Office of Operations Freight Management and Operations

Quick Response Freight Manual II

2.0 Freight Demand – Controlling Factors

This section of the QRFM update provides a detailed discussion on the controlling factors that impact freight demand analysis and forecasting. These factors can be broadly grouped into the following categories:

  • Economic Structure;
  • Industry Supply Chains and Logistics;
  • Freight Infrastructure/Modes;
  • Freight Traffic Flows; and
  • Organization and Public Policy.

An understanding of how the above factors impact freight demand is critical to performing an accurate freight demand analysis in a region and developing reliable freight forecasts for planning purposes.

2.1  Economic Structure

Freight demand has a direct correlation with the type and amount of economic activity in a region. The amount of goods production and consumption in an area and the relationship between producers, consumers, and intermediate suppliers impact the magnitude and spatial distribution of freight flows. The dependence of freight demand on economic structure can be better understood by considering the following components of the economy, and analyzing their specific impacts on freight flows:

  • Types of Industries;
  • Personal Consumption; and
  • Trade.

2.1.1  Types of Industries

Freight demand is a direct function of the types of industries in a region. The types of industries in an economy can be broadly classified into goods-related and service industries, each having unique impacts on freight flows. Goods production industries, for example, vary in the types and quantities of goods produced and consumed, as well as the types of transportation services used to meet the demand for production inputs and supply of outputs. Warehousing and distribution activities, big-box retail, hospitals, and other institutions also are major drivers of freight demand, especially in and around metropolitan areas. Transportation services in a region provide the supply to meet freight transportation demand, thus impacting the characteristics of modal freight flows such as the types of equipment, time-of-day activity, etc. Trucking flows generated by service industries in urban areas may account for a significant share of total trucking activity, and need to be considered in urban freight (truck) models in order to accurately predict total trucking demand on the highway network. Service-related trucking also is unique in terms of the types of equipment and time-of-day activity, which are important variables to consider in analyzing trucking activity in a region.

2.1.2  Personal Consumption

Personal consumption is another important component of an economy that has a major impact on freight demand. Personal consumption is driven by economic growth, and generates demands from households for goods and services. This demand translates to increased retail activity, which is a major generator of local truck trips, especially in urban areas. Freight flows associated with retail activities also have unique trip distribution and trip chaining patterns, which are important parameters for consideration in developing urban freight models. Personal consumption is a key data element in economic input-output models, which provide the total household consumption of goods and services. This information can be used to analyze total freight demand associated with personal consumption activity.

2.1.3  Trade

Trade activity is a critical component of the economic structure of a region and can be divided into three broad categories – international, domestic, and local. Each of these trade categories have distinct freight demand characteristics in terms of the origin-destination (O‑D) patterns of shipments, commodities handled, modes used, types of facilities used, length of haul, size of shipments, and time dependencies. For example, local trade in a metropolitan area is dominated by the trucking mode and has different facility usage compared to international shipments, which have significant intermodal rail activity and logistics operations with unique facility usage (for example, container freight stations).

2.2  Industry Supply Chains and Logistics

Following are some important elements of industry supply chains and logistics that have a major impact on freight demand and are critical considerations in developing freight forecasts:

  • Spatial Distribution Networks;
  • Interactions between Logistics Players; and
  • Supply Chain/Logistics Trends.

2.2.1  Spatial Distribution Networks

Industry supply chains are characterized by spatial relationships, which dictate the spatial distribution of commodity flows. For example, the spatial organization of distribution networks of a retailer influences the O‑D patterns of freight flows moving through seaports as part of an international supply chain. These distribution patterns are typically influenced by market areas (for example, locations of distribution facilities close to customer markets). In terms of their importance in freight demand analysis and forecasting, these critical aspects of the supply chain directly impact the development of commodity flow databases, freight trip generation, and distribution models as well as freight traffic assignment.

2.2.2  Interactions between Logistics Players

Freight industry logistics decisions are typically shared by a host of players, which include producer/receiver logistics managers, third-party logistics managers, and integrated carriers. The interactions between these logistics players impact freight demand characteristics in terms of the choice of modes, the size of shipments, the ports of call, the time of day, frequency of shipments, etc., which are critical elements to be considered in the modeling of freight transportation demand.

2.2.3  Supply Chain/Logistics Trends

Due to the dynamic nature of the freight logistics system, trends in industry supply chains need to be considered, especially in freight forecasting. For example, increasing trend towards just-in-time (JIT) logistics is having an impact on the modes used, and size and frequency of shipments. Other important supply chain trends include shipper-carrier alliances impacting mode choice, and increased outsourcing activity impacting freight and intermodal traffic through seaports. Also, historic trends in transportation productivity, and the tradeoff between transportation and inventory are leading to increased transportation service demand relative to industry output.

