[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
HOW LOGISTICS FACILITATE AN EFFICIENT
FREIGHT TRANSPORTATION SYSTEM
=======================================================================
(113-27)
HEARING
BEFORE THE
PANEL ON
21st-CENTURY FREIGHT TRANSPORTATION
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
JUNE 26, 2013
__________
Printed for the use of the
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina ELEANOR HOLMES NORTON, District of
JOHN J. DUNCAN, Jr., Tennessee, Columbia
Vice Chair JERROLD NADLER, New York
JOHN L. MICA, Florida CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana STEVE COHEN, Tennessee
BOB GIBBS, Ohio ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York JOHN GARAMENDI, California
DANIEL WEBSTER, Florida ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida JANICE HAHN, California
JEFF DENHAM, California RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky DINA TITUS, Nevada
STEVE DAINES, Montana SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
------ 7
Panel on 21st-Century Freight Transportation
JOHN J. DUNCAN, Jr., Tennessee, Chairman
GARY G. MILLER, California JERROLD NADLER, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas CORRINE BROWN, Florida
RICHARD L. HANNA, New York DANIEL LIPINSKI, Illinois
DANIEL WEBSTER, Florida ALBIO SIRES, New Jersey
MARKWAYNE MULLIN, Oklahoma JANICE HAHN, California
CONTENTS
Page
Summary of Subject Matter........................................ iv
TESTIMONY
David Abney, Chief Operating Officer, UPS........................ 4
Tracy Rosser, Senior Vice President, Transportation, Wal-Mart
Stores, Inc.................................................... 4
Edward R. Hamberger, President and Chief Executive Officer,
Association of American Railroads.............................. 4
Scott Satterlee, Senior Vice President, C.H. Robinson, on behalf
of the Transportation Intermediaries Association............... 4
Mark V. DeFabis, President and Chief Executive Officer,
Integrated Distribution Services Inc., on behalf of the
International Warehouse Logistics Association.................. 4
Richard H. Fisher, President, Falcon GlobalEdge, on behalf of the
Airforwarders Association...................................... 4
PREPARED STATEMENTS SUBMITTED BY WITNESSES
David Abney...................................................... 27
Tracy Rosser..................................................... 36
Edward R. Hamberger.............................................. 39
Scott Satterlee.................................................. 58
Mark V. DeFabis.................................................. 69
Richard H. Fisher................................................ 73
SUBMISSION FOR THE RECORD
Edward R. Hamberger, President and Chief Executive Officer,
Association of American Railroads, response to request for
information from Hon. John J. Duncan, Jr., a Representative in
Congress from the State of Tennessee........................... 20
[GRAPHIC] [TIFF OMITTED] 81677.001
[GRAPHIC] [TIFF OMITTED] 81677.002
[GRAPHIC] [TIFF OMITTED] 81677.003
[GRAPHIC] [TIFF OMITTED] 81677.004
HOW LOGISTICS FACILITATE AN EFFICIENT FREIGHT TRANSPORTATION SYSTEM
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WEDNESDAY, JUNE 26, 2013
House of Representatives,
Panel on 21st-Century Freight Transportation,
Committee on Transportation and Infrastructure,
Washington, DC.
The panel met, pursuant to call, at 1:00 p.m., in Room
2167, Rayburn House Office Building, Hon. John J. Duncan, Jr.
(Chairman of the panel) presiding.
Mr. Duncan. The panel will come to order. Good afternoon
and welcome to this hearing of the Panel on 21st-Century
Freight Transportation.
Before I begin, I want to let everyone know we are
expecting a vote series anywhere from 1:45 to 2:30 this
afternoon.
With that, I recognize Mr. Miller.
Mr. Miller. Mr. Chairman, I request unanimous consent that
the chairman be permitted to declare recess during today's
hearing.
Mr. Duncan. Without objection, so ordered.
Today's hearing examines the relation between logistics and
a productive, efficient, and safe freight system. The movement
of goods across the country may not always grab headlines, but
the efficiency of freight transportation has a major impact
upon the lives of every American on a daily basis. From the
clothes we wear to the cars we drive to the food we eat, the
freight transportation system impacts all aspects of our
everyday lives.
The logistics industry is valuable to the Nation's freight
system because logistics improve the efficiency of the supply
chain. The logistics industry adds value to the supply chain by
improving the planning, implementation, and control of the flow
of goods from point of origin to point of consumption.
As I have said before, the purpose of this panel is to
provide recommendations to the committee on ways to modernize
the freight networks and make the United States competitive in
the 21st century. We have been given cross-jurisdiction across
all the different subcommittees, and we are going to try to do
our best with that opportunity. We have been working hard
toward our goal, holding multiple hearings and roundtable
discussions and visiting critical freight facilities in
southern California and a few days ago in the greater Memphis
area.
We also have before us today an outstanding group of
witnesses. I am interested to hear from them regarding their
operations as well as any recommendations they have on ways to
improve our Nation's freight system, and we would appreciate
their specific recommendations.
First, we have David Abney, the chief operating officer of
UPS. UPS is the world's largest package delivery company,
delivering over 16 million packages to almost 9 million
customers every day.
Second, we have Tracy Rosser, the senior vice president of
transportation at Wal-Mart Stores, Inc. Walmart operates over
4,000 stores across all 50 States and is a large user of all
modes of transportation.
Third, we have Ed Hamberger, the president and CEO of the
Association of American Railroads. AAR represents all of the
Class I railroads as well as over 170 short line railroads and
regional lines.
Next we have Scott Satterlee, a senior vice president at
C.H. Robinson, testifying on behalf of the Transportation
Intermediaries Association, TIA. C.H. Robinson is a leading
third-party logistics company, and TIA is the professional
organization for the third-party logistics industry.
Fifth, we have Mr. Mark DeFabis, president and CEO of IDS.
Mark is testifying on behalf of the International Warehouse
Logistics Association, IWLA. IDS is a warehouse logistics
company from Indianapolis, Indiana, and IWLA represents
warehouse-based logistics companies.
Finally, we have Richard Fisher, president of Falcon
GlobalEdge, testifying on behalf of the Airforwarders
Association, AFA. And Falcon is, of course, a logistics company
focusing on air cargo. In his capacity as chairman of AFA, he
represents 360 similar companies.
I thank all of our witnesses for joining us today, and I
now recognize our ranking member, Mr. Nadler, for his opening
statement.
Mr. Nadler. Thank you, Mr. Chairman.
Mr. Chairman, thank you for holding this hearing today and
for your leadership as this panel carries out its work. Through
hearings, roundtables, and site visits we have made steady
progress in spotlighting the challenges facing our freight
transportation system. Today we have the opportunity to hear
how companies serving a variety of critical functions in the
movement of goods employ logistics to maximize the efficient
movement of freight. What these private entities are doing to
move commerce is remarkable. Some testimony will underscore
what is very visible to consumers, such as UPS moving 16
million packages throughout the world every single day. Other
testimony will reveal a largely hidden network of third-party
forwarders and warehousers and warehouse-based supply chain
management. Each of these companies, through innovation and
adaptability, ensure that the movement of freight across the
country does not come to a screeching halt. Advancements in
logistics have made our Nation's roadways, railways, waterways,
and skies realtime warehouses thanks to Just in Time delivery.
