The Amazon effect: The real reason trucking needs new infrastructure
E-commerce, evolving routes and the future of Trump’s $1.5 trillion plan
In February, a blueprint emerged of President Donald Trump’s $1.5 trillion plan to overhaul the nation’s highways, ports and other infrastructure. Last month, Democrats proposed their own $1 trillion plan, including $140 billion marked for revamping roads and bridges.
Which plan — if either — will become reality could have massive implications for a business built on infrastructure. Rapidly-growing industry players like Daseke are already chomping at the bit to see what the 13-figure spending bill might portend.
“There’s a national conversation about infrastructure,” Don Daseke, the company’s founder, chairman, president and CEO, recently told JOC. “We don’t know when that bill will pass, but when it does, everything you need to build infrastructure, we move.”
It’s easy to see how crumbling roads could slow down shipping, but the debate over the future of America’s roadways also reflects much more daunting issues facing the logistics sector: namely, how to deliver goods increasingly offered on-demand. At the crux of the issue is not just the quality of road surfaces, but the way cities and surrounding highway networks have been constructed over time — and how that stands to change as trends like e-commerce and autonomous driving converge.
“Easing the burden of commercial traffic in cities will require new technologies, new business models and new regulations,” analysts at McKinsey predicted in a 2017 report. “Traffic is bad, and getting worse.”
Though new regulation isn’t an appealing prospect for many carriers, traffic stemming in part from outdated infrastructure is already a costly problem for the industry. The last time ATRI tallied the numbers, congestion cost freight carriers more than $63 billion during 2015.
“This delay is the equivalent of 362,243 commercial truck drivers sitting idle for an entire working year,” the ATRI report stated.
It’s a cost that has risen over time and increases with distance traveled:
Still, traffic is only the tip of the iceberg in the conversation about the limits of post-World War II infrastructure in an increasingly digital economy.
As unconventional logistics players like Amazon illustrate, the tools of the trade are also evolving to more easily navigate crowded cities. The online mega-retailer has invested heavily in more agile alternatives to heavy-duty trucks, like multi-modal fleets and drones, spurring incumbent shippers like UPS and FedEx to follow suit in transportation R&D.
At the same time, fleets and drivers everywhere are experimenting with new on-the-road communication and analytics tools to better match routes to real-time road conditions.
The challenge is most pronounced on short-haul trips in cities, which are increasing rapidly thanks to the growth of online orders. Already, e-commerce makes up some 10–20 percent of deliveries in the $35 billion LTL or “less-than-truckload” category, Kevin Zweier, a vice president at supply chain consultancy Chainalytics, told the Wall Street Journal.
In terms of specific markets, ATRI found that 2018’s worst bottlenecks are all in or near major cities: Atlanta, New York City, Chicago and Los Angeles.
What’s next
As the evolution of shipping reveals additional gaps in America’s D-rated infrastructure, what exactly will be done to counteract the dysfunction isn’t yet clear.
Much of the uncertainty stems from who will help pay for the country’s infrastructure deficit, which the American Society of Civil Engineers estimates at around $1 trillion for surface transportation and $2 trillion total.
While many details of Trump’s infrastructure plan are still to come, the White House plan released in February focuses more heavily on stimulating rural economies than infrastructure needs in clogged cities.
“The program will focus on projects that could have a significant positive impact on states, cities, and localities but may not attract private sector investment,” according to the White House.
Trump has pledged $200 million in federal funds toward this nascent vision, with the balance of the $1.5 trillion expected from states and municipalities. Skeptics say the bill may be too big for smaller or less affluent states to pay, not to mention controversial proposals like cutting environmental protections in the process of infrastructure improvements, adding to uncertainty about the policy’s future.
“How are the state and local governments going pay for this?” said Congressman Tom Carper (D-Del.) in a statement. “Will we simply use streamlining and modifications to environmental law to make all of this work?
The financial mechanism favored by much of the trucking industry to help pay for road improvements remains higher gas taxes.
“Because it is a user fee, the fuel tax is the most conservative, cost-effective and viable solution to making that vision a reality,” American Trucking Associations President and CEO Chris Spear said in a statement about the Trump infrastructure plan. “Ninety-nine cents of every dollar goes directly to road and bridge maintenance.”
While political debate about the future of the country’s roads will surely continue, the question for a trucking industry experiencing rapid change is how much business may fall by the wayside between now and the time any action takes place.
