source: National Transportation Statistics, BTS, USDOT.

Figure 3.5 US freight intensity 1960–98

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

19 60

19 65

19 70

19 75

19 80

19 85

19 90

19 91

19 92

19 93

19 94

19 95

19 96

19 97

19 98

R a

tio

0.2

0.4

0.6

0.8

1.2

1.4

1.6

1.8 ton-miles per US$1 GDP tons per US$1000 GDP

Table 3.2 US freight by value, 1993, 1997

Indicator 1993 1997 % increase, 1993–97

GDP (billions) chained 7054 7270 3.0 1992 dollars

Freight (value) 6335 6944 9.6 Freight (value) / GDP 0.90 0.96 6.6

Source: BTS Commodity Flow Survey, 1993–97. Special Tabulations by Felix Amma-Tagoe, (2001).

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in intermodalism. As the efficiency of containerized transport became evident, ports, railroads and motor carriers invested in container facilities. Associated developments, such as double-stack trains in the railroad and port sectors as well as the explosion of container traffic worldwide have stimulated intermodal transportation.

Table 3.3 highlights the modal composition of freight movements in the US in 1997 as gleaned from the Commodity Flow Survey of the US Bureau of Transportation Statistics. Trucks, accounting for 72 per cent of freight by value (69.4 per cent of tonnage, and 37.6 per cent of ton-miles), are the

46 Intermodal transport operations

Table 3.3 Estimate of total commercial freight activity in the United States by mode of transportation, 1997

Mode of transportation Value Tons Ton-miles ($ billions) 1997 (millions) (billions)

Overall total (CFS plus 8 556 14 800 3 951 out-of-scope estimates)

Commodity Flow Survey data Mode Truck 4 982 7 701 1 024 Rail 320 1 550 1 023 Water 76 563 262 Air (includes truck and air) 229 4 6 Pipeline1 113 618 169 Intermodal Parcel, US Postal Service or 856 24 18

courier Truck and rail 76 54 56 Truck and water 8 33 35 Rail and water 2 79 78 Other multiple modes 4 26 19 Other and unknown modes 279 437 73 CFS subtotal, all modes 6 944 11 090 2 761

Notes: These out-of-scope estimates were calculated by the Oak Ridge National Laboratory. The Bureau of Transportation Statistics, Commodity Flow Survey, US Department of Transportation, Washington, DC, May 2000. 1 The pipeline ton-miles shown here are not a Commodity Flow Survey (CFS) estimate.

CFS data for pipelines exclude most shipments of crude oil. The ton-miles were estimated based on Association of Oil Pipelines data.

Source: US Department of Transportation, Bureau of Transportation Statistics, based on 1997 Commodity Flow Survey data plus additional estimates from the Oak Ridge National Laboratory.

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dominant mode. Growth in high-value trade in general, the growth of high- value trade with the US’s NAFTA partners – Canada and Mexico – and the growing global market for time-sensitive, high-value goods account for this. Domestically, trucks carry domestically more freight than railroads when measured in value terms. While railroads account for about the same ton-miles, their share of value is under 6 per cent, and of tons 14 per cent. Railroads move low-value goods (coal, grain, and so on) over long dis- tances (Lakshmanan 1998).

Intermodal transport – represented by parcel post, truck and rail, truck and water, rail and water, and other multiple modes not including truck and air – accounts for 13.62 per cent of total freight value and 7.4 per cent of total ton-miles. This share is higher than that of pipelines. However, in terms of tonnage moved, intermodal transport is very small, accounting for 0.02 per cent of total tonnage. Higher-value goods are transported longer dis- tances intermodally. Within the intermodal category, parcel, postal or courier service clearly had the highest value in 1993 ($29 816/ton) while other intermodes, such as truck and rail had higher value per ton than uni- modal transport – $690 for truck, $160 for rail, $134 for pipeline, $118 for water (Figure 3.6).