Yet the transportation systems that facilitate freight
movements have not evolved to meet the changing demands.
Logistics and technology can only help companies maximize the
efficiency of operating on the existing transportation network,
and the bottom line is that the existing infrastructure becomes
less and less adequate to maintain our Nation's global
competitiveness. While freight volumes across the globe are
exploding, our international competitors are rapidly upgrading
their transportation networks to meet the needs of the global
economy.
With our Nation's population expected to exceed 400 million
by 2050 and freight volume is expected to grow by 60 percent in
the next three decades, future demands on our intermodal
freight network will require a bold new vision and approach to
addressing these challenges. Providing a vision for a 21st-
century freight transportation system and ensuring that funding
is available to upgrade and maintain the infrastructure in
which freight moves remains the responsibility of the Federal
Government. We must work to bridge the gaps that exist in all
modes--highway, rail, water, and air--between current system
capacity and our growing goods movement needs. Robust
investments across our freight network will ensure that
shippers and logistics providers will have good choices to make
among modes. We must also work to specifically identify and
address freight bottlenecks that cause congestion, slow the
movement of goods, and come at a cost to our economy.
We will hear from Mr. Abney today that if every UPS vehicle
is delayed just 5 minutes each day, it would cost UPS $105
million annually. Particularly with respect to surface
transportation, we do not currently have a reliable way to fund
large-scale transportation investments whose impacts can be
felt regionally and nationally. These high-cost projects
overwhelm the ability of any State to take on and, as a result,
most often do not advance. We need a dedicated source of
funding outside of the existing State-based system to foster
and prioritize these investments which are crucial to freight
movement.
I am pleased to hear that the witnesses on this panel agree
with this assessment. Some are willing to go further and
recommend ways to fund freight movement. I look forward to an
active discussion today and at future meetings of this panel
not only on investment needs but on revenue options to meet the
enormous challenges before us.
I thank you and I yield back.
Mr. Duncan. Well, thank you very much, Mr. Nadler.
Does anybody else wish to say anything? Any other
statements at this time?
All right. We will go ahead and proceed with the witnesses.
I think I have chaired about 250 or 300 hearings since I have
been here. And they have thrown me. They have reversed the
order for the first time. So we are going to go backwards. I
guess it doesn't make any difference. It fooled me though.
Our first witness will be Mr. David Abney, the chief
operating officer of UPS. Mr. Abney.
TESTIMONY OF DAVID ABNEY, CHIEF OPERATING OFFICER, UPS; TRACY
ROSSER, SENIOR VICE PRESIDENT, TRANSPORTATION, WAL-MART STORES,
INC.; EDWARD R. HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, ASSOCIATION OF AMERICAN RAILROADS; SCOTT SATTERLEE,
SENIOR VICE PRESIDENT, C.H. ROBINSON, ON BEHALF OF THE
TRANSPORTATION INTERMEDIARIES ASSOCIATION; MARK V. DEFABIS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, INTEGRATED DISTRIBUTION
SERVICES INC., ON BEHALF OF THE INTERNATIONAL WAREHOUSE
LOGISTICS ASSOCIATION; AND RICHARD H. FISHER, PRESIDENT, FALCON
GLOBALEDGE, ON BEHALF OF THE AIRFORWARDERS ASSOCIATION
Mr. Abney. Chairman Duncan, Ranking Member Nadler, and
members of the panel, thank you for the opportunity to testify
about how UPS utilizes logistics to move freight and the
opportunities we see to improve America's productivity.
UPS plays an important role in freight transportation. I
have four slides. If we can show the first slide. And you can
just see that we have 400,000 UPS employees, many of which are
in the United States. And we have almost 100,000 commercial
vehicles. At any given time, the economic value of the goods
and services that are in the UPS network are equal to 6 percent
of the U.S. GDP and 2 percent of the world's GDP.
If you look at slide two, I am just going to give you a
quick example of logistics in action. And in this case, we have
a supplier in Los Angeles, a manufacturer in New York, and a
customer in Germany. And I am just going to focus on the
transportation mode changes. So it goes by truck. And then when
it gets to Chicago, to our catch hub, it gets shifted into
rail. It will move by rail to New Jersey. At that point, it
will have another mode shift. It goes back to truck. And then
it gets delivered to the manufacturer where it is added and
final assembled and then again it goes by truck. And then of
course it would travel by air to Germany. And then it would be
delivered.
This is very common to see these shifts in our modes of
transportation. And you know most times things go very well.
But as the next slide will show, there are some challenges. And
when those challenges occur, they can delay the movement of
goods. And one of those is weak intermodal connections. So when
you are trying to change from one mode to the other. Now a good
example of a project that is going to correct one of these
large ends is the project created in Chicago that Congressman
Lipinski is involved in. We certainly appreciate your efforts
there. There is always highway congestion in all the urban
cities. We all know that. And then the air traffic controller
delays could be because of many reasons, but our antiquated
navigational system is one of those. You can see at the bottom
of the slide that there is real cost to this congestion and to
these delays. And as was quoted by Ranking Member Nadler, every
5-minute delay to every one of our vehicles is $105 million.
And what it causes us to do is to overstaff and to put more
trucks on the road than we need to to make up for the
congestion.
The last slide, I just wanted to talk about solutions for a
minute. And I will highlight the first three. And you can see
the others. But over the decades, America's transportation
infrastructure has been built in silos. So highways were built
to connect to highways. Railroads were built to connect with
railroads. Congress has tried to link them together, but it is
still a patchwork. And America needs a freight system that is
built like a network. And I encourage Congress to take a long-
term coordinated view of how the different modes can work
together.
For highways, the simplest improvement that we would
recommend is to increase the length but not the weight of each
trailer from 28.5 feet to 33 feet in twin trailer
configurations. This would allow freight to move more
efficiently, reduce the number of trucks on the road, and would
provide environmental benefits without compromising highway
safety. Because we are not increasing the weight limit, there
is no risk of further damage to highways and bridges. UPS also
supports raising the motor fuels tax and indexing it to
inflation.
The other mode I will mention is air transportation. And we
endorse increased funding of the FAA's next generation air
traffic control system, and we think those benefits have been
well documented.
So I joined UPS 39 years ago. I could not have imagined the
incredible growth and global commerce or could I have imagined
the role that UPS plays in facilitating America's economy. But
I also cannot imagine that nearly four decades later, America's
transportation infrastructure would still be stuck in the 20th
century. This panel can help modernize infrastructure, build
connections between different modes, address global barriers to
freight movement, can move our freight transportation system
into the 21st century, boosting America's efficiency, growth,
and competitiveness. It is a critical mission, and all of us
stand ready at UPS to assist you in this vital effort.
Thank you very much.
Mr. Duncan. Thank you very much, Mr. Abney.
Our next witness is Mr. Tracy Rosser, who is senior vice
president of transportation for Wal-Mart Stores, Inc.
Mr. Rosser. Chairman Duncan, Ranking Member Nadler,
distinguished members of this panel, thank you for the
opportunity to speak with you today. My name is Tracy Rosser,
and I am senior vice president of transportation for Wal-Mart
Stores, Inc. I am responsible for domestic transportation, our
private fleet operations, and global transportation.
