Daily Archives: September 21, 2006

The Coming Economic Reality

I have written in the past about my doomsday thoughts on the global economy. As more things get connected, the easier it will be for world events to cause ripple effects that lead to a global economic meltdown. I believe the world will face major economic problems during my lifetime. Unfortunately, many that have grown up over the last 40 years in the USA will not be ready for it.

Think I am crazy. Just consider the following story that I recently wrote about the U.S. logistical infrastructure. When we go to buy something at the store, we don’t usually think about how it got there. But the moving of goods is tied to the success of our economy. And the bad news is that our logistical/transportation network is facing dire situations. It’s not a question of if but when it collapses.

Maybe we can do something if we act soon. I welcome your thoughts to chaille@ organicfaith.com.

 Excerpt from “Logistics Infrastructure Poses Problems“, which ran in the September of the Recycle Record.

            The things we neglect today tend to become tomorrow’s problems. That certainly appears to the case when it comes to the country’s logistical infrastructure.

            The Council of Supply Chain Management Professionals (CSCMP) recently released its annual State of

Logistics Report. The results indicate that the nation is facing some major transportation challenges that are only likely to get worse in the future. Overall, business logistics costs were $1,183 billion during 2005, which is an all-time high. Dramatic fuel price increases, truck driver shortages, new security requirements, and continued capacity pressures have helped drive rising logistics costs.

            Written by Rosalyn Wilson, the report predicts a “looming crisis” in transportation system capacity due to deteriorating critical infrastructure.


Wilson wrote, “The physical transport network, the roads, rail lines, ports, airports, freight yards, etc. is the backbone of our nation’s freight system and economy. Its continued health or lack thereof will determine our position in the global economy – and we are losing ground.” 

            The country faces capacity constraints throughout the system. Many experts believe it is not a question of ‘if’ we will reach a crisis point, but ‘when.’

            Truck driver shortage remains a big problem. And the hours-of-service rules have only made things worse by reducing the capacity of an individual driver. The American Trucking Association (ATA) has estimated that the driver shortage will grow to 111,000 by 2014. Shortages have led to more drivers jumping from company to company in search of the best compensation. This makes it harder to reduce driver turnover.

             Rail doesn’t offer much relief because it has been working near capacity. Average train speeds keep ping which translates into higher costs and more congestion. Railroads move about 50% of all international cargo in the country, and it is expected to double its current level by 2025.

             Many of the traffic jams start at ports that are facing severe traffic jams. The country needs to add capacity equal to the

Port of
New York and
New Jersey every year just to keep up with the expected volume increase over the never several decades. Adding extra capacity isn’t an easy thing to do.

            One major concern is that many

U.S. ports have shallow harbors and narrow navigation channels that do not permit access by deep draft vessels. As global trade blossoms, cargo vessels are getting larger.
America’s trading partners have built ports capable of servicing these extra large vessels. In some cases, it takes decades to develop deeper channels. The
U.S. cargo industry doesn’t have that kind of time. The CSCMP’s report suggested urgent action on port development.

            The logistical crisis is so big that there is no one single solution. Recruiting more drivers, adding port capacity and building more roads is part of the plan. A number of ports have extended cargo terminal hours on nights and Saturdays. Many of these facilities have instituted peak hour fees on cargo loading and unloading. Soon the east coast will experience many of the port capacity and congestion problems that have become all too common on the west coast.

            CSCMP’s reports calls for major investments to create high speed rail freight corridors with grade separated rail crossings to alleviate highway congestion and improve efficiency and safety. Government and the rail industry needs to work toward alleviating choke points in congested urban areas and replace grade crossings that impede average rail speed.

            Safety and security must become a core business function for transportation companies. This requires better control of shipment data as well as improved screening procedures. Any action that can improve shipment visibility will likely be championed in the future.

            CSCMP’s report told the story about one cargo container that was found in 2001 at an Italian port. A 43-year old Egyptians was found to be living in the container. The man’s container had a small kitchen, a bed, food, water, batteries and a cell phone. This story illustrates just how vulnerable the cargo system can be to terrorism or smuggling.