Intermodal freight transport in the United States 47

Source: Bureau of Transportation Statistics (BTS) (1996). US Department of Transportation, p. 16.

Figure 3.6 Value, tons and ton-miles of freight shipments by mode, 1993

Ton-miles

Parcel, postal, courier service

Truck (for-hire, private, both)

Air (including truck and air)

Rail

Water

Pipeline

Truck and rail

Other intermodal combinations

Other and unknown

Value Tons

100

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48 Intermodal transport operations

Note: JIT: just-in-time, DST: double-stack trains

Figure 3.7 Forms of freight intermodalism by commodities

Air

Express

Truck Containers,

JIT

shipments,

comman-

dation

Domestic

Rail None intermodal

DST

and TOFC

Petroleum

None gas None

Pipe

Coal,

grain,

Petroleum,

Barge None chemicals Coal, grain,

ore

chemicals

Express Inter-

national

Containers,

grain

Coal,

Ship Containers,

JIT

containers Autos, Petroleum, petroleum,

shipments automo-

biles

chemicals gasoline containers

Air Truck Rail Pipe Barge Ship

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In Figure 3.7 the forms of intermodalism by type of commodities are shown. There are cooperative relations between some modes, for example air–truck, rail–truck and ship–truck. Rail and truck cooperate with trailer on flatcar (TOFC) and chassis on flatcar (COFC) for long-distance hauls. Air–truck partnerships handle high-value shipments of express goods as noted above. On the other hand, several modes have virtually no interac- tion – some due to their inherent competitiveness such as air–rail or pipelines–rail, others due to lack of common infrastructure interfaces at terminals.

Intermodalism promotes greater efficiency through cost reductions and improved service quality as each mode has different cost or service advan- tages. Modes vary in their average haul distances due to these differential cost–benefit advantages. For instance, trucks provide door-to-door delivery and are most efficient for shorter hauls. Rail and water have the advantage of low–cost line haulage, in contrast to private trucks which operate at local levels. The US has the largest active rail network in the world, amounting to more than 128 000 miles. In terms of ton-miles railways still dominate the movement of heavier bulk commodities. Railways have the longest average haul distance among the land modes. Air and air–truck have advantages of speed and are valuable for express packages and just-in-time delivery as shown in Figure 3.7, which indicates the complementarities between the modes. Intermodal cooperation occurs more commonly for longer hauls of freight as it permits a combination of the cost savings advantage provided by each mode. Even though rail intermodalism has been doubling since 1990 the base is still relatively small (Muller 1999). The total intermodal shipments including rail–water, truck–water, rail–truck and truck–air are still minor and account for less than one-fifth of the volume of freight moved by rail alone.

3.5 TECHNICAL AND INSTITUTIONAL DEVELOPMENTS

Institutional and Organizational Factors

Intermodalism is economically viable only through reduction of transac- tion costs at points of connectivity. Interconnectivity along a transport network requires improvement of the links and nodes. The nodes – the air and ocean ports, railway and truck terminals – pose the greatest challenges as interconnectivity occurs at these locations. Prior legacy has left physical infrastructures lacking spatial connectivity between terminals of the various modes, and lack of sufficient space to retrofit the urban form to

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accommodate to intermodalism. For instance, container ports require vast spaces for assembling and moving thousands of containers. Often these ports are located proximately to congested metropolitan areas that impede the flow of trains and trucks at the gateways. Some of these problems are being addressed through infrastructure investments, others involve adop- tion of technological innovations in information and cargo handling. Institutional changes such as greater cooperation between public and private sectors and evolution of new forms of business enterprises such as third- and fourth-party logistics firms are also working to relieve conges- tion and increase interconnectivity between modes.

As noted earlier, except for parcel, package and courier service, inter- modalism is still in its early stages of development. Intermodalism implies freight transfers between modes and intermodalism will not be adopted if these transfers involve high human, time and monetary costs. In this section we discuss selected facilitative technologies and institutional factors that are reducing these transaction costs.