Walmart's logistics network is critical to providing goods
to our customers throughout the world. The ability to replenish
our stores and clubs quickly and at low cost has been a key
contributor to our success. Technology, innovation, and the
commitment of our associates continue to drive our mission in
providing customers an outstanding shopping experience that
saves them money so that they can live better.
Walmart opened its first distribution center in 1970, using
a system designed to quickly and efficiently replenish our
shelves. Walmart logistics employs 77,000 associates at 150
distribution centers and 87 transportation offices. We run
6,200 trucks, 55,000 trailers, and we have 7,500 drivers in our
private fleet operations. And I would say that our private
fleet operations is among the safest, with a 1.56 million miles
per preventible accident.
Our fleet drivers log approximately 700 million miles per
year, with the average truck driver logging more than 100,000
miles a year. Our distribution center network typically serves
from 90 to 100 stores and uniquely caters to the needs of
specific stores within a 200-mile radius of those distribution
centers. They move hundreds of thousands of cases each day, and
our import facilities provide efficient methods of handling
international merchandise. Walmart also has nine disaster
distribution centers strategically located across the country
stocked with relief supplies.
We have set really ambitious strategic sustainability goals
that include doubling our fleet efficiency by 2015 with
solutions like cross-dock consolidations networks, lean
routing, reduction of empty miles, and optimizing how
merchandise gets loaded in our trailers. In 2012, we delivered
297 million more cases, driving 11 million fewer miles than in
2011. We continue to work with the trucking industry on a
variety of innovative technologies, including hybrid and other
advanced power trains, alternative fuels, aerodynamics, and
advanced tire technologies. For 2012 alone, such reductions
helped us avoid emitting 103,000 metric tons of carbon dioxide,
the equivalent of taking 20,000 cars off the road. In addition,
by reducing food miles between farmers and markets, reducing
food waste and working with farmers to optimize production, we
have been able to strengthen local economies and create
logistical and environmental savings.
With over 4,000 stores in the U.S. and locations in every
State, Walmart is a user of all modes of transportation, from
our ports to our rail networks to our highway infrastructure.
The transportation infrastructure is an asset to our country,
offering a competitive advantage that should be utilized to the
fullest.
Looking ahead, we believe it is important to focus on
maintaining a system that yields the highest degree of safety,
efficiency, and environmental stewardship. We encourage your
panel to dedicate attention and funding on areas with the
highest priority maintenance needs and areas of extreme
inefficiency and congestion. Like other users, we have noticed
that bottlenecks can develop across all modes, at points of
significant freight movement, as well as in and around urban
areas. When we find that customers in urban areas share a
similar demand for goods and services in other areas of the
country, the logistical costs of meeting those needs can be
significant. In addition, as e-commerce grows, customers are
demanding faster delivery tailored to their schedules. Without
a focused effort to address timely movement of the freight
through urban areas, restrictions and workarounds will continue
to add cost, both environmental and economic. Although we pride
ourselves on our ability to adjust quickly, challenges
underscore the need for a national freight policy. State and
local regulations often share similar goals of safety and
efficiency, but the variety of measures can be cumbersome and
costly to interstate commerce.
We encourage the development of solutions that address the
needs of our transportation network in as uniform a manner as
possible. Maintaining a strong infrastructure will also help
our suppliers to remain competitive. Walmart recently announced
a commitment to buy an additional $50 billion in U.S. products
over the next 10 years. As the economy continues to improve,
domestic producers will rely on a lean, efficient
transportation network to get their products to market quickly
and cost-effectively.
To conclude, as a significant user of the Nation's
infrastructure, we understand the value of our Nation's system
and of ensuring that it remains competitive in the decades to
come. We encourage the use and development of safe, efficient,
and sustainable solutions in freight movement. We also believe
that attention and financial resources should be directed
towards areas in high needs of maintenance, congestion points,
and challenges of urbanization.
Finally, a clear national freight policy can promote
interstate commerce while meeting safety and efficiency needs
and goals. Walmart appreciates that this panel has been tasked
to consider ways to best meet the demands of the Nation's
freight network. There is no easy answer here, and we look
forward to working with you as you address the challenges
ahead.
Thank you again for your time today. I am happy to answer
any questions. Thank you.
Mr. Duncan. Thank you very much, Mr. Rosser.
Next is Mr. Edward R. Hamberger, who is the president and
CEO of the Association of American Railroads. Mr. Hamberger.
Mr. Hamberger. Mr. Chairman, thanks to you and the other
members of the committee for the opportunity to be here to
represent North America's freight railroads and address this
important topic.
A couple of years ago, Mr. Chairman, we came to the
conclusion that the story of logistics and freight needed to be
told on a wider basis. So we went ahead and put together a
video. I do have a clip I would like to show you today under
the theory that a picture is worth a thousand words. So this is
about a minute and a half of what we believe are rail logistics
in the supply chain.
[Video shown.]
It may not be as catchy as some other logistics videos I
have seen, but we think it gets the point across. And I hope
the point that you take away from it is that we see ourselves
as an interrelated network. Obviously it was freight rail-
centric, but you saw a lot of our other modal partners in it.
Working together with our partners and customers here, we
create jobs, grow the economy, and keep American products
competitive in world markets.
Let me just get right to the end. How do we keep that
going? In terms of public policy, we recommend, as my two
previous colleagues did, that you continue to focus programs to
improve the first mile and last mile connections where freight
is handed off from one mode to another, from truck to rail or
rail to truck, at intermodal terminals. Improving these
connections will lead to large increases in efficiency and
fluidity throughout the network.
While we have been reinvesting more private capital than
ever before, $25 billion this year alone, 40 cents of every
revenue dollar back into the infrastructure--as you saw, $500
billion in the last 30 years--sound public policy helps to
ensure that these investments continue. So we would say, number
one, please keep in place the current balanced economic
regulatory structure governing our industry.
Number two, please encourage more voluntary--and I
emphasize voluntary--public-private partnerships for freight
rail infrastructure improvement projects.
Three, please try to improve the environmental and other
permitting reviews to make them more efficient, by shortening
the time it takes for these reviews of freight expansion
projects, of course in ways that do not adversely affect the
quality of those reviews.
Fourth, we ask that you defer consideration of any truck
size and weight legislation until the congressionally mandated
study from MAP-21 is completed next year.
And five, sort of more of a philosophy, ensure that various
freight modes pay their own way. That is to say, the ``user
pay'' concept has worked very well for developing and growing
the infrastructure in the country. We believe that the ``user
pay'' concept should continue into the future.
Thank you for the opportunity to testify and I look forward
to answering any questions.
Mr. Duncan. Thank you very much.
Our next witness is Mr. Scott Satterlee, who is with C.H.
Robinson, on behalf of the Transportation Intermediaries
Association.
Mr. Satterlee. Chairman Duncan, Ranking Member Nadler, and
members of the committee, thank you for the opportunity to
testify at today's hearing. As one of the Nation's largest
third-party logistics providers and a proud member of the
Transportation Intermediaries Association, C.H. Robinson has a
unique view on how goods and commerce flow from manufacturer to
consumer. My name is Scott Satterlee, and I am senior vice
president for C.H. Robinson. I joined C.H. Robinson in 1991.
