The Supersized Supply Chain

Stephen DeAngelis

July 11, 2011

In a world that appears to believe “bigger is better,” we have seen super-sized meals, super-sized stores, super-sized flat screen televisions, and super-sized churches. The logistics sector is apparently not immune to this effect. Below I will discuss how efforts to super-size transportation are affecting the maritime, trucking, rail, and air cargo sectors.

Maritime Sector

In a post entitled Shipping Industry Update: Going Big and Going Green, I discussed the gigantic ‘Triple-E’ class container ship ordered by Maersk that will carry 18,000 TEU containers. Jennifer Levitz reports:

“[These giant vessels] are expected to be frequent visitors to Eastern U.S. ports starting in 2014, with the completion of the widening of the Panama Canal, the primary shipping conduit between Asia and the East Coast. They are almost 25% longer and 35% wider than today’s ships that use Eastern ports. Ports such as Savannah, Ga., are starting to deepen channels in preparation.” [“Supersizing Hits Freight World,” Wall Street Journal, 15 August 2010]

While many states, port operators, manufacturers, and retailers welcome these new ships, Levitz indicates that some residents living in port towns “aren’t as eager.” Toby Bronstein, a retired advertising executive who lives in Caswell Beach, N.C., told Levitz that he finds the ships, “‘Horrifying, really, really horrifying. They defy the imagination in terms of their size.” Levitz continues:

“Ms. Bronstein and other residents say the giant ships could change the character of coastal towns that rely on tourism. Ms. Bronstein and neighbors in coastal North Carolina recently successfully fought a megaport proposed for Southport, a city of 2,500 people. The North Carolina Ports Authority is now seeking another site for a $2 billion port big enough for the new ships.”

To learn more about how supersizing is affecting ports and harbors, read my post entitled Ports Vie for Increased Market Share. The shipping industry isn’t the only part of the supply chain that some participants hope to supersize.

Trucking Sector

A coalition of 180 companies have been “lobbying Congress to allow trucks that are 20% heavier on U.S. highways.” Levitz reports:

“When Kraft Foods Inc. packs trucks with weighty items such as jars of Miracle Whip and pouches of Capri Sun juice, 40% of the rigs must leave the loading dock partly empty to avoid exceeding federal truck weight limits. Kraft says those rules force it and others to make extra trips and spend more on fuel. Now, the Illinois food giant is part of a coalition of [180] companies lobbying Congress to allow trucks that are 20% heavier on U.S. highways. Supporters of the idea say truckers could pay an extra fee to offset road repairs. There is an arms race of sorts in the shipping industry—and it is prompting a backlash. Efforts are under way to supersize trucks, trains, and cargo ships as freight haulers look to move more goods in fewer trips.”

Everyone knows that rising fuel prices have put a crimp in consumer spending and slowed the recovery from the recent recession. In fact, some fear that fuel prices will create a double dip recession. Rising fuel prices have the same deleterious effect on the cost of producing and moving products. Since consumers are extremely price conscious, manufacturers, like Kraft, pursue any course that will help keep costs down and profits up. Levitz notes that beyond rising fuel costs, companies are also trying to reduce carbon footprints and deal with “capacity constraints created during the recession as freight movers scaled down.” She continues:

“The big rigs that cruise the nation’s roadways may be getting not only heavier but longer. Separately from the companies that are pushing for higher weights, which include Kraft, Coca-Cola Co., and MillerCoors, a group of 19 Western governors are lobbying Congress to allow for more ‘doubles’ and ‘triples’—multiple trailers hitched together than can span up to 120 feet—on Western highways. Currently, most interstates allow rigs no longer than 53 feet. In general, states can individually set limits on truck size and weight on state roads, but not for federal highways. The Western Governors’ Association says longer trucks would make it easier to haul goods across vast distances in the West, which could benefit the region economically. Doubles and triples typically have to bypass federal roads and stick to state roads, sometimes forcing them to take longer routes to their destination. The governors’ group estimates that miles traveled by heavy trucks could be cut by 25% with the use of more combos.”

Not everyone, however, agrees that supersizing is in the best interests of the country. She explains: said Paul Bingham, managing director of transportation markets for the research firm IHS Global Insights.

“Road-safety officials say rigs are big enough now. ‘It’s insane,’ said Deputy Chris Rizzo, a truck inspector for Loudon County, Va., of efforts to increase the weight limits set by Congress in 1974. ‘I can actually feel bridges bouncing up and down’ when trucks go over them, he said. ‘The heavier the truck, the more the bridge bounces.'”

Increasing wear and tear on infrastructure that is already stressed has to be a concern. How bad are things? Jason Kelly and Jonathan Keehner report:

“For years, states and cities around the country have been using duct tape and baling wire to patch over a gargantuan problem: They don’t have nearly enough money to maintain their transportation systems, electrical grids, ports, and other crucial facilities. The gap between what governments are likely to spend on infrastructure and what is needed over the next five years, according to the American Society of Civil Engineers, is a mind-numbing $1.1 trillion.” [“Privatize This!Bloomberg BusinessWeek, 4 March 2010]

Clearly, any extra fees paid by truckers to offset road repairs aren’t going to be enough to keep roads and bridges in repair if companies are also going to try and keep shipping costs affordable. The tension is as real as the problem. The infrastructure challenge begs for a public/private solution, but Congress isn’t in a bargaining mood. Kelly and Keehner note that “there has been public backlash against Wall Street buying up Main Street.” That situation is unlikely to change over the next several years and infrastructure is likely to continue to suffer as a result. There is no free lunch when it comes to infrastructure development and upkeep. Although I suspect that supersizing will continue to occur, the delayed bill for repairing/improving infrastructure is only going to grow larger.

