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Logistics' Need for a World-Class Transportation Infrastructure

How important is the international freight transport system to the U.S. economy? Very.

September 2010
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Because of the amalgamated issues articulated above, the movement of cargo will require new infrastructure at existing hubs and new hubs that create route diversity. There will be some emphasis on smaller, specialized hubs that are closer to population and production centers, allowing for more supply-chain efficiency.

Regional opportunities include:
Inland waterway/St Lawrence Seaway - We can begin to follow the example set in Europe by using our inland waterway system and the associated in-place road, rail, and land assets. These assets are severely underutilized.

Gulf Coast - The Gulf is a relatively modest logistics gateway now and can certainly take on more growth and is a gateway to our inland system. The Panama Canal project is an important element bringing more cargo potential, but also the factors of the growing South, good land transport, inland waterway system and land assets.

Western U.S. - Huge existing hubs will still grow but growth rates will be under pressure because of congestion, environmental factors, cost, and community concerns; smaller mini-hubs have a chance to emerge.

East Coast - Large hubs will continue to get larger. There may be opportunity for some smaller port development for specialized cargo and for inland port distribution and intermodal facilities.

In all cases, the connection to "port-centric" operations and development will increase as ports evolve from simple transport terminal facilities to specialized logistics hubs that can provide efficient value-added services.

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Opportunities and Solutions
Economic development - There is significant opportunity for new development in regions that have the necessary ingredients for logistics hub growth. Promoting a logistics hub will allow some communities - especially those places that are emerging centers - to compete for manufacturing and distribution investment previously not possible.

Shipper competitiveness - Shippers and 3PLs will be looking for new less expensive, more reliable, and quicker solutions in getting goods to and from overseas markets. Creating competitive routes to foreign markets can make an enormous difference to shipping companies, and 3PLs and will undoubtedly attract new industrial development.

Money and infrastructure - As with most things, it all comes down to money. The bottom line is that there will be fewer government funds and they will be in higher demand. On the local front, states are in bad shape and won't have adequate resources for the most basic infrastructure and maintenance, much less larger impact projects. Local bodies like port authorities suffer from a lack of market access, poor bond ratings, and generally very tough access to capital markets.

It will be necessary for the public sector to look to creative solutions with private partners to fulfill public objectives. After all, entities like port authorities are business animals - they exist to perform a business function with the private sector. The reality is there is huge need for investment in ports, terminals, roadways, and rail lines. Private investment in property assets will rapidly follow. The further reality is that the U.S. government will not be able to cope with the need, and politics will get in the way of a proper business investment strategy.

Private funders have cash and are looking for viable projects with (1) reliable and sophisticated public partners, and (2) assets that can be utilized to create revenue flows. We will need to think creatively about how to create infrastructure, and the ability to integrate public and private monies will be key.

In the realm of transportation, things will certainly change - they must. How fast things change will depend on a myriad of factors - but those that get out in front will have a good chance to mine the opportunity created by this churn in the marketplace. New cargo route potential will bring the need for large quantities of new infrastructure investment, as well as new property solutions at emerging logistics hubs for companies seeking more efficient strategies.

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