And I am responsible for overseeing the operations of our 175
U.S. branch offices which employ more than 8,400 U.S.
employees.
C.H. Robinson was founded in 1905 and facilitates the
movement of over 11.5 million shipments a year. We have been
named the number one 3PL for 2 years in a row by Inbound
Logistics magazine. Additionally, C.H. Robinson is a member of
the Transportation Intermediaries Association. The TIA is a
professional organization of the $162 billion third-party
logistics industry. TIA represents over 1,300 member companies
most of whom are small family-owned businesses.
C.H. Robinson relies on all the Nation's freight capacity
to manage our customer shipments on a daily basis. We do not
own equipment with wheels. So we are mode-neutral when
tendering shipments. We monitor and qualify over 45,000 U.S.-
based motor carriers for proper authority, valid insurance, and
other data points. 82 percent of the carriers operate three or
fewer trucks, and 98 percent of the carriers operate 25 or
fewer trucks. Many of these companies do not have their own
dedicated sales force, so companies like C.H. Robinson enhance
their sales capabilities. We also have access to all Class I
railroads for intermodal freight. We operate a series of
gateways and consolidation centers for air freight and ocean
freight and perform customs clearances as a licensed customs
broker. Some shippers only use our services a handful of times
when they need assistance finding a truck while other customers
have fully integrated our services and even our people into
their transportation departments.
So how does freight get assigned and picked up across the
country in a regional or long-haul marketplace? We act as a
traditional freight broker for almost all of our transportation
customers. If our rates and service levels are competitive, we
bring thousands of carriers of all sizes to our customers that
normally would never have a chance to access their freight due
to technology, payment, or contracting requirements. For some
customers, we also act as a 4PL or shipper's agent by executing
the routing guide. In theory, transportation should be pretty
simple. If you have a load you need transported, you locate a
truck, you assign the truck, and wait for the freight to
deliver. Unfortunately, many variables make the matching of a
load with an available truck much more complex than that. For
example, weather and traffic delays, equipment failures,
changing regulation, lane capacity imbalances, business
seasonality, and economic conditions all add tremendous
complexity to the system. In addition, systematic problems,
such as short lead times and heavy reliance on expedited
services, excessive loading and unloading time, poor visibility
to inbound or outbound freight, and securing surge capacity
during busy seasons combine to add inefficiency to the
country's transportation system.
Property freight brokers and 3PLs like C.H. Robinson
mitigate these factors that contribute to inefficiency by
matching the right load to the right piece of equipment at the
right time. Finally, we offer these recommendations where
Government can reduce both chronic and unexpected exceptions,
therefore increasing efficiency in the supply chain.
One, provide shippers and brokers clarity in which carriers
are safe to hire in regards to the CSA program. Freight brokers
and shippers should not need to second-guess the FMCSA on who
is authorized to operate on the Nation's roadways.
Two, encourage our transportation system to have built-in
modal flexibility. An example of modal flexibility would be an
increase in rail ramps across the Nation or a viable shortsea
shipping program.
Three, make sure trucking remains a great opportunity for
the small- and medium-sized entrepreneurs. They provide the
flexibility and service to keep our entire transportation
system in equilibrium. Barriers for small carriers include
California's environmental regulations which is significantly
different from the rest of the country.
Four, help industry address the growing rise of
sophisticated cargo theft. Regional cargo theft task forces are
under increasing budgetary pressures from law enforcement
agencies but provide industry and consumers valuable deterrent
to a costly problem.
Lastly, ensure consistency between food safety regulations
and cargo claims regulations. It is now common for a shipper to
request the destruction of hundreds of boxes of food without
clearly establishing proof of actual damage. 3PLs are often
caught in the middle of a tension between freight cargo claims
responsibility and food safety fears.
We are encouraged and optimistic that the next highway bill
can and will find ways to improve the Nation's freight
efficiency by addressing some of the noninfrastructure barriers
to the efficient flow of freight across the country as well.
Thank you.
Mr. Duncan. Thank you very much.
Our next witness is Mr. Mark DeFabis, president and CEO of
Integrated Distribution Services. Mr. DeFabis.
Mr. DeFabis. Chairman Duncan, Ranking Member Nadler,
members of the committee, thank you for inviting me to testify
today. I represent members of the International Warehouse
Logistics Association and serve on the organization's executive
committee.
The IWLA is the only trade association for warehouse-based
third-party logistics providers. These are companies like mine
that offer warehouse-based supply chain management services to
other businesses across North America.
Independent warehouses are a vital part of the economy. We
best serve our customers by identifying efficiencies that allow
goods and materials to move with more velocity from creation to
the end consumer while navigating the legislative and
regulatory waters that affect goods movement. We do all of this
while constantly looking for ways to achieve efficiencies
within the overall supply chain. And our success is evidenced
by the fact that logistics costs as a percentage of GDP have
fallen almost in half from 16.2 percent of GDP in 1981 to 8.5
percent in 2012.
Our unique position in the supply chain allows us to
understand just how goods move across the country and exactly
where the system needs to focus to ensure smooth commerce in
the future. Today's commercial freight is multimodal. And the
warehouse-based 3PL is the point at which modal interchange
happens. This is one reason IWLA members' facilities are
located near every major airport, seaport, harbor, railyard,
interstate interchange, and why adequate access to these
locations is imperative.
As I mentioned, velocity and security and accuracy within
the supply chain are mission critical outputs. This is the
reason that warehouse-based 3PLs provide a growing number of
value-added services. These warehouses, once only big boxes
where goods were stored, now may label, package, sort, blend,
test, and save customers on transportation costs to speed the
process. These same warehouses may also support made-to-order
operations and handle returns processing and refurbishing of
returns.
Warehouse-based 3PLs also play a key role in another
growing segment of the economy, Internet commerce. This
increasing amount of e-commerce sales means more shipments are
being delivered directly to the consumer. This fact
demonstrates that commercial freight does not just move on
interstate highways but extends all the way to the residential
doorstep.
This new model, based on value-added services, exposes
warehouse-based 3PLs to regulations that previously only
applied to manufacturers. One distinction between the warehouse
and manufacturers is important to keep in mind. Warehouse-based
3PLs do not own any of the products that move through our
facilities. Ownership of the goods remains with the customer
and the relationship is that of a bailor and bailee governed by
Article VII of the Uniform Commercial Code. It seems that this
relationship is often not understood or considered during the
drafting of Federal rules and regulations. While warehouse
operators are prepared to live by rules and regulations
governing the handling and storage of various products, we can
only act upon the direction and information supplied by our
customer, the bailor. As bailee, we should not be held to the
same level of liability that applies to the owner of the goods.
From its unique position in the supply chain, the
warehouse-based 3PL can see and is directly affected by
bottlenecks and choke points within the commercial freight
network. These often manifest themselves at the warehouse where
increased costs are incurred to keep the supply chain moving in
a coordinated fashion. A strong logistics industry enables a
healthy and growing economy. But a strong logistics industry is
only possible with freight policies that support the needs of
the 21st-century supply chain.
