Office of Operations Freight Management and Operations

II. NHS Intermodal Connectors: Their Role in Freight Movement and Emerging Challenges

NHS Intermodal Connector Role in Goods Movement

NHS intermodal connectors are critical components of the Nation's freight system that tie modes together and facilitate distribution of products to users. They are key links integral to achieving a U.S. transportation system that will seamlessly move goods within regions, across the country and throughout the world.

They are relatively short, averaging less than two miles, and are usually local, county, or city streets designed to lower standards because they carry less volume at lower speeds than the typical mainline NHS route (primarily Interstate and Principal Arterial). These connectors, however, must be able to handle heavy large trucks moving between the terminals and mainline NHS system or to other terminals for transfer to other modes (i.e., from port to rail yard). Those in poor condition or those that have design deficiencies can slow freight movement, damage goods in transit, decrease efficiency and negatively impact safety. A well-designed and maintained intermodal connector will allow freight to move efficiently to and from the terminal.

Intermodal connectors, as part of the overall freight system, carry the full range of commodities, from high value container shipments to low value, bulk moves. They carry items found in retail stores, the materials used in factories and hospitals, the supplies and express, overnight packages for offices and businesses, crops from farms, forests and orchards, coal and petroleum products, etc. While the movement of freight provides the essentials for daily living, freight movements (primarily trucks) often conflict with local vehicular traffic and compete for roadway space.

NHS Intermodal Connector Role in Military Deployments

The intermodal connectors also support defense mobilization and national security. The military is becoming more reliant on the commercial transportation system, utilizing ports, airports, rail, and highways to transport supplies and personnel in both peacetime and mobilization efforts. DOD is already a major user of commercial services, spending $2 billion annually on freight services alone. Further, the military anticipates that it will rely on commercial providers for 90 percent of its peacetime movements and 85 percent of its wartime movements.(4)

Looking into the future, DOD has a requirement that by 2001, the military must be able to respond to two geographically divergent major regional contingencies, each the size of Desert Storm, at nearly the same time. This translates into the need to ship 7,000 containers a week, along with troops and rolling stock movements, most of which will travel on NHS intermodal freight connectors. More than 3.5 million tons were moved as part of Desert Storm/Desert Shield, which is roughly the equivalent of moving the entire city of Atlanta (people, their belongings and cars) half way around the world. National defense mobilization and deployment is increasingly reliant on the NHS connectors to project U.S. military power abroad to meet the challenges of regional conflicts and other defense missions. With redeployment of U.S. military units stateside, logistics supply lines are longer and each portion of the line is expected to meet time sensitive mobilization requirements.

Emerging Issues and Changes in the Freight Industry

The NHS connectors face a series of critical issues and challenges in the 21st century. Industry changes frame the overall business context under which the intermodal connectors are developed and operated. Within that business context, there are issues specific to the development and operation of the intermodal connectors. The freight industry and the intermodal movement of goods are undergoing radical changes. Intermodal connectors will need to be responsive and flexible as distribution and logistics strategies evolve and new technologies, equipment and vehicles are deployed. These changes will affect route and mode selection and the amount and composition of freight and vehicles moving over the NHS connectors. The major changes reshaping freight transportation are business practices and the qualities sought in freight transportation services.

The remainder of this Chapter is summarized from an FHWA-commissioned report "The Role of the National Highway System Connectors: Industry Context and Issues". It identifies some of the overarching changes in the U.S. freight industry and business models that will create future challenges for the NHS connectors and the Nation's ability to harness and use its freight transportation infrastructure to meet customer requirements.

Changing Business Practices

In the past few decades, the U.S. economy has undergone changes as dramatic as those that occurred during the industrial revolution. These changing business practices are a reflection of major evolutions in key economic sectors, such as manufacturing and trade. Much of this restructuring, changing the way businesses operate, was not only brought about by transportation efficiencies but is also increasingly dependent on it.

Restructuring of traditional manufacturing and globalization: To maintain competitive advantage, manufacturers are continually searching for opportunities to restructure their operations. They are consolidating production at fewer and lower cost locations, and reducing inventory-carrying costs by limiting inventories of supplies and parts used in manufacturing and moving production directly into supply chains. This downsizing and restructuring has required them to modernize their manufacturing and distribution systems to become far more efficient and reliable than in the past.

In our global economy, American manufacturers increasingly rely on multinational production. They must be able to efficiently move raw materials, partially assembled products and finished goods to and from all areas of the world to remain competitive. Consequently, logistics systems must be able to rapidly adjust to changing demand and inventories during the various stages of the production and distribution cycle around the globe. The NHS connectors are an integral part of these new logistical systems.

Production runs and just-in-time (JIT) delivery: As the value of products have increased, one way to lower overall costs has been to reduce the amount of inventory on hand both in production and distribution. With the uncertainty of demand levels resulting in larger or smaller-than-required inventory levels at certain times in the economic cycle, manufacturers have adopted techniques that permit rapid adaptation to changes in demand. An important factor in reducing overall costs is to achieve a delicate balance between maintaining an adequate inventory and the volume of production runs.

Responding to specialized consumer preferences and tastes, manufacturing now involves smaller, shorter production runs. Companies have adopted techniques that permit the production of a variety of goods, aimed at various market segments, with the same production line. These new production processes require the ability to receive inputs just in time.

This emphasis on reducing inventories requires more frequent, smaller shipments. The transportation infrastructure – including the connectors – must be able to function reliably so that businesses can count on their deliveries being on time, with minimal delays due to congestion at or near intermodal terminals.

