This morning the Bureau of Transportation Statistics announced that American industry shipped 13 billion tons of goods valued at almost $12 trillion in 2007.  Not surprising, trucking remains the leading mode of transportation in terms of value (over $8.3 trillion, or almost 71 percent of the total), tons (close to 9 billion tons, or 69 percent of the total), and ton-miles (almost 1.4 trillion, or 40 percent of the total).  Rail may be “how tomorrow moves” (in the words of CSX’s ad campaigns), but most things still move by truck today.

I haven’t had a chance to do a detailed analysis of the data, but a couple of things jumped out at me.  First, water transportation, in terms of ton-miles, had the highest compound annual growth rate (CAGR) of any other mode from 2002-2007.  Water grew by 8.5 percent, while truck and rail grew by 2.2 percent and 3.5 percent, respectively.  If you look at water transportation by its subcategories (shallow draft, Great Lakes, and deep draft), ton-miles via the Great Lakes had a CAGR of more than 24 percent in the five year period, compared to almost 12 percent for deep draft and 6 percent for shallow draft.  Maybe water is how tomorrow moves, at least for some industries.  In the days immediately following 9/11, several automotive plants shut down because supply trucks were lined up for miles at the Canadian border.  A few plants remained open, however, because they used barge shipments.  My guess is that some of the ton-miles increase in the Great Lakes is linked to the automotive industry.

The other interesting trend is that a greater percentage of total value, tons, and ton-miles is moving 249 miles or less.  Almost 58 percent of total value was shipped within 249 miles in 2007, compared to almost 55 percent in 2002.  Similarly, 78 percent of total tons (77 percent in 2002) and 20 percent of total ton-miles (18 percent in 2002) moved within this distance.  This coincides with a trend we’ve been seeing here at ARC, where companies are shortening the distance between supply and demand as a way to decrease cycle times and lead time variability.  The sharp rise in fuel prices in 2007 and the first half of this year is another contributing factor.  Will this trend continue?  I believe so, but it depends on several factors, including how long it takes for fuel prices to rise again and if/when carbon cap and trade regulations take effect.

In terms of total percentages, trucking will remain king in the years ahead.  But as I’ve written about in the past, challenging times are ahead.  Once the economy recovers, demand for truckload capacity will increase, but there won’t be enough capacity in the market to meet it.  And shippers may have to operate in a capacity-constrained environment for a long time.  A large amount of truckload capacity has exited the market due to carrier bankruptcies, carriers downsizing their fleets, etc. and most of this capacity may not come back, at least not quickly.

A few months ago, before the financial crisis hit, I spoke with Mary Lane, Director of Transportation at Unilever.  “Over the past four years I’ve been hearing that the transportation market is changing,” she said, “but now I’m starting to believe it.“  The change is most evident in Unilever’s refrigerated and frozen lines of business, where their carrier base is more fragmented and the impact of carrier bankruptcies has been the greatest.  Moving away from “one-way freight” is a common objective for many of the transportation executives I’ve spoken with this year.  Using more dedicated fleets, shifting more volume to intermodal, and encouraging more customer pick-ups are among the actions companies are taking to “take freight off the [truckload] grid” as one shipper described it.

The US Department of Transportation forecasts that over 18.1 billion tons of freight will travel by highway in the year 2020, a 75 percent increase from 1998.  But when you consider that the federal highway trust fund could be in the red by $3.2 billion next year, it’s unlikely that our road infrastructure will be ready to handle this increased freight volume. 

Whether its rail, water, or some other combination, one thing is clear: how tomorrow moves cannot be the same as today.