With this in mind, the members of the International
Warehouse Logistics Association ask the committee to consider
the following: Develop new approaches to infrastructure
financing for all commercial transit modes. These can come via
traditional revenue sources and through new sources, such as
user fees, mileage-based taxes, and greater use of private
investment. Implement policies to ensure that revenue
designated for commercial freight projects cannot be diverted
in the same way that Highway Trust Funds are today. Guarantee
that fees that are collected on imports at the ports through
the U.S. Harbor Maintenance Trust Fund are used for their
intended purpose, dredging and maintaining the Nation's ports
and waterways. Also, with expansion of the Panama Canal, many
ports will need dredging to accommodate the larger ships
transferring through the canal.
We have made other recommendations as a part of our written
testimony, and we would ask your attention to those as well.
But on behalf of the International Warehouse Logistics
Association, I thank you for your time. And our industry stands
ready to work in partnership with the committee on ways to
enhance commercial freight movement that would result in
economic growth for the economy.
Mr. Duncan. Thank you very much.
Next is Mr. Richard Fisher, who is the president of Falcon
GlobalEdge, for the Airforwarders Association.
Mr. Fisher. Chairman Duncan, Ranking Member Nadler, and
members of the committee, thank you for inviting me to testify
before the committee today. I also would like to thank Chairman
Shuster and Ranking Member Rahall for setting up this important
panel.
My name is Richard Fisher, and I am president of a
forwarding company called Falcon GlobalEdge, and I am also
chairman of the Airforwarders Association. Falcon GlobalEdge is
headquartered in Boston and operates both domestically and
internationally.
Today I am testifying on behalf of the Airforwarders
Association. Our association represents 360 member companies,
employing tens of thousands of employees and contractors. AFA
members range from small businesses to large companies
employing thousands, with business models varying from domestic
to worldwide operations, with some members operating their own
aircraft. In short, we are the travel agents for freight. We
move cargo throughout the supply chain in a time and cost
efficient manner regardless of the transport mode that is
chosen.
The global economic downturn continues to erode forwarder
margins in the face of increasing costs. And these expenses
only escalate as the regulatory web expands. For example, in
the case of an air shipment between Washington and Paris, the
timely delivery of our customers' product is dependent on a
myriad of U.S. Government agencies and regulations beginning
with TSA and CBP. It is critical that both FAA and CBP are
adequately staffed to manage flights and clear shipments
quickly and efficiently. When going to or from the airport,
shipments that move by truck fall under the purview of the DOT,
and the trucker himself falls under the oversight of FMCSA.
Ultimately, one import shipment arriving in the United States
could meet 13 regulatory agencies at our border, and delays can
and will result. Sun Tzu once said, ``The line between disorder
and order lies in logistics.'' True in war and in forwarding.
Aviation is a key for many of our members' businesses.
According to the International Air Transport Association, air
cargo transports over $6.4 trillion worth of goods on an annual
basis, amounting to 35 percent of trade by value.
Allow me at this point to thank the committee for resolving
the FAA furlough situation and keeping our control towers open
and operating. As an industry, we are heavily dependent on
passenger carriers. As an aside, the administration's proposal
to impose billions of dollars in new and higher aviation taxes
should be flatly rejected. It is in our Nation's economic
interest to have a healthy and robust aviation sector, and
increasing taxes on airlines runs contrary to this goal. Our
industry's operations are immensely complicated by new
regulatory burdens. Conversely, the Government can assist by
continuing to support the modernization of our antiquated air
traffic control system by deploying what is called NextGen
which has been alluded to by my colleagues. The benefits of
NextGen have demonstrated that the technology can save flight
time, greatly increase the safety of flight operations, and
reduce emissions. I urge this committee to maintain its strong
support for NextGen development.
AFA members and their customers see the impact of high fuel
prices every day by paying higher freight rates and higher
prices at the pump. Still, we also realize that our shipments
require good roads and bridges to get to and from the airport,
and current funding sources are insufficient to maintain this
vital infrastructure. For example, one in nine bridges in the
United States remains structurally deficient. Proposed
solutions range from increasing the Federal gas tax to a
vehicle miles traveled tax. Before embracing the higher tax, we
need assurance that existing taxes are being invested as
intended. Given the new hours-of-service regulation that will
take effect next Monday and requires as many as 40,000 new
truckers, it is even more critical for the CSA program to
better work for industry. We need to have surety on who is
authorized to operate on our Nation's highways.
In conclusion, I urge members of the committee to remain
vigilant on the promulgation of additional regulations and its
impact on the freight industry. Thank you for this opportunity.
And I will be happy to answer any questions you might have.
Mr. Duncan. All right. Thank you very much.
I apologize, but we do have two votes going on on the floor
right now. So we will have to be in recess until we conclude
those votes. Thank you.
[Recess.]
Mr. Duncan. All right. I am sorry that we got interrupted
by votes, and then we only had two votes but we had to have an
announcement about the women Members' softball game tonight, so
obviously, obviously very important business on the floor of
the House, but we certainly appreciate all the testimony that
all of the witnesses gave and now we will get into a little
discussion.
Mr. Abney, as you understand, I think, the purpose of this
panel is to try to coordinate all our different subcommittees
and come up with a way to always be trying to improve our
freight mobility or freight transportation system, and you said
in your testimony that our present system was built in silos
and is more a patchwork of modes.
If you could change one thing about how the Federal
Government addresses our freight system, what would it be? What
is the big thing that you see for UPS?
Mr. Abney. You know, the big thing for us would be long-
term planning that would link the intermodal connection. So,
those strategic locations in the U.S., whether it be for
national importance or whether they be regional, but if those
intermodal connections would be strengthened where we do switch
from ocean to ground or from ground to rail, and Project CREATE
is a good example of an area that is focused on that. But right
now we just see that highways are meant to connect with
highways and the railroads to railroads, and that would be the
area we would like to see the biggest focus on.
Mr. Duncan. Mr. Rosser, you want to take a stab at that?
Mr. Rosser. Sure. Thank you, Chairman, for the question. I
think you are already doing it, frankly. When you think about
the issues that you are addressing, I think you are nailing it,
so studying the problems, continuing research and engagement
with the private sector like you are doing to understand where
the issues are, continue to invest in the intermodal network in
terms of identifying and finding those areas that add costs.
So, our business, we are all about helping our customers save
money so that they can live better, and those issues that Mr.
Abney talked about are critical issues that add cost to our
customers, and I think solving those issues on behalf of those
constituents is a really important thing.
And so I would just add, focusing on those things that
improve the safety and efficiency of the network in total.
Mr. Duncan. Let me ask you something else I am a little
curious about. When, oh, I think just about a year after 9/11,
the FedEx people told me that they had spent about $200 million
on security measures that they wouldn't have spent if it hadn't
been for 9/11, and it just really boggles my mind how much we
have spent on the Federal level, the State level, all the local
governments, and then all that the private companies have spent
on security, and now we have this huge industry related to
security.