2.3  Freight Infrastructure/Modes

Each of the modes that carry freight provide different types of service, which in turn is the controlling factor of which modes will be chosen to carry freight. Among the important issues to be considered are:

  • Characteristics of Demand – The origins and destinations served the shipment length, etc.;
  • Characteristics of the Supply – The capacity, frequency, cost, special handling abilities, etc.; and
  • Characteristics of the Shipments – Size of shipments, pick-up and delivery times, special handling characteristics, shipment value, etc.

These factors are discussed in more detail for the Trucking, Rail, Marine, and Air Cargo modes.

2.3.1  Trucking

Operational characteristics of the trucking industry pertaining to market area, type of carrier, and type of service impact various elements of trucking freight demand. When analyzing freight demand by market area, it is important to note that trucking dominates the short-haul freight market due to its flexibility and cost characteristics relative to other modes. For this reason, many urban freight models are typically “truck” models and do not involve a mode share component.

Trucking operations can be categorized into for-hire truckload, Less Than Truckload (LTL), and private, based on the type of carrier. Each of these carrier operations are associated with distinct freight demand characteristics pertaining to the market areas, commodities handled, size of shipments, trip chaining characteristics, time-of-day traffic distributions, and freight facilities used.

Trucks not only haul commodities, but also are used for “service trucking.” Urban models that include freight, local goods movement, and service vehicles are often referred to as “commercial vehicle” models. Urban areas, in particular, have significant service trucking activity wherein service trucks can account for a notable share of the total truck traffic on key locations. This has significant implications in the development of commodity-based urban truck models, which need to account for service-related truck traffic in order to accurately predict total truck traffic in the region. Distinguishing service trucks from freight trucks in empirical data can be difficult, and it entails the need for more rigorous data collection through surveys to determine the share of service versus cargo trucking on specific highway facilities.

Trucking involves a wide array of equipment, from small delivery vans and pick-up trucks to 18-wheelers. The type of truck used can vary based on the type of operation (service or cargo trucking), and for cargo trucking, on the type of commodity hauled. For example, while tractor-trailers are most commonly used for carrying long-haul freight, they also can perform local pick-up and delivery of goods.  This has implications in the development of commodity-based truck models, in terms of the use of accurate payload factors to convert commodity tonnages to equivalent truck trips. Truck equipment-type information also is important in the application of freight models for congestion, air quality, safety, and pavement impact analyses.

The highway infrastructure can be categorized into a shared-use or a truck-only facility based on the truck usage of the system relative to other vehicles. In a shared-use facility, trucks share the same network as autos and buses, which entails the need for the integration of passenger and truck models to predict the total traffic demand on the network. The type of infrastructure also plays a critical role in the analysis of key characteristics of freight flows on the network pertaining to travel times/speeds, reliability, safety, congestion, and related economic impacts.

2.3.2  Rail

Railroads are classified into Class I, II, and III, based on their operating revenue characteristics. This classification also is important in the analysis of rail freight demand, as each railroad class has distinct rail freight demand characteristics pertaining to the types of commodities handled (for example, increasing share of Class I railroad market being domestic and international intermodal cargo), O‑D patterns and length of haul, and size of shipments.

Two main categories of railroad service – carload and intermodal – are the most important determinants of rail freight demand. Each of these categories is associated with different commodities, service characteristics, logistics, equipment, etc. Also, the rate of growth in rail freight demand for carload and intermodal freight have been different, with intermodal rail demand rising at an astonishing rate compared to carload. Due to these reasons, rail carload and intermodal services need to be analyzed separately, particularly in generating rail freight forecasts. Additionally for operational reasons, railroads may offer carload service for a single commodity, such as coal or grain, called unit trains.

Unlike highway infrastructure, railroads own their own networks, generally control operations and maintenance (O&M), and make investment decisions on the networks, mainly for capacity enhancements. Because of the private ownership of railroad networks, analysis of the factors affecting railroad routing decisions, as well as accurate determination of link-level rail traffic flows on the network, is nearly impossible due to the proprietary nature of the railroad data.

In addition to trackage (mainline, spurs, and sidings), railroad terminals, intermodal lifts, and classification yards are important railroad system elements. Consequently, forecasting freight movements through these railroad facilities is critical in the overall rail system planning process in order to avoid congestion and bottlenecks in the rail freight transportation network.

2.3.3  Marine

The two main operational types of marine freight transportation include inland and ocean shipping. These two operations not only involve different infrastructure (ocean versus inland waterway ports/terminals), and types of equipment (vessels, barges, terminal equipment, etc.), but also are unique in the types of commodities carried, shipment sizes, freight logistics/supply chains, and trading partners involved. Recent trends towards short-sea shipping services for domestic transportation between coastal cities on the west and east coasts of the United States indicate the importance of this form of ocean transportation in meeting growing freight demand.

