California State Rail Plan 2007-08 to 2017-18

Chapter XVI – Major Freight Issuessystems must have reliable, timely, and visible door-to-door freight transportation.Shippers increasingly send frequent, smaller shipments rather than fewer largerones, multiplying the opportunity for something to go wrong. An accident,congestion, labor disputes, storms – even unanticipated spikes in supply anddemand – can unravel these tightly strung systems. Overall logistics systemscapabilities are growing simultaneously more robust and more fragile.The armed forces also are adopting pull logistics techniques and integrating theirlogistics systems with commercial freight systems to reduce deployment time andcost. Under peacetime conditions, the military is just another very large shipper.But with its new doctrine of rapid response, future wartime military deploymentswill likely occur as short, sharp surges. Large-scale deployments will stress thefreight transportation system and could disrupt the tightly strung logisticsnetworks of civil commerce and defense industry production.Shippers and the economy have benefited from these changes, but they are farmore reliant on timely, reliable freight service than they were 20 or 30 years ago.The consequences of service failure today matter far more than they did in thepast. Service failures today mean: depletion of critical materials and stocks;degraded product quality – from rapid (days) to immediate (hours); idled workers,equipment, and customers; loss of market share and profits; and an increasing riskthat failures in one part of the chain will ripple through more than one firm andmore than one business sector.Therefore, it is not surprising that the freight transportation modes offering thehighest levels of service are also growing the fastest. Air cargo has grown by17.9 percent annually; truck by 6.9 percent annually; and rail intermodal by4.6 percent. Rail carload and bulk grew just 1.4 percent annually, while domesticwaterborne trade declined by 0.5 percent annually.However, the productivity returns from deregulation, the capacity investmentsmade in the 1970s and 1980s, and the introduction of just-in-time logistics arediminishing. There are relatively few opportunities for further economicderegulation. Congestion is increasing; the impact is most noticeable inmetropolitan areas where peak-period travel times have risen significantly andtravel-time predictability has dropped. After two decades of improvement, totallogistics costs appear to have stalled at 10 percent of GDP, and there are someindications that costs – especially wages, insurance, and fuel costs – are beginningto rise again. These trends are expected to continue into the coming decades,suggesting that it is time to think about new strategies to meet the nation’s freighttransportation needs in the 21st century.227