Is that spending, has it leveled off? I guess what I am
thinking about, is a few months after 9/11, the Wall Street
Journal had an editorial, and they said they noticed that all
the departments and agencies were sending up requests for
additional money for security and they said, from now on, a
wise legislative policy would be that anytime the word
``security'' was mentioned, a wise legislative policy would be
to give it twice the weight and four times the scrutiny, yet we
are not doing that. The Congress votes for anything that has
the word ``security'' attached to it. Then I go to these ports
and I go to all these places and I see all the trucks have to
stop and go through the machines and all that kind of stuff,
and it just seems to me we have gone ridiculously overboard on
all that stuff.
But are your companies, or your association, what do you
say? What do you find in that regard? Are you still having to
spend a lot of money on security? Anybody?
Yes, sir, Mr. Abney.
Mr. Abney. Yes, I could answer for UPS, and the answer is
that it continues to grow, and I wouldn't tie it to just 9/11.
I would tie it to all the terrorism activity that has happened
throughout, and one of the areas that we are really working on
and working with the Federal Government on is to take a risk-
based approach. So while we deliver almost 16\1/2\ million
packages a day, most of those packages, we would have no reason
to suspect. So with the technology that we have that can put
various parameters in and tying it into the Federal Government
system, we can zero in on those areas that are--have the most
risk of security, and that would be a better use of the dollars
and it would allow you to target versus this shotgun approach.
Mr. Duncan. Well, I just think it is sad that we are
spending so much money on all of that. But Mr. Hamberger, in
your testimony you mentioned the first mile and last mile
connections are vulnerable to disruptions. Can you elaborate on
that a little bit? What are your solutions there?
Mr. Hamberger. Well, I think one of the areas that you
probably saw when you were out in southern California concerns
the transfer points from the ports to a railyard. For example,
I know that one of our members has been working for 8 years to
get an intermodal transfer station sited. We need to focus
attention on improving the regulatory permitting review system.
That station is going to take millions of trucks a year off the
road, and they finally got their approval this year. And now,
of course, they will be in court for the next couple of years
fending off challenges. But it is that transfer point from one
mode to another which needs attention.
Mr. Duncan. All right. I have got many more questions, but
I am going to go now to Mr. Lipinski first.
Mr. Lipinski. Thank you, Mr. Chairman. Thank you for
holding this hearing on logistics. I appreciate the
participation of all the witnesses today, and a couple of
things that I just want to mention, I probably won't have time
for comments on this, but I just want to make sure I mention
the--I think next year, and was mentioned as I think that is
very important, that we move forward more quickly on that than
we have, and also, what Mr. Nadler had mentioned in his opening
comments about the importance of having a Project of National
and Regional Significance, a fund so that we can make sure that
we get the funding that is needed for some of these really,
really big projects that are critical to our Nation.
Mr. Abney, I appreciate your package flow example in your
comments about CREATE and how important CREATE is when we are
out in the ports of Long Beach and L.A. They talked about the
importance 2,000 miles away of how important CREATE was to
them.
Your testimony highlights that Illinois is the
transportation hub of the country. You know, I have the honor
of representing Hodgkins, which is home of the UPS Chicago Area
Consolidation HUB that you reference in your example. The
facility employs over 6,000 people and forwards 1.3 to 1\1/2\
billion packages every day. It is also located adjacent to the
BNSF Chicago Willow Springs intermodal facility which opened at
the same time as the HUB in 1995. I visited that complex a
number of times. I more was impressed not just by the logistics
used there but also the men and women who work there.
So, that example that you had shown us, Mr. Abney, I had
noticed and actually Mr. Nadler had mentioned this to me as he
was leaving, what impacts the decision about what modes to use,
because I noticed it was as you moved by truck from California
to Chicago and then by rail from Chicago to New York. What
influences those decisions?
Mr. Abney. Excellent question, and we have noticed that
over the years, too, believe me, and you know, we put over
3,000 loads or containers a day on the rails. We are one of the
largest customers and we have been doing that my entire career
at UPS. What causes us to put this particular segment on the
road is time in transit. If we truck it to Chicago, we can cut
at least a day's time in transit the way it works with the
train schedules, and so we look at each of these lanes and
where we can place it on the rail and maintain the time in
transit, we certainly do so. That is our first option. Where we
can improve time in transit, we have to measure the increased
cost compared to the customer demand, and in this case to be
able to reduce the days, time in transit, we put it on the
road.
Mr. Lipinski. But know you do move by rail also from--out
from southern California to the Willow Springs CACH, I
understand.
OK. I wanted to ask Mr. Rosser. You had talked about
increasing your efficiency of your trucks on the road. How did
you, as a company, increase the sufficiency of movement?
Mr. Rosser. Thank you for the question, Congressman
Lipinski. So, we had an objective set forth back in 2005 where
our CEO challenged us to double our fleet efficiency, our own
trucks that we operate by 2015. I am glad to say that we are
about 80 percent there and still have some work to do.
Our focus has been on moving the most cases over the fewest
amount of miles and in the most efficient equipment. So kind of
a three-pronged approach, and the way we measure our efficiency
is cases shipped per gallons of fuel burned, is how we measure
that. I will tell you that in 2011 we delivered 297 million
more cases and avoided 11 million miles. And I stated earlier,
too, compared to 2007, we moved 658 million more cases, driving
298 million less miles, which saved us about $875 million that
we were able to pass along that savings to our customers.
If you think about the approach, I will tell you that we
are probably a little biased and we think we have the best
truck drivers in the industry that are working for Wal-Mart
Stores, and it starts with our people, and our truck drivers
are very cognizant of fuel economy in our tractors. We work on
some of the basics relative to fuel economy with engine
calibrations, driver training, managing our speed, our
maintenance programs, things of that nature. We are constantly
looking with--at advanced technology with our vendor partners,
looking at aerodynamics, weight, things of that nature, fuel
efficient tires, et cetera. And then the other things that we
are looking at that are fairly basic is just increasing what we
are able to put on the trailer.
We work with our merchants and our suppliers to reduce
packaging size, so we are able to move more product in our
trailers with more efficient packaging. We have used technology
with loading techniques in managing our loading techniques to
get more cases per trailer. For us, one additional case per
trailer can save us and our network about $680,000 over the
course of a year just getting that one extra case per trailer.
We look at delivery frequency to our stores, multistop
networks. We optimize the--utilize technology to reduce our
network miles driven. Our supplier base is constantly changing.
Our ship points are constantly changing, and so we have to
constantly evaluate what the network looks like, and we do so
on an ongoing basis to reduce miles driven, and so I will tell
you that, you know, it is not any one thing. It is a recipe of
a variety of basic fundamental operations that have allowed us
to reach the 80 percent point of our goal.
Mr. Lipinski. Thank you. I had another question, but let me
just throw out if we don't get another round, I just wanted
to--I was going to do this for a question for the record, Mr.
Fisher and Mr. Abney, about the impact of night tower closures
at airports because I know Midway, in my district, was
threatened with that, Ontario was also threatened with that,
and just interested in the impact, if that happened in the
future, which is still threatened. But way over time now, so I
yield back.
Mr. Duncan. All right. Thank you very much. Mr. Webster.
Mr. Webster. Thank you, Mr. Chairman. I had a question for
Mr. Hamberger. Are there any Federal laws that are impeding
efficient freight transportation?
Mr. Hamberger. I think there are, as I mentioned,
environmental permitting regulations that are slowing down the
siting.
Mr. Webster. OK. I will add that to my question, too,
Federal regulations.
