Productivity Gains in Rail, Trucking, Container and

Productivity Gains in Rail, Trucking, Container andthe Impact on Supply Chain in Urban Areas

John FalcettaDirector LogisticsUMA - AECOM

Contents

• History of Productivity Gains in the Supply Chain• Drivers of Labor Productivity with Supply Chain

participants • Impediments to Gains• The Future


Supply Chain refers to the distribution channel of a product, from its sourcing, to its delivery to the end consumer (also known as the value chain). The supply chain is typically comprised of multiple companies that coordinate those activities.

As in any other Chain – it is only as strong as it’s weakest link! John Falcetta

Director LogisticsUMA - AECOM

Productivity Gains – Why is it significant

Labour productivity is directly linked to quality of life within a nation as a result of it’s ability to compete globally.

“Labour productivity" or "worker productivity"; is the value of goods and services produced in a period of time, divided by the hours of labor used to produce them.

Last year, labour productivity in Canada grew by 1.1% – less than one-third the rate of the US. Within the OECD, Canada’s productivity growth is ranked 17th among 30 countries.

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History of Rail, Trucking and the Container in the last 50 years

• Labour Productivity in Rail increased dramatically. In train service alone gains of over 250% have been made since the mid 20th century to present.

• In that same time period freight handling costs at major port areas (such as New York) reduced by 40% to 80% per ton of freight handled as a direct result of containerization.

• Trucks improved haulage capacity from an approximately 15 tons to 30 tons in that period representing a 100% improvement in productivity.

The supply chain is handling much more tonnage with far fewer people and resources!


Drivers to Labor Productivity In Supply Chain

The North American Perspective - Rail

Capital spending has a bigger impact on Labour productivity than training and investment in people (Baldwin – Beckstead 2003) (Statistics Canada 2007 …)

Steam locomotive to Diesel to high adhesion modern locomotives improved haulage capacity from 1000 tons to about 4000 tons per locomotive (train size).

Train Crew size reduced from 5 to 2 people.

Fewer numbers of people required to repair track and roadway –average size track gang reduced from 200 people to 60 today.

Locomotive and car repair has reduced dramatically as result of improved wheel and axle technology including defect detection technology. Rail car loading from 166,000 LBS to 286,000 LBS (72% productivity improvement)

Containers are typically double stacked on trains.

Administration and support has reduced about 70% of full time equivalent staff as result of computing technology (AEI). John Falcetta

Director LogisticsUMA - AECOM


The North American Perspective - Trucking

Capital spending has a bigger impact on labor productivity than training and investment in people

Load limits increasing dramatically from 15 ton average lading to in excess of 30 tons today

Fuel Consumption has improved by some 30% to 60% tons/gallon

Administration and support has reduced about 70% of full time equivalent staff as result of computing technology.



The North American Perspective -Containerization

Capital spending has a bigger impact on Labour productivity than training and investment in people

Costs of handling freight per ton at Ports decreased by 80%. Longshoreman work rules and unnecessary freight handling demanded that factories be located close to ports. The use of containers drastically reduced handling costs and efficiency at ports so that labour could be utilized at alternate locations – mid west and deep south rather than in major urban areas. Eventually Labor was offshored to the Asia Pacific.

Ship efficiency – far fewer ships and personal are required to move the tonnages from off shore locations to and from North America due to standardized containers moving the freight.

The ability to move the freight to a location where cross docking from one mode to another can occur rather than simply moving freight in bulk has enabled better use of resources in the supply chain i.e. rail car to container.


Impact on Urban Areas and traffic flows

Transportation inevitably flows to and from or through urban areas on road, rail and marine ports.

More and cheaper freight has been accommodated by bigger railcars and double stacked trains bigger trucks and larger ships.

If that same freight moved exclusively by only truck this same freight would add greatly to urban congestion and air pollution and cost. Conversely, if it moved all by rail or marine, the length of time involved would increase and other supply chain and production costs (inventory in transit, working capital) would be negatively impacted. And some consumption might not be possible.

Productivity gains in transport have lowered the costs of distribution. This has made urban centers more attractive places to live by encouraging economic growth further in land.


Impact on Urban Areas and traffic flows

The success of transport has also put it at odds with some urban dwellers.

Residents in cities such as Vancouver want to build condos on the waterfront that hosts transportation terminals.

Auto drivers are impatient to wait for longer trains and demand grade separated crossings.

Port are congested – Long Beach, Vancouver


Six Impediments to productivity improvements in Supply Chain

1. Redistribution of Costs - Are supply chain participants willing to pay.

No!


2. Lack of Leader – The big player drives change not the small innovator i.e., Wal-Mart, CN etc…

Impediments to productivity improvements in Supply Chain


3. Uncertainty of the outcome

• Will the improvement help as intended?

• Corporate bureaucracy and principal agency may inhibit the interests

of the supply chain and shipper.



4. Market condition must be conducive for the change to occur. “Good times Bad Times”.

• Recession has a tendency to encourage shippers to re-engineer the supply chain.

• Supply chain participants particularly transportation companies experience the “burning platform” Possible extinction vs. certain extinction.

• In better market and economic conditions, those firms that are able to make capital improvements may not due to a perception that “don’t fix it if aint broke”.



5. The only people that embrace and desire change are baby’s with wet diapers.

• Often change in transportation has come with a great deal of anxiety –

strikes, walkouts.



6. Any supply chain or system that has existed for 50 or more years is a candidate for re engineering.

• Rail Yards and Terminals

• Rail main line plant

• Marine terminal

The above mentioned comes with price tags in the tens of millions to hundreds of millions $$$



Two major factors that have enabled the freer flow of goods world wide are;

•The Internet

•The marine container

Change in Supply Chain is also driven by factors outside of Supply Chain


Who are the “Winner and Losers”

North American Consumers and workers that benefit from greater consumption and re-deployment of labor from low value to higher value activities.

Asia Pacific benefiting from the re distribution of wealth.

Mexico and Central America lost that opportunity to become more industrialized losing to more efficient use of labor in other regions of the world


Globalization “The China Affect” has not caused more shipping…

Rather the efficient supply chain has facilitated the free flow of capital – allowing comparative and absolute advantage in labor both domestically and intentionally


The Future of Productivity Gains

RFID technology – facilitating greater improvements in JIT thus improving working capital.

Integration of information system allowing for Supply chain decisions to be made in real time from consumer and producer information at source (Wal –Mart).

Greater loading on trucks and railcars i.e.. 315,000 LBS from 286,000 in railcars and 255,000 LBS on quad chassis.

Finally we will need to do all of this in a environmentally responsible manner.


Productivity Gains in Rail, Trucking, Container and the impact on Supply Chain in Urban Areas

Thank you for your attention

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Productivity Gains in Rail, Trucking, Container and

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