Essay on "Transportation Strategic Intermodal"

Essay 7 pages (1890 words) Sources: 8

[EXCERPT] . . . .

Transportation (general)

Strategic Intermodal Transportation

The Last Mile

Port and Terminal Operations

How has the railroad industry changed from its monopoly position in the 19th century due to the Staggers Act?

The construction of an intercontinental railroad is one of the industrial projects that is responsible, to a large extent, for America's greatness today. It allowed goods to be transported quickly and relatively inexpensively which, in turn, allowed for an economic explosion and further development of the American land holdings. It did come at a cost however. The federal government, under Abraham Lincoln, had to basically subsidize the industry by offering entrepreneurs land grants and bond guarantees to ensure that the railroad would be developed (Tuttle & Wykle, 2003). It is almost counterintuitive to think that America, home of the fervent dedication to free markets, heavily subsidized this industry but that is exactly the case. However, when compared to other nations in which the government owns the rail system completely, this can be construed as a compromise between a free market system and nationalized industry.

One result of the federal subsidies to the industry, was that the industry itself because considerably monopolistic. The government subsidies created an industry that had considerable barriers to entry. These barriers can be also attributed to the substantial investments necessary to construct a rail system. Investors had to inject massive amounts of capital to lay the tracks even after the government guaranteed that the land would be available. Rail tycoons were created in the process and were only controlled by price controls issued through regulations. These regulations existed continued even through the second of the country's transportation revolutions (Tuttle & Wykle, 2003). Other forms of regulations were also imposed that practically dictated how railroads were able to operate.

These conditions persisted until the 1960's in which railroads were federally mandated to continue their intercity passenger railways even though this required the private railways to operate these services at a considerable loss. The ever increasing popularity and availability of the automobile, coupled with the improved automotive infrastructure, made traveling by rail increasingly inconvenient among commuters. Declining ridership fell from nearly one billion passengers a year in 1944 to less than 300 million in 1970 (Dilger, 2003).

The Staggers Rail Act of 1980 marked the most significant change in rail policy since the Interstate Commerce Act of 1887 (Babcock, 1984). This act was signed by President Jimmy Carter in October 14th, 1980 and deregulated the railroad regulations that were imposed initially by the 1887 act. Individual carriers could now establish any price they deemed fitting with one exception; they could not set prices if they were deemed not to have any competition. This returned the rail system in the United States to a system that is more consistent with what one would expect to find in a free market economy.

Question Two

Analyze and contrast the differences between rail and truck-based cost, both fixed and variable, when moving freight. What are the benefits and pitfalls for consolidation in the freight rail industry working in conjunction with the trucking industry?

Rail-based shipping solutions are generally more cost effective than truck-based shipping solutions if there is enough volume of the good and it is going a large distance (greater than five hundred miles). This stems from the fact that railroad is generally more efficient than truck when traveling the same distances. This is not always the case however. For example, if you were to attempt to ship a single letter via truck then you would undoubtedly have a headache on your hands. The cargo you wish to ship must meet at least the minimum cargo quantities required by the rail carriers to make the venture worthwhile.

Rail generally works most efficiently when the good can be packaged in a multimodal contain. Such a method is higher in fixed costs (the container) and lowers in variable costs. This is because once you pay for the container then you can fill it as full as possible. It is conceivable that in many cases the cargo that can fit in such a container goes by rail, while the leftover cargo may be more efficient to transport by truck since the fixed costs would be lower.

Trucks, by enlarge, offer much more flexibility than trains and as a result they have low fixed costs and higher variable costs. It is significantly easier to orchestrate a door to door solution utilizing truck services than with rail services. Trucks have the ability to be loaded with various shipments that allow the trucking lines to try to fill their trucks with the optimal amount of cargo which can then be further divided at distribution points to reach the final destination.

The greatest potential in the rail and truck systems working in conjunction together is that the greatest efficiencies in transport could be reached; both by economic measures as well as energy efficiency measures. For example, if a group of shipments could be loaded on one side of the country and sent by train to the other side of the country to be unloaded at a distribution point to be carried by truck to the final destination, then the customer would receive the best of both worlds, so to speak. This may be especially appealing amidst the anthropogenic warming of the atmosphere since train cargo emits a significantly lower amount of greenhouse gases per mile when compared to a truck shipment.

Some of the potential pitfalls would include potential damage to the cargo by transferring between the two modes of transport and also it would add to the complexity of the shipment resulting in a greater need for coordination between the two carriers. Another potential pitfall would be that a premium would be charged for such a mixed shipping method and any cost savings may not be passed along to the consumer. Whatever premium the shipping companies receive however may be justified given the convenience they are providing the consumer.

Strategic Intermodal Transportation

What is the environmental impact of the world's ever increasing (direct and indirect) demand for transportation?

The world's demand for transportation is increasing at an alarming rate. The graph below shows the vehicle miles traveled of all U.S. roads.

Source: U.S. Federal Highways Administration

The graph represents a trend that is shared by all modes of transportation. As the population of the world increases and incomes increase across populations the demand for transportation skyrockets, both direct and indirect forms of transportation.

The environmental implications of transportation are potentially devastating. Although it should be noted that transportation alone is not the sole provider of greenhouse gas emissions, it is definitely a large contributor. According to the IPCC's (Intergovernmental Panel on Climate Change) last report the level of carbon dioxide emissions has reached a level above three hundred and ninety parts per million (IPCC, 2007). They recommend that the target level of greenhouse gases in the atmosphere should be no greater than four hundred and fifty parts per million. Other leading scientist such as James Hansen believe we have already crossed the threshold point and the target should be no higher than three hundred fifty parts per million. Despite disagreements among scientists about the implications of anthropogenic warming, they have pretty much come to a consensus that it is occurring. Plus it is pretty hard to argue with the temperature record (shown below).

Source: http:Nasa's Goddard Institute for Space Studies

The Last Mile

The last mile of distribution is a problem that refers to how to get the cargo to the very last point in its journey and can be graphically summarized the illustration shown below.

Source: The Geography of Transport Systems

As the cargo gets closer and closer to its final destination the economies of scale significantly reduce in the process. For example, an international shipment may first be contained in a batch on a cargo freighter, then be transported by rail, and then have to be dispatched by truck to the customer. Each step of this process results in smaller batch sizes in the shipping process. Though the reducution in batch sizes the economies of scale diminish. Therefore the most inefficient part of the entire process is the "last mile."

Port and Terminal Operations

Explain how you would develop port labor as a port owner. Be specific. Discuss in detail.

Port owners face enormous challenges in developing labor to work in the port. One such challenge is due to the increased security threats that are felt by the ports and their employees. After the inception of the Maritime Transportation Security Act of 2002 (MTSA) and subsequent amendments have established a framework for a national maritime security system and required Federal agencies, ports, and vessel owners to take numerous steps to upgrade security (Global Security). This greatly increases the need to have quality employees who are capable of performing their job efficiently and effectively.

Another complication that port owners face is that the industry is heavily unionized. For example, in 2002 importers, such as Walt-Mart… READ MORE

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