Mr. Hamberger. Slowing down the siting of intermodal yards.
I mentioned the one in southern California. What I have learned
this morning is that at the other end of that yard where the
railroad wanted to move the trailers and the containers across
the country to Edgerton, Kansas, there was a dry riverbed. That
situation led to a lawsuit before the State Supreme Court of
Kansas challenging the Corps granting of a 404 permit to build
an intermodal yard around that dry riverbed. So those kinds of
regulations are something that I know the committee worked on
in MAP-21. I know you have tried to do it in WRDA. If that
moves, we would ask that you take a look at some way of
streamlining regulations in the rail infrastructure building
arena as well.
Mr. Webster. All right. Thank you.
Mr. Abney, how do you see the emergence of e-commerce
affecting the logistics chain?
Mr. Abney. You know, it has had a big effect on our
business. It at one time, the largest part of our business, is
about a little more than 50 percent now, was from shipper to
another business, so B to B. And so we were delivering 50 to
100 packages to a commercial stop. Now we see a lot more B to
C, which is going to be one, one-and-a-half packages per stop,
and it is just a fact of life and it is one thing that through
our technology has allowed us to make changes to where we can
address those needs.
So, now we have an example of that, is UPS My Choice where
an end consumer that has got a package coming to their house
can request to have that package redirected, redirected to
their office, redirected to their neighbor or held for a day
until they are going to be home. So it is those kind of
creative things that we do that allow us to adjust to this
change. But--and we see it especially during Christmastime. You
know, the percent of packages that we deliver to residential
neighborhoods increases greatly and we have had to adjust our
network to that.
Mr. Webster. Thank you. Anyone else on that question?
Mr. DeFabis. Congressman Webster, I would also say that
what we--you know, as e-commerce grows, there is a number of
services that are offered through UPS, FedEx, other parcel
carriers, that also are these hybrid services that utilize the
U.S. Postal Service for last-mile delivery for some of these
lighter weight packages, and I would say that as we look at
logistics in total there probably is some role that the Postal
Service is playing today to facilitate e-commerce for delivery
of those lightweight packages that needs to be considered as
well. And as I said in my comments, the commercial freight now
with e-commerce is moving all the way to the doorstep, so we
can't just say that it is moving on the freeways. It is really
moving into the residential streets, and how are we going to
efficiently do that.
Mr. Webster. Thank you. Yes, one more.
Mr. Fisher. The Airforwarders Association, Mr. Webster, has
a slightly different view. As it applies to our business, we
just recently endorsed IATA's e-Air Waybill initiative, which
is to transmit all information to air carriers in a
standardized fashion electronically. We are a paper dependent
business and have been for years, so we will see in the future
all of that information going electronically to carriers, which
will make us more efficient and make the carriage of freight
more efficient as we go forward.
From a personal perspective, in my own company, we have
been electronic now for several years. We don't like paper. We
have tried to get rid of it. All of our communications to our
other offices are done electronically. There is very little
document transfer, so it is the wave of the future for
logistics to embrace e-commerce in that fashion.
Mr. Webster. Thank you. Thank you, Mr. Chairman.
Mr. Duncan. Thank you very much. I am going to go to Ms.
Hahn, but I do have to tell you that people used to say that we
had to go to all the computers to cut down on the paperwork,
and all it has done is greatly increased the papers that come
into our offices.
Ms. Hahn.
Ms. Hahn. Thank you. I really appreciate everyone coming
here today and listening to your testimony, and I, too, always
want to give a shout out to Chairman Shuster and Ranking Member
Rahall for agreeing to impanel us to, as I understand, the
first time come up with recommendations for a national freight
policy as we move forward. So, I know everyone on this panel is
listening very intently to your suggestions and your
recommendations as we really try to come up with a national
policy, understanding, fundamentally, how important goods
movement is to our economy, to being competitive globally, to
creating good jobs. So this is really, I think, a great moment
in our history as we move forward to create one that makes a
lot of sense.
And one of the things I was going to ask, and any of you
could respond. Should we look at doing something really bold
like really start to talk about opening our ports for off-peak
cargo movement? I know in 2002, when I traveled to Hong Kong
and Singapore and saw those ports operating 24 hours a day 7
days a week, I came back to Los Angeles and spearheaded what
has been sort of an incremental program. It's called PierPASS
and it has been pretty successful in moving cargo off peak. It
is now 4 nights a week, and you know, maybe 1 day on the
weekend, maybe not. Wondering how that would impact logistics
for all of you if you weren't always trying to meet gates that
were only open certain hours, and is that something we should
look at as a policy for all of our ports in the country?
I would like to hear your responses on that.
Mr. Rosser. I will take first stab at that. Thank you for
the question, Congresswoman Hahn. So our customers shop our
stores 24 hours a day. And what we try to do in every decision
we make is we start with what does the customer want, what do
they expect, and then we work to solve their need. And as a
consequence of our customers wanting to shop 24 hours a day,
most of our stores are open 24 hours a day.
Ms. Hahn. You know, I will say, Walmart was one of my
partners when we were crafting the off-peak cargo movement
policy at Los Angeles-Long Beach.
Mr. Rosser. Yes, and thank you. And our distribution
centers operate 24 hours a day and our trucks are running 24
hours a day, trains are running 24 hours a day, and I would
just--I would tell you that to the extent that we can fully
utilize the assets that the country has, you know, we are open
to those discussions to have, you know, the discussions where
we can operate safely and efficiently and fully utilize the
great assets that we do have as a country.
Ms. Hahn. Thank you. Anybody else?
Mr. Fisher. Yes. Thank you, Congresswoman Hahn. I want to
congratulate you on the PierPASS program and which you have
implemented, but I have to tell you I was terrified by it when
I first saw it, but we have adapted, and I think that knowing
that ocean transportation is an imperfect science, if many more
ports had PierPASS programs and more open gate programs, we
would be much more successful in getting product to our
customers. I think it is a good idea.
Ms. Hahn. Well, you know, it was one of the things I
thought about when I worked on that was, again, I mean,
obviously I would like to fix every highway, every bridge,
widen freeways, more near dock, on dock, I would like to do it
all, but in the meantime it seems like we could utilize our
current infrastructure more efficiently, smarter, and it would
give a lot of the goods movement industry an opportunity to
travel our roads when the commuters are also not on the roads.
I know that the truck drivers would love to not have us on the
road with them because they don't think we know how to drive
either, so I think it would, you know, really sort of move
cargo, I think, in a more efficient way.
The other thing--my time is almost up--you know, I am a big
believer in spending the money that we are collecting for the
purpose for which it was collected, and the harbor maintenance
tax has been collected year after year after year. We have an
$8 billion surplus. We are not spending that money for the
purpose it was intended, which was to, first of all, dredge our
harbors and ports and waterways so that we have, you know,
efficient movement of cargo. So, I am advocating that, I have a
bill that would encourage us to spend that money and also
possibly look at--you talked about the last--the first mile and
the last mile. I also think it would be something we might look
at if ports have already completed their dredging. Is this
money that we could use for landside infrastructure and
improvement? I mean, we worry about cargo being diverted to
ports in Canada, in Mexico. I have always been told that the
number one reason cargo is diverted is not for some new
regulation or environmental fee that we place on containers,
but it is because of landside congestion. You-all want that
stuff in and out and to the destination as quickly as possible.
