Shippers need to join users in developing strategic plan “to rebuild America,” says FedEx Freight’s Duncan

John D. Schulz, Contributing Editor -- Logistics Management, 11/2/2007

WASHINGTON—The American Society of Civil Engineers recently gave the nation a grade of “D” for its overall infrastructure. Douglas G. Duncan, president and CEO of FedEx Freight, says he thinks that might be charitable.

At the McGraw-Hill annual construction business forum in Washington last month,
Duncan said that shippers and logistics solutions companies are facing a growing crisis in transportation infrastructure—and they need to act together in helping solve it.

“We are a huge user of the transportation infrastructure,” Duncan said. “The good news about the transportation infrastructure is the research has been done. Nobody is saying we don’t have a problem.  We have been under-investing in transportation infrastructure for about 20 years.

The Federal Highway Administration estimates that if the U.S. economy grows at a conservative annual rate of between 2.5 and 3 percent annually over the next 20 years, domestic freight tonnage will nearly double and freight moving through the largest U.S. ports could triple or quadruple.

 “That would be gridlock,” Duncan said.
 
Or as Caterpillar Group President Gerry Shaheen said simply last year, “Transportation in this country is breaking down.”
 
Duncan is urging individual shippers, and their representative groups in Washington, to join a growing coalition of all transportation modes to urge Congress to act now. Already, under the leadership of the U.S. Chamber of Commerce, a major coalition of shippers and users of the transportation system, has been formed to mobilize all users of the transport system that the time to act is now. That group estimates that 36 percent of urban highways are congested now with congestion costing Americans $63 billion in wasted time and fuel.

The federal-aid highway reauthorization is up in 2009 and Duncan is urging action now.
 
“It can’t be a splinter group,” Duncan said. “We have to be in this together. I’m at my most powerful when I can go to Capitol Hill as a carrier and I can go there with Wal-Mart, a customer, and we speak with one voice.”

Supply chain professionals have done a great job taking cost out of logistics as companies implement Just-in-Time inventory system, Duncan said. Inventory (including transportation) account for about 10 percent of Gross Domestic Product, compared with about 18 percent of GDP in 1980, the year the trucking industry was deregulated.
“One of the tenets of that system is you need rapid replenishment in supply chains,” Duncan said. “If we don’t invest in infrastructure going forward, that will regress. It means fewer jobs and smaller markets for American businesses to serve.”
 
A major problem, Duncan said, is the nation has not defined that type of transportation the country needs.
 
“We have to define a transportation system that works,” Duncan said. “We have to look at transportation system like a power grid. In transportation, we have developed infrastructure mode by mode. Rails do their thing. Ports do theirs. Highways do theirs. Somehow we hope that all comes together. That approach will not work in the future.”
 
Instead, Duncan said, the nation needs to develop a comprehensive overall transport infrastructure plan with focused, strategic investment on all modes.

“Until we have that vision and that plan, any funding plan won’t work because we haven’t defined what the system needs to look like in 20 years,” Duncan said. “That’s the biggest problem we have at the moment.”
 
Unlike some trucking brethren, Duncan said the nation should not rule out privatization to help ease the nation’s congestion crisis.
 
“Today, the private sector values investment in transportation greater than we do,” Duncan said. “It might help bring capital to the market place.”
 
The Bush administration is pushing for greater use of tolls to pay for infrastructure projects, rather than increases in the fuel tax (24.3 cents on diesel, 18.4 cents on gasoline, unchanged since 1993).

The trucking industry has just the opposite approach—it is opposed to greater use of tolls on highways already paid for in most cases. Individual trucking companies, including FedEx Freight, are hinting that it would support a high tax on diesel if that money were earmarked for improvements in areas where congestion. The American Trucking Associations has sent signals that it too would support such a measure.
 
Such calls seem to be falling on deaf ears in Washington, where Republicans have been loathe to raise any taxes, including fuel taxes. One high-ranking Bush administration official said there was plenty of money available, a view not shared by many motorists and trucking officials.
  
“The capital is out there,” said Tyler D. Duvall, the Department of Transportation’s assistant secretary for transportation policy. “The problem is the current model with its polarized views is really not conducive to unleashing that capital.”
 
Janet F. Kavinoky, director of the U.S. Chamber’s Americans for Transportation Mobility Coalition, recently told Congress that it’s time for shippers and the business community to act. “We must put an end to the intramural squabbles that have divided stakeholders—mode vs. mode, shipper vs. carrier, urban vs. rural and region vs. region. We will all lose unless we rally and unite around an urgent mission—to rebuild America.”
 
J. Richard Capka, administrator of the Federal Highway Administration, said the I-35 bridge collapse in Minneapolis briefly served to galvanize public opinion on the need for greater investment.
  
“The bottom line is it should not have happened—13 people should not have been killed,” Capka said.
 
About half the nation’s 600,000 bridges have been rated structurally deficient, although he said that does not mean they are unsafe. The nation needs “wise and informed” investment decisions, Capka said.
  
David G. Mongan, president of Whitney, Bailey, Cox and Magnani, a Baltimore engineering and transportation planning firm, said the public needs to understand when they reject a half-cent increase in the fuel tax they really, in effect, are voting for more congestion and road delays.
 
“Solving the American infrastructure crisis will take real leadership,” Mongan said. “Lots of people are throwing their hats into the ring to be president of the United States. But nobody is seriously addressing our infrastructure issues. This has to change.”
  
Ed Link, senior research engineer at the University of Maryland’s Department of Civil and Environmental Engineering, agreed that the political leadership is lacking at the local, state and federal level.
 
“That rests on our shoulders rather than Capitol Hill,” Link said. “We elect them.”