As of this writing, Congress has yet to pass the Safe and Efficient Transportation Act (SETA) which would up the weight limit to “97,000 pounds on interstates for trucks that have a sixth axle to compensate for the extra weight.” Both proponents and opponents are mounting impassioned campaigns. Proponents are making efficiency and environmental arguments while opponents are focusing on safety issues.

Rail Sector

What about supersizing railroads? Levitz reports:

“[Early in 2010], California safety regulators were alarmed when a record-setting, 3.4-mile train—two to three times the length of a typical freight train—rolled through Southern California. Witnesses dubbed it ‘the monster train’ and posted videos online. It turned out to be a test by Union Pacific Corp., which increased the length of its intermodal trains 15% in the first quarter, and was experimenting with an even longer train. … Longer trains raise concerns about blocked rail crossings, especially when emergency vehicles need to cross tracks, and about whether trains can safely make turns, he said. A Union Pacific spokesman said the company did make required federal notifications but ‘in hindsight, we probably should have made the courtesy call’ to state agencies also. Union Pacific said the ultra-long train was a one-time test. But [last April], a company official said Union Pacific believes it can increase its average train length by another 10% to 15% in an effort to reduce fuel use and emissions as well as wear and tear on its tracks. Other railroads, including CSX Corp., and BNSF Railway Co., have also been running longer trains to improve efficiencies, these companies said.”

Unlike highways, railroads are generally owned and maintained by private companies, which should make it easier for them to supersize. Freight railroads transport about 42 percent the country’s freight (measured in ton-miles) making them critical to the country’s economic well-being and global competitiveness. Whether the public will tolerate the wait at railroad crossings while monster trains pass by is another question.

Air Cargo

The final logistics area that could be supersized is air cargo. Although giant planes already ply the skies, the number of air facilities that could handle increased air cargo are limited. Nevertheless, some people are talking about ushering in an age of supersized airships. Before you get too excited about seeing giant airships float overhead, Joseph A. Dick predicts they won’t be developed because “airships are inefficient.” [“Helium Hokum: Why Airships Will Never Be Part of Our Transportation Infrastructure,” Scientific American, Guest Blog, 27 May 2011] Dick writes:

“The purpose of transportation is to get a thing from one place to another. The measure of any vehicle’s efficiency—be it by land or by sea or even by air—is how much it carries vs. how hard you have to push it and how fast it goes. At the end of the day, we all want to get it there fast, and we all want to get it there cheap. … So, using information you can readily get today via the Internet, I’ve plotted a few examples: A container ship, a train, a truck, a couple of airplanes, a couple of old-school airships, and a couple of ‘modern’ airships of the type that keep getting some press every few years, again and again, over the last 40 years or so. These “new” airships are now called ‘hybrids’ because they try to augment the lift of their gasbags with a bit of aerodynamic lift—in short, they try to be part balloon and part airplane at the same time. … [It turns out] that a train is roughly as efficient as a container ship—but it goes much faster. … It takes about four times as much power to haul cargo by road at roughly the same speed as a train. Therefore it takes that much more energy to get the cargo from here to there compared to trains and boats. But trucks are more flexible than trains, since you can send them everywhere that roads go; and that’s why we use trucks to get it there: It may cost more per mile, but we can get it there by a more direct route. Then of course there are cargo airplanes. They aren’t cheap; you’ll need roughly 2.5 to 5 times the energy to get it there compared to a truck, and roughly 10 to 20 times the energy if you used a container ship or train; but you can get it there about 10 times faster than trucks and trains and over 20 times faster than a container ship. So if it’s a really important last-minute package or if you want something like a fresh pineapple from Hawaii, it can be worth it. Finally we have airships. There are classical airships like the Hindenburg and its little brothers that came before it; and there are the ‘new’ so-called ‘hybrid airships’. Both types aren’t much faster than trucks or trains; and both are dreadfully slow compared to the usual way of getting it there by air, traveling at roughly a fifth the speed of a cargo jet. And in terms of energy cost, large classical airships like the ones that flew in the 1930s are just barely cheaper than the most efficient cargo planes; meanwhile very large ‘hybrid’ airships—using performance numbers published by their proponents, mind you—aren’t any cheaper than a 747, let alone as cheap as the old-school airships. And again, in terms of energy, trains, trucks, and cargo ships are a whole lot cheaper.”

Soviet dictator Joseph Stalin liked things big. He reportedly said, “Quantity has a quality all its own.” That may or may not be true. There are no pat answers for when super-sizing makes sense and when it doesn’t. Scale and quantity can make a difference and bright people will continue to analyze when and where “going big” is right thing to do.