So I would like to hear you give an affirmative to Congress,
actually, as part of this policy, spending the tax for the
purpose it was intended in the locations that it matters.
Please, please, please nod your heads affirmatively out loud
for the record. You think that is a good idea that we should?
Mr. Hamberger. Yes.
Mr. Duncan. All right. Well, thank you very much, and we do
need to do more with that harbor maintenance fund.
Ms. Hahn. Yeah, we got it.
Mr. Duncan. Mr. Hamberger, you mention in your testimony
that the railroads are ready to handle the traffic from the
expansion of the Panama Canal, and you know, this is my 25th
year on this committee, and I can remember many years ago when
they thought a 4,000 TEU ship was a pretty big ship, and then
they started talking about, they thought an 8,000 TEU ship was
huge, and now, of course, they are talking about--it is just
mind boggling, the ships they are talking about.
So, everything is in this together. I mean, when we were
out in California, for instance, Matt Rose told us that his
biggest customer now was the Hunt Trucking Company then, and he
said a few years ago they were 90 percent trucking, 10 percent
by rail. He said today they are 80 percent by rail, and there
are other examples like that that I can give. But are there any
particular choke points? Are there any places--for instance,
all the ports are wanting to expand and so forth. Are the
railroads set up to handle big increases from most of these
ports or are there particular places where we need to do more?
Mr. Hamberger. Well, of course, it is my job to answer yes,
we are ready. But in fact it is impossible to predict exactly
how the opening of the canal will impact traffic. There are so
many factors that come into play, depending on what is being
shipped. Is the timeliness of transit the most important thing?
Is it the cost? What is the fee at the canal going to be? What
will the landside facilities be? Will the ports be dredged?
Which ports will be dredged? So it is impossible to predict
exactly what the impact will be on the flow of commerce. But
what I am trying to get across in my testimony is that our
members are in fact investing with ports. I know in Florida,
major investment is going on between the State and the Florida
East Coast Railway. CSX is trying to make sure that the port in
southern Florida is ready; the east coast carriers are spending
money to be able to double-stack their tunnels. Tunnels maybe
100 years old weren't designed for double-track or double-stack
and so a lot of money is going into that. The intermodal yards
that are being built in the center of the country are BNSF's
investments out there and Union Pacific's investments on the
west coast.
So, we hope we are ready, we think we will be, but it is
not something that is sneaking up on anybody here. Everybody is
trying to be best positioned to handle the flow of commerce
wherever it does hit.
Mr. Duncan. Well, I guess--and you have covered some of it,
but what I guess partly of what I was aiming at was like in
southern California we saw that at the ports most things have
to be trucked out to where the railroads are, and I am just
wondering, are there places, the Panama Canal or other places
in the country where we really need to expand the rail capacity
or the lines coming in, anything like that? Are there any
particular places where you see that we may have a problem in
the years ahead?
Mr. Hamberger. Well, let me get back to you for the record
on that, but just to draw your attention to the fact that again
each one of these Class I's has corridors in mind. I would be
remiss if I didn't join Mr. Abney in thanking Mr. Lipinski for
his leadership on the CREATE project. One-third of all railcars
originate, terminate, or transit through Chicago, so that is an
area we have been focused on and we need to get that to
conclusion.
But let me get back with more specifics for you.
[The information follows:]
As the committee knows, freight railroads fully
maintain and develop their transportation
infrastructure. As a result, the freight rail industry
is among the most capital intensive of any of America's
industries, annually reinvesting about 17 percent of
its revenue back into capital investments in the rail
network. A significant percentage of these expenditures
is used to expand capacity to handle more rail volume
more expeditiously. Investments considered each year by
the individual freight railroads include:
Ladding new track to existing right-of-
way, such as a second main line;
Ladding or extending new sidings on
existing right-of-way;
Lconstructing new intermodal or transload
facilities;
Lnew, technology-based expansion, such as
signaling dark territory;
Lnew locomotives that increase the
horsepower capacity of a railroad's fleet.
Railroads evaluate a wide variety of factors in making
these investment decisions--including present and
future traffic demands (as determined by railroads
working closely with their customers at ports and
elsewhere) and the expected return on their private
invested capital. Our Nation's freight railroads are in
a good position now, and are working diligently to be
in an even better position in the future, to offer the
safe, efficient, cost-effective service that their
customers need no matter where those customers are, no
matter what the freight is, and no matter where the
freight is going. America's freight railroads have
reinvested $525 billion (including maintenance
expenditures) since 1980--including $25.5 billion in
2012--to create a freight rail network that is second
to none in the world. If there is any area where
railroads could use assistance in developing the
infrastructure necessary to support the Nation's
growth, it would be in having the ability to have an
expedited environmental permitting process particularly
as we need to add intermodal and other terminal
capacity.
Mr. Duncan. OK. All right. Mr. Satterlee, you mentioned the
need to reduce chronic delays due to congestion. You got into
that pretty much in your testimony. Are there any ways in which
you feel we can better allocate or better use our
transportation funding to go at this congestion problem a
little bit better? I mean, we all know it is there. Then, too,
you mentioned that the typical lead time for shipments is only
48 hours. Are there any ways that you know of that, you know,
that we could work on that or do anything to help on that?
Mr. Satterlee. Thank you, Mr. Chairman. Your question is a
very good one. You know, it is challenging to answer when you
think about all the different sorts of investments that you
could make. You know, we think a little bit about congestion.
We think about the supply chain as a whole. It is really about
trying to drive as much efficiency and streamlining and
simplifying things, you know, as necessary. And so, you know,
from an infrastructural standpoint, you know, ways to be able
to create opportunities for a more efficient transportation
over the road with the asset-based players, you know, to be
able to get from point A to point B more efficiently within the
regulatory laws, investments in the road systems, all those
sorts of things are, I think, have been discussed and are very
important. And we think about it from a 3PL standpoint. You
know, it is really about creating as much flexibility as you
possibly can to be able to make as efficient and drive out
inefficiencies by, you know, really decongesting, you know, the
flow information and the flow of, you know, the transport of
the goods themselves.
And so the--you know, the specific things that would help
from an infrastructural standpoint, I made a couple of
comments, increasing rail ramps and the regulatory laws that
may affect or help improve things like shortsea shipping
programs, kind of like Congresswoman Hahn was referencing, you
know, those things help speed up the infrastructure and the
flow of goods. And so, you know, what we see is there is some
things that affect both infrastructurally and regulatory that
we think that the Government can put a little bit more energy
in.
Mr. Duncan. All right. Thank you. Mr. DeFabis, tell me
about your business. All of you, all of the witnesses today
know much more about their businesses than I do, but I know
probably the least about your business. And what I am
wondering, I am wondering several things, but tell me a little
bit about your business. Did you see a big downturn 2 or 3
years ago, and is it coming back now, and what do you see in
the future for the warehouse logistics business?
Mr. DeFabis. Thank you, Mr. Chairman. Well, in general, I
think the warehouse logistics industry in the recent recession
did see a downturn. Our particular business, my company is
actually in the