The ability to move cargo smoothly at the water–land and air–land boundaries is a necessary precondition for successful adoption of inter- modal delivery schedules. A number of new enterprises have been created to facilitate goods movement and transfer and thereby reduce transaction costs at these boundaries. These enterprises have developed two classes of adaptive responses. First, the total task has been segmented by specialized firms whose personnel perform selected functions and through their exper- tise and contacts are important in saving time and improving connectivity and system reliability. Second, these enterprises utilize Internet and com- munications technologies in the creation of associations and cooperative ventures between firms with a common interest.

The following types of firms are important for outsourcing and inter- modal coordination:

● Freight forwarders are responsible for the transportation of goods from origin to destination including the assumption of liability for loss or damage of cargo. They contract with motor, rail, water carri- ers and shippers for procuring freight to consolidate intermodal ship- ments and also provide intermodal bills of lading.

● Container leasing companies allow carriers to lease containers, and slightly less than 50 per cent of the world’s land–ocean container fleet is owned by them. In 1997, ten of the largest leasing companies owned 90 per cent of the world’s leased containers and 80 per cent of all leased TEUs (twenty-foot equivalent units) are owned by American companies. These firms provide flexibility to carriers in times of high demand. Containers are a multi-million dollar fixed investment, where

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usage is subject to business and trade cycle fluctuations. Consequently, ownership of containers is highly concentrated – two US companies, Transamerica Leasing and Genstar Container Corporation, control 45 per cent of the worldwide rental fleet of TEUs due to their world- wide facilities and container availability, which allows them to capture scale economies.

● Consolidators take LTL (less-than-truckload) loads and consolidate them into trailer or boxcar loads. Also they break down truckload shipments and distribute them to warehouses by geographic area or location of hub. The consolidators could be truckers, warehouse operators or customs brokers.

● Customs brokers are important for JIT shipments. As authorized agents of shippers for dealing with the US Customs they currently handle 90 per cent of all goods entering the US. They are important for time savings by providing highly specialized expertise in docu- mentation of cargo entry, bills of lading, entry manifests, making invoices and paying customs duty which they later recover from the importer.

● Logistical firms: third- and fourth-party logistical firms specialize in the provision of logistical services on contract, having been spurred by the changing relationship between shippers, carriers and interme- diaries following transport deregulation. These firms provide for-hire services to client firms which need to outsource functions such as inventory and order management, selection of carriers and ware- houses, negotiation of transport rates and management of logistical information services. Currently, 50 per cent of Fortune 500 com- panies have contracts with third-party firms with business amount- ing to $46 million in 1999 (Bradley, Gooley and Cooke 2000). Physical and human capital asset considerations such as adequate fleet size and composition, and in-house availability of personnel skilled in a rapidly changing environment of logistical innovations, are fueling the rapid growth of logistical firms.

Technological Factors

Intermodalism had its start in technological improvements such as con- tainerization. However, the rapid growth of container transportation was made feasible by related technological improvements through the rational- ization of cargo-handling equipment. For instance, gantry cranes discharge containers between the ship and pier at an average of 30 containers per hour and double-handling equipment on a single gantry can increase the rate to 40 containers per hour. Such rapid offloading of containers requires

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technological developments in ground container moving and stacking equipment such as corn stackers. These types of equipment permit better utilization of space in container terminals and more rapid interface during load transfers between modes. On-dock railways with roll-on and roll-off transfers on flatcars allow speedier transfers between sea, rail and road. Intermodalism also requires standardization of containers compatible with two or more modes. For instance air–truck intermodalism requires smaller-sized containers and can be contrasted with larger containers for ocean–rail–truck. These are only a few of the numerous innovations in physical technologies which have facilitated intermodalism (Hagler Bailly 1999).

Information technologies provide a different function and have been crit- ical for intermodalism as efficient and timely transport of freight across a variety of modes requires a plethora of information on the type, size, com- position, origin, destination and the location during transit of these con- tainers. Innovations such as automated electronic identification (AEI) and GPS have been crucial for intermodalism. To provide greater accuracy, the US DOT is implementing the DGPS (differential GPS) to increase accu- racy in predictability, to provide finer area coverage (US DOT 2000). Automatic vehicle location (AVL) technologies are used for tracking mobile assets such as vessels, vehicles, containers and so on.

A wide variety of innovations are grouped under the rubric of intelligent transportation systems (ITS). Intermodalism would not have been possible without these advances in information processing and communications technologies. ITS has increased system capacity, permitted better coordin- ation between modes, reduced transit times and increased overall produc- tivity of the network (Proper 2003). For instance, intelligent grade crossings reduce accidents at modal interfaces, that is, road and rail. The US DOT has played a key role in the development of a national ITS architecture and standard definition.

The interaction between the physical and information technologies has fuelled the institutional and organizational development discussed above. These organization innovations can monitor the freight movement, adjust and control the timing of shipments, and so on. Moreover, the recent explo- sion of IT and data management software for the transport sector allows the acquisition of capability at lower and lower costs.

3.6 PUBLIC POLICY ISSUES

There is an important role for the public sector in facilitating inter- modalism. The type and nature of the public role in intermodalism

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derives from the fact that intermodalism is a quasi-public good that in some aspects reflects market failure. Even though there are system-wide external benefits from investments in intermodalism, there will be an underprovision due to market failure, leading to congestion along major corridors, and at terminals such as airports and seaports. In addition to the standard public-good attributes of transportation infrastructure such as non-excludability and pervasive externalities, additional problems arise from the fact that each mode views itself as a private good. The legacy of modal competition in the overall transportation system and transporta- tion network reflects this attitude as each mode made investment and management decisions to maximize its individual private interests. As noted earlier, landside congestion of containers or truck queues at access gateways arose because the port authorities were interested in unloading and offloading containers to maximize turnaround times for ships, that is, servicing their major client. Indeed, the efficiency of a port is still mea- sured by the standard indicator of ‘idle’ time spent by a freighter at the port, instead of measuring throughput such as time spent by containers at ports. The latter is an intermodal indicator in contrast to the former which is a modal indicator. Each mode in optimizing its own welfare in terms of service provision as a private good can only lead to suboptimal transportation conditions in the country, as noted by the US government in its legislative mandate. Hence, here is the attribution of an important role for the public sector.

It is important to recognize that the roots of intermodal cooperation lie in private sector activities, starting with the container revolution. The lag has occurred in the requisite infrastructure provision. The federal government has recognized the importance of fostering and speeding up the market- driven forces for intermodalism, as the poor coordination between modes posed serious constraints to national productivity (Krebs 1994). As early as 1988, the Subcouncil on Public Infrastructure drew attention to the impor- tance of intermodalism for increasing national competitiveness; concerns that are reflected in the ISTEA (1991) and TEA 21 (1998) legislations. The ISTEA created the Office of Intermodalism, which was a valuable first step in recognition of the important role of the public sector. The ISTEA also set standards for a National Intermodal Transportation System and priori- tized the need for a more integrated system (National Research Council 1993). However, much more needs to be accomplished by the public sector to improve the efficiency and effectiveness of the total transport system in the US (Gwilliam 1998). We briefly highlight some classes of enabling interventions.

What is the role of public policy if we recognize the public-good char- acter of intermodalism? That role includes: (1) coordination, planning,

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location and design of intermodal facilities; (2) infrastructure provision through direct investment in grants and loans, and indirectly through loan guarantees and insurance mechanisms; (3) improving safety and security issues through regulation and enforcement; and (4) facilitating informa- tion flows. We have discussed these aspects in the body of the chapter. Here we discuss only the logic for these types of interventions.

The public role in planning and design guidance is necessary due to the fundamental lack of coordination between the numerous agents supplying and using the transport infrastructure at points of modal contact. For example, any change in the existing situation implies differential costs and benefits to the various modal users, and rearrangement of positive and neg- ative externalities. The public sector can shape the physical environment through analysis provided by planning agencies and consultants, provide incentives and enforce regulations. In addition, the public sector can use the powers of eminent domain (compulsory purchase or expropriation) to secure land for terminals on both brownfield and greenfield sites. In cases of heavily built-up land, as around Long Beach, the government can provide planning alternatives such as the Alameda Corridor. The ISTEA and TEA 21 have resulted in greater attention being paid to efficient move- ment of goods to and from aircraft in truck and aircraft operations. As several state transportation agencies such as the Oregon Department of Transportation (ODOT) and the Massachusetts Department of Transportation have demonstrated, the public sector can play an important role in providing the framework for discussion, brokering interactions among various stakeholders toward a common goal, and analysing and planning the spatial organization in a regional context. This role is critical as there are relatively few locations where most of the bottlenecks and con- gestion occurs – predominantly around metropolitan areas with imper- fectly articulated networks of associations that include public, private and civil society sectors.

The public sector needs to channel economic resources in order to support the need for massive demand for finance and to overcome the potential of underinvestment. This role is a direct extension of the logic for public expenditure decisions in funding construction through tax revenues, raising capital through bonds or underwriting private investment through risk insurance. The expenditure of funds can minimize or mitigate the stasis and resistance to change found in intermodal decision making. The US DOT (1998, p. 62) notes that expanded public–private partnerships will be required to fund costly projects. The total cost for the Alameda Corridor is projected to be $100 million per mile.

Safety and security of cargo at terminals becomes an increasing problem with the relaxation of the regulatory and enforcement role of the public

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sector. Indeed cargo crime at intermodal points of transfer has become a major activity of organized crime. Theft of containers has become rela- tively easy due to their mobility, and yet a single container of a high-value good can be valued at millions of dollars. Enforcement is an important role for the government. In addition there are environmental and traffic safety issues. There is an important role for the public sector in incorporating safety enhancement standards into the physical design of intermodal ter- minals, along with technology to monitor theft with a greater focus on pre- vention rather than after-the-fact mitigation.

Much of the information technology which brings about data connec- tivity and operational cohesion in the transportation industry has been fostered by the transportation companies. Each mode has invested significantly in electronic communication. However, intermodalism involves the interchange of information across the industry actors and there are serious problems arising from poor communication inter- faces between and within modes. There are numerous vendors producing customized software and there is a public role in standardizing and making uniform standards for intermodal shipments of cargo. The Transportation Data Coordinating Committee (TDCC) began to address the standardization and coordination needs as early as 1968. Electronic Data Interchange (EDI) standards were developed by the American National Standards Institute (ANSI) in 1983 for the electronic exchange of data between and within a large variety of organizations such as public sector agencies, firms and port authorities. However, there are different standards that are not compatible in software. Cumbersome translation software is routinely used, which becomes a problem for intermodalism (Norris and Haines 1996). For example, Muller (1999, p. 285) notes that only a fraction of the 2000 licensed forwarders in ocean shipping have adopted information and process standardized procedures. The majority use customized software which is a handicap to intermodal interactions even as it increases firm and modal efficiencies. The public sector has an important role to play in developing and sponsoring the use of protocols such as the Montreal Protocol for handling waybills. There is an increased need for integrating information technology with infrastructure and the development of multinational standards and requirements (US DOT 1998). The Intermodal Association of North America (IANA) provides a forum for such discussions.

Since the 1980s, transportation has moved from a highly regulated industry to a situation where competitive market forces are guiding the development of the industry. While this has increased modal efficiencies through a diversity of technological applications, the prolifer- ation of alternatives poses constraints for intermodalism. It is in the areas

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of coordination, guidance and ensuring safety, that is, where externalities are most prevalent, that there is a critical role for the public sector.

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