Changes in the U.S. Transportation of Goods
Recent Transportation Statistics
Every four years the U.S. Department of Transportation collects data on domestic and export-bound freight shipments. The most recent years for which the Bureau of Transportation Statistics has published data are 1993 and 1997. Updated information for 2001 should be published by 2003. Trends established by the 1997 statistics are expected to continue into 2001, especially the increases in parcel, postal and courier shipments, and the value of goods moving as air freight. Between 1993 and 1997, the value of U.S. shipments grew by 17.4%. Tons shipped grew by 14.0%. Ton-miles increased by 10.1%. Transportation data by mode is presented in Tables 1, 2 and 3.
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†SOURCE: U.S. Department of Transportation, Bureau of Transportation Statistics, 1997 Commodity Flow Survey: United States, EC97TCF-US, (Washington, DC: 1999)
The Impact of Electronic Commerce
The real purpose of a supply chain is not to help companies get rid of products in their inventories but to help customers find and acquire them efficiently. Electronic commerce (e-commerce) has significantly changed the way companies “go to market.” The Internet provides an opportunity for supply chains to work 24 hours a day, seven days a week, in all countries using the language of the customer to effect an exchange of values. The power of the Internet lies in its capability to connect companies, their trading partners and consumers easily, quickly and inexpensively. The impact of the Internet on the supply chain is nothing less than profound in its contribution to improved planning, improved asset management, shorter cycle times, tailored product positioning, and customer service. Adoption of the new technologies that enable this capability has been at a remarkably fast rate.
The concepts of aggregation of purchases, inventories, orders and shipments and slower cycle times to achieve logistics economies are being challenged by the e-commerce enabled supply chain. Concepts of make-to-customized order, transact in units of one or a few, and complete the fulfillment within hours, not weeks are being widely adopted. More and more, customer expectations for “overnight deliveries” will shift truckload to less-than-truckload deliveries and dramatically increase the freight moved by parcel delivery companies.
Shifts in the U.S. economy toward more services and high-value, low-weight products are influencing the mix of commodities, even as overall shipments increase. Such shifts affect the average value by unit of weight of commodities shipped (e.g., personal computers have a much higher value per ton than lumber). On average, a ton of goods shipped in 1997 was valued at $580, a slight increase from $563 in 1993 (both in constant 1997 dollars) (USDOT BTS 1998).
New Global Supply Chains
Changes in how and where goods are produced, and increase in international trade, have contributed to the rise in freight tonnage and ton-miles over the past few years. For example, the manufacture, assembly, and sale of a single product may involve several different facilities located hundreds or even thousands of miles apart. The importance of international trade to the U.S. economy can be seen in the increased value of U.S. merchandise trade in recent decades. Between 1980 and 1997, the real-dollar value of U.S. merchandise trade more than tripled, from $496 billion to $1.7 trillion (in 1997 dollars). In addition, the ratio of the value of U.S. merchandise trade relative to U.S. GDP doubled from about 11 percent in 1980 to 23 percent in 1997 (USDOC ITA 1999). During the past two decades, changes can be seen in the geography of trade. Trade with Asian Pacific countries grew greatly. In 1997, five Asian countries were among the top 10 U.S. trading partners, despite a slight downturn in trade in the second half of 1997 related to economic problems in the region. These five countries accounted for 26 percent of overall U.S. trade in 1997, up from 17 percent in 1980. Canada and Mexico were the first and third largest U.S. trading partners in 1980 and in 1997. While the rankings remained the same, the U.S. trade relationship with these two countries deepened. In 1980, Canada and Mexico together accounted for 22 percent of all U.S. trade by value. By 1997, this had increased to over 30 percent (USDOC Census FTD 1997). Canada accounts for approximately 20 percent and Mexico 10 percent of U.S. merchandise trade. U.S. trade with Mexico has grown more quickly than with Canada, and in 1997 Mexico surpassed Japan as the second largest market for U.S. merchandise exports (although Mexico remained the third largest trading partner overall). Between 1993 and 1997, trade with North American Free Trade Agreement (NAFTA) partners increased 62 percent in current dollars, from $293 billion to $475 billion. During this same period, U.S. trade with Mexico grew most rapidly, almost doubling from $81 billion in 1993 to $157 billion in 1997 (USDOC 1998, table 1323; USDOC Census FTD 1997). Changes over the past two decades also occurred in the commodities traded. Higher value manufactured goods now dominate U.S. trade, accounting for $1.3 trillion or 85 percent of the value of all merchandise trade in 1997. Of these goods, motor vehicles, computers, telecommunications equipment, and aircraft are among the top U.S. import and export commodities by value. While the value of manufactured goods increased as a share of U.S. trade, the share of agricultural commodities declined from 13 percent in 1980 to 6 percent in 1997. Mineral fuels accounted for approximately 6 percent of the value of U.S. trade in 1997, primarily imports of crude petroleum and petroleum products (USDOC ITA 1999).
In terms of commodities, motor vehicles and motor vehicle parts and accessories dominate trade between all of the North American countries. Other leading North American trade commodities include consumer electronics, telecommunications equipment, and aircraft equipment and parts. In addition, crude petroleum, natural gas, and petroleum products are important U.S. imports from both Canada and Mexico. Mexico is also a chief source of U.S. imports of clothing and textiles, while paper products, furniture, and wood products are among leading U.S. imports from Canada.