The main types of marine transportation services include bulk, break-bulk, container, and roll-on/roll-off, depending on the type of commodity carried. Each of these services is considered separately in freight demand analysis due to the need for distinct representation of commodity flows (tonnages, TEUs [Twenty-Foot Equivalent Unit, a standard measure of container volume], number of trucks, etc.), as well as in the analysis of land side impacts of marine freight flows (for example, land side traffic impacts of bulk transport will be different compared to containerized transport because of differences in mode choices, as well as the size of shipments). Segregations based on the type of service also are pertinent for marine freight forecasting, since each service market is expected to have different growth trends in the future (for example, containerized cargo has been the fastest growing group in marine transport).

Vessel size is another important consideration in the analysis of marine freight demand. Vessel sizes have an impact on the port of call as well as land side traffic flows, and also are key inputs for the analysis of environmental impacts (such as emissions) associated with marine transportation. Other marine transportation system elements, including terminals, container yards, wharves, gates, and land side access routes, play a critical role in the marine freight transportation system and are useful elements to be considered in the freight modeling and forecasting process.

2.3.4  Air Cargo

The air freight system is typically characterized by low weight, small volume, high-value cargo. Consequently, air cargo constitutes a small fraction of total freight tonnage but a higher fraction of total value of freight in domestic and international trade. Air cargo, due to its high value, also has high travel-time sensitivities, implying that slight changes in transit times can have significant cost impacts for air cargo shippers.

Operationally, air freight transportation tends to concentrate in larger metro area hubs. However, it also involves freight moving through some regional freight-only airports. The analysis of hub activity in air freight transportation is important for the development of air cargo forecasts in metro areas. Hub activity also is an important consideration in land side traffic impact modeling, since it generates significant truck trips in metro areas.

Air cargo operations can be divided into air cargo freighters, integrated carriers (for example, FedEx), and cargo shipments in the belly of scheduled commercial carriers on passenger routes. These operations have distinct routing characteristics and time-of-day patterns, and also may be different in their underlying logistics frameworks.

Other aviation system elements useful for the analysis of air cargo flows include air-cargo terminals and sort facilities. Sort facilities may be located at off-airport sites, which generate truck trips, and also impact truck traffic distributions. Forecasting truck moves to and from these facilities is thus an important component of local freight planning.

2.4  Freight Traffic Flows

Freight traffic can be represented in many different ways, depending on the mode, type of vehicle/equipment, and commodity. A common representation is in terms of the number of vehicles (for example, number of trucks and carloads, for trucking and rail carload, respectively). Intermodal freight traffic is typically measured in terms of 20-foot equivalent units (TEU), where one TEU represents a standard 20-foot container, while commodity-based representation of freight traffic involves measuring the total weight (tonnage) or value (dollars) of shipments for each commodity group.

Measures of freight traffic flows are important in freight demand analysis for a host of applications such as congestion and safety impact analyses. For example, information on the number of trucks on the network is essential for integrating truck flows with autos on shared-use networks, to understand congestion impacts. Freight traffic flows also are key inputs for safety impact analyses, which are critical in the overall freight planning process for highway and rail modes. In the case of highways, the number of trucks on the network and their fractions relative to total traffic are important parameters to understand interactions between truck and auto traffic, and how they impact safety. Forecasting safety implications associated with rail traffic is particularly difficult, because of the absence of integrated network models, as well as limitations in the capability of government agencies to estimate accurate rail forecasts on private rail networks. Typical approach involves developing general rail traffic growth rates or relying on specific flow data from railroads to analyze rail/passenger conflicts.

Specific applications of freight traffic flow information in freight forecasting include trend analyses and trip generation estimation. Historic measures of freight traffic flows are often used for estimating growth rates based on a trend analysis approach to freight forecasting. Truck trips also are used for facility-level freight forecasting by developing trip generation rates for truck trips as a function of facility characteristics such as employment and land area.

2.5  Organization and Public Policy

There are many key private sector decision-makers within the freight logistics and industry supply chain framework. Shippers, consignees, carriers, and other logistics service providers play a critical role in contributing to decisions about what, how, when, and where transportation services are used to move goods across the supply chain. These organizational frameworks and their underlying decision-making processes are useful to understand in order to accurately model and forecast freight flows in a region.

Regulations have a significant impact on freight flows in a region. For example, safety regulations such as route restrictions, truck size, and weight limitations influence routing patterns of truck movements, types of equipment used, and shipment sizes. Environmental regulations pertaining to emissions will impact equipment types, while hours of service regulations impact time-of-day characteristics.

Land use regulations may have the most significant impact on freight demand due to the inherent interrelationship between land use and transportation. For example, land use regulation on the development of warehousing facilities in a region impacts truck traffic patterns and trip length distributions.

Increased surveillance and inspection practices for freight shipments to meet security rules and regulations can potentially find applications in modeling freight demand. For example, border and gateway simulation tools are being developed that can provide key inputs to freight models (such as for model calibration or validation). Security inspections and technology also may create new sources of data that can be used to understand freight flow characteristics and model freight demand.

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