Thursday, October 15, 2009

Supply-Chain Management: Freight Planning.

Since I am a Logistics major, and since I study it incessantly, I thought maybe it's time to share with you a little about Freight Planning.

But first off, I'll let let the US Department of Transportation give you a great understanding of specifically what Supply-Chain Management is, and the importance of reliable, efficient modes of transportation.

They did a pretty good job, huh? Hopefully that gives you a visual understanding of how the supply-chain works. However, the supply-chain is more than just different vehicles utilized to carry products--it is the entire process that begins with raw materials and ends with the product in the consumer's hand. For a more formal definition:
Supply chain management (SCM) is the control of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Supply chain management involves coordinating and integrating these flows both within and among companies. The ultimate goal of any effective supply chain management system is to reduce inventory (with the assumption that products are available when needed).
So you see, the supply-chain is just not "boats-to-trucks-to-home", it is the entire system in place that brings goods to people. It includes the inventory that sits on a shelf, the raw materials necessary to produce a single unit, the people required to coordinate the creation and transportation of a product, the financial data necessary to continue to produce a product, so on and so forth.

Focusing specifically on Freight Planning, there are many, MANY questions to consider:
  • Is the current system working?
  • Is the current system under/over utilized?
  • Does the current system provide enough capacity to hold future freight loads in 2035?
  • What are the environmental impacts of rail freight versus truck freight?
  • What are the costs associated with rail, truck and ocean freight?
That is simply the beginning. Currently in North America more than 6,500,000 trucks travel on our highways. Due to linking rail and ocean freight, most trucks travel only within 50 miles of their base (although there are many outliers to this generalization). By 2035, however, this number is expected to dramatically increase, causing usage to balloon to over 600 million miles per day. Looking at the maps below, you can see where the increase in highway congestion will appear:

2002 of Highway Congestion

2035 Projected Map of Highway Congestion

Can you even see the states of Ohio, Ilinois, Indiana or Kentucky? This unfortunate truth gives us three options: we can expand the highways, expand the runways or expand the railways. I, along with the rest of sensible people, recommend expanding the railways.

CSX is one of the largest private rail companies in North America. Historically rail has been unreliable, hence the shift to relying on trucks instead. However, companies are recognizing that rail is CHEAP--like, real cheap. For example, a CSX Train can take one ton of goods 427 miles on a single gallon of gas. Is that not insane? As a private company, they are constantly seeking ways to improve, and since 1980 they have improved efficiency 80%. In addition, rail is not only the cheaper way to go--it is the more environmentally friendly way, too! Look at this graph on the difference in carbon emissions between a trailer traveling 1000 miles on a truck and a 1000 miles on a train:

Clearly, rail provides better financial outcomes and environmental stewardship. However, rail moves slower--and it isn't as direct. It is impossible to route trains to be able to deliver all kinds of material right to your doorstep. That is without question. However, planning practices that support rail and provide for a larger system across our country would significantly reduce transportation costs for a company and cut out carbon emissions by a huge margin. In addition, AMTRAK could utilize the rails to provide better commuter service. And, if there is one thing about transportation, it is this--it goes hand-in-hand with economic development. Just as a coastal city cannot trade if there is no port to receive goods at, a city cannot grow without modes of transportation for people to utilize. It will become stagnant. It will lose it's attractiveness and luster. It will, essentially, be Columbus.

Reduced Costs, High Environmental Stewardship, Better Transportation Options and less congestion on highways? And people argue against this?

Now you know why I'm going into the private sector and not into planning.