E-commerce: The development of new computer and Internet technologies has created a revolution in how businesses communicate and consumers shop. For example, the "1998/1999 Boeing World Air Cargo Forecast" noted that "consumers are increasingly using the Internet for home and business purchases, fueling growth in air/truck logistic networks."(5) Statistics from the 1999 holiday season confirm this trend. An analysis by VISA estimates that "Internet shoppers using its cards spent $1.47 billion this November and December, 179 percent more than in those months last year."(6) Similarly, a New York Times/CBS News poll found that 17 percent of the adults surveyed bought gifts over the Internet compared with seven percent in 1998.(7) But even more significant is emerging business-to-business e-commerce. Linking businesses with suppliers is introducing more choices and competition, thereby creating savings in their purchases.

The success of e-commerce rests not only with the Internet but also on the ability of the transportation system to deliver the goods ordered quickly and as promised and also making returns convenient and prompt. Accordingly, e-commerce relies heavily on an efficient, seamless freight transportation system.

Qualities Sought in Freight Transportation Services

The increasingly competitive environment in which firms must operate has fundamentally altered the use of freight transportation services and infrastructure. Businesses view freight transportation as a means for providing better service to customers, supporting their operations and for increasing efficiency as well as controlling overall costs. Businesses make decisions on freight transportation in terms of what they achieve for their firms, not as simply trucks, trains, vessels and aircraft. In fact, the actual physical movement and routing of cargo is increasingly likely to be handled by a third party logistics provider (3PL) on behalf of the firm. The 3PLs are managers of the flow of goods as they pass from origin to destination through inventory, transport, and distribution, including documentation and related material control services, on behalf of the customer. Firms seek to balance the following qualities in their freight transportation service-overall cost vs. reliability, transit time, efficiency, and damage minimization.

For example, to reduce the overall cost of production, a manufacturer can reduce inventory costs of parts needed in a production run with a marginal increase in transportation cost. This can only be achieved if transportation costs remain low and they are assured that the components arrive on time. A missing part for an assembly line could halt a production line. Since many firms no longer stockpile large inventories, the manufacturer must rely on the transportation provider as well as a reliable transportation system (e.g., congestion/incidents) to deliver the components when needed.

Inventory control has evolved into the concept of JIT delivery to reduce inventory and overall production costs. Reliability of delivery times is often written into contracts with transportation providers for exacting specifications – requiring specific delivery schedules close to 100 percent of the time. For transportation providers, meeting time definite service requirements can impact the modes and routes used. Because of the potential costs of shutting down a production line due to a late delivery, penalties can be severe, ranging from monetary fines to loss of the work.

Cost vs. transit time is always a consideration in freight movement, as firms try to minimize the cost for moving goods. However, there are tradeoffs regarding cost and transit time. For example, high-value or time-sensitive freight will most likely travel by higher cost air or truck transportation to avoid in-transit inventory costs, where as low value, high volume/weight cargo will travel by cheaper ship or rail. Efficiency is achieved when optimally using transportation equipment and modes so as to minimize transit time and costs. Shippers usually focus on the overall costs of moving a shipment from origin to destination, regardless of the number of modes involved and while relying on the transportation provider to achieve efficiency. Also, since damaged cargo is of little use, shippers and transportation providers must assure damage minimization and safety. Conditions on intermodal connectors, including pavement, road geometry, and security all affect damage minimization and safety. Carriers and customers look at overall reliability, cost, and time of the total trip from origin to destination.

Intermodal Connectors in Chicago:

Intermodal connectors in Chicago are essential links in ensuring the efficient movement between intermodal terminals and between terminals and customer, suppliers and factories. These essential movements must take place in a highly developed and congested urban setting, where roadways are also used for local goods movement and passenger transportation. The eastern and western railroads meet in Chicago, making it the leading railroad transportation hub in the country:

  • Containing 27 major rail yards
  • Performing 5.5 million annual lifts
  • Consisting of 10.3 million twenty-foot-equivalent containers (TEUs)
  • Generating 14,200 daily truck moves related to distribution and redistribution of trailers and containers.(8)

International and domestic goods move through these rail yards. However, the major railroads are not interconnected, requiring containerized cargo to be trucked between rail yards. Local and regional distribution takes place from these rail yards, generating thousands of truck trips to and from suppliers, factories, and customers. Bulked rail cars are transferred at the Chicago Belt Railway yard, but intermodal trains require the containers to be transferred by rubber tire. In addition, residents and businesses along the route must endure the trucks and congestion associated with its existence. Fifty-five of the 616 NHS intermodal terminals are in Chicago. This presents a unique challenge to the State and local officials.

Further, the development, operation and maintenance of the connectors serving the rail yards are largely the responsibility of the municipality, which must consider all of the transportation needs in Chicago. This situation demonstrates the need for collaboration between public sector agencies and the private freight sector stakeholders, who operate the intermodal terminals and transport cargo via the NHS connectors, to ensure the efficient and seamless movement of freight. FHWA has funded a special study in Chicago to bring together all the parties to develop a process for identifying Connector needs and advancing priorities into the programming process.

4. National Conference on Setting an Intermodal Transportation Research Framework, Transportation Research Board, Conference Proceedings 12, 1997.

5. 1998/1999 Boeing World Air Cargo Forecast, p. 17.

6. S. Hansell, "Retailers Look Back and See Online Shopping Is Gaining," The New York Times, December 24, 1999.

7. New York Times, op. cit.

8. Source: Chicago Area Transportation Study (CATS), Statistics for 1998.

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