In their search for new markets and customers as well as more favorable sources of supply and production sites, U.S. companies have been pursuing globalization strategies as a means of insuring access to resources and growth in revenues. Joint ventures and strategic alliances with trading partners around the world are characteristic today of major American companies. Elimination of country tariffs and quotas and simplification of trade documentation has been pursued by the U.S. government and trade organizations. Market defensive strategies are being replaced by market prospecting strategies where the goal is to establish supportive, interdependent business relationships and influence emerging industries, technologies and supply chains.
New Technologies
Technologies exist today that can be used to create more effective and efficient supply chains. Examples include bar coding, scanning, data warehousing and data mining architectures and software systems, and use of the Internet to connect trading partners and customers. Applications of radio frequency and computer directed storage and handling systems, of satellite supported ground positioning systems (GPS) for tracking and expediting shipments, and of point of sale and point of use capture of demand data are examples of ‘new’ technologies being used. Progress toward improved supply chain management does not appear to be limited or propelled by available technology as much as the capability and desire of management to establish strategic, and mutually beneficial multi-firm relationships.
Emerging New Forms of Supply Chain Management
Today, Internet-based catalogues offer everything from consumer electronics, luxury goods, sporting gear, freshly produced foods, prescription medicines, and replacement parts. Demanding customers are expecting overnight delivery of this Internet-based e-commerce. This can occur out of a network of market-based distribution centres filled with inventory, or more cheaply out of fewer fulfillment hubs, requiring much less inventory, where overnight delivery is still possible. Parcel express companies, like Federal Express and UPS are developing sophisticated new software for customer order fulfillment and electronic warehousing at strategic “pick and pack” hubs. Orders placed today over the Internet can be delivered anywhere in the U.S. from locations in Seattle, Memphis or Lexington. International shipments can be cleared by customs electronically before they land, overnight or the next day, in the destination country. Pick up and delivery carriers can be coordinated electronically on both ends to schedule the quickest and least expensive movements. The supply chains of tomorrow will be supported by virtual logistics networks where manufacturers and their suppliers and customers, repair vendors, delivery companies, and logistics service providers will be connected electronically via virtual data centers and web interfaces on the Internet. Internet-based collaborative relationships will provide enterprise-wide and supply chain visibility for improved planning and execution.
As we head into this new millennium the movement toward globalization, with emerging markets, cheaper supply sources, and new trading partners, is compelling enterprises of all sizes to build alliances and on-line commerce systems that efficiently deliver products to customers while providing a worldwide view of operations. Virtual along with traditional organizations are developing new strategies to track orders and react to changes in real time in handling and transporting materials as they move across the supply chain from originating suppliers to end customers.
The goal is to electronically link the entire forecasting, planning, sales, procurement, production, delivery, freight payment and revenue collection processes into one seamless flow of information across national borders, time zones, and differing languages, creating a global view of the supply chain flows. Transportation and fulfillment providers, including Federal Express, UPS, Sea Land, DHL and SkyWay, are opening up their systems allowing e-commerce vendors to access, track, and communicate logistics information in a variety of innovative ways. Web casting and publish/subscribe techniques allow all interested parties to be alerted to situations requiring their attention. This includes changes in customer demand, order revisions and cancellations, adjustments in quantity and/or locations for deliveries in progress, customs clearance problems, and on-time delivery or installation issues. An integrated, virtual solution can diagnose when a critical piece of equipment is about to fail, can tell when a hub is short of replacement or repair parts, and also locates the source of the problem, whether it is due to an en-route delivery, warehouse situation, or change in the scope of an order. These new Internet-based solutions have the potential to all but eliminate the strategic role of distribution centers for replacement parts, putting the emphasis on moving information, not parts. This new capability provides for dynamic decision opportunities, or fixing problems before they arise.
Automated online personalities that emulate human customer service representatives will become widespread in the Internet at a much lower cost than traditional support functions. These web-based “virtual reps” will be able to react to customer inquiries and handle frequently asked questions twenty-four hours a day, seven days a week, in any language.
Internet-based, extra enterprise-wide e-commerce applications are part of a fundamental shift in how computing is being applied to the business of managing logistics across the trading landscape. New strategies and software to support those strategies are being developed, tested and implemented in order to help companies to find the best balance between demand opportunities and supply constraints while enabling effective, controlled logistics execution. As trading partners work together to improve the overall performance of their supply chain, they are beginning to discover the solution might just be a virtual reality.
REFERENCES
U.S. Department of Commerce, Census Bureau (1999), 1997 Commodity Flow Survey (CFA): United States, EC97TCF-US, Washington, D.C.
U.S. Department of Commerce (USDOC), Census Bureau Foreign Trade Division (FTD) (1997), FT920 U.S. Merchandise Trade: Selected Highlights, December 1997, Washington, D.C.
U.S. Department of Commerce (USDOC), Census Bureau (1998), Statistical Abstract of the United States 1998, Washington, D.C.
U.S. Department of Commerce (USDOC), International Trade Administration (ITA) (1999), GDP and U.S. International Trade in Goods and Services, 1970-1998, Washington, D.C.
U.S. Department of Transportation (USDOT), Bureau of Transportation Statistics (BTS) (1998), National Transportation Statistics 1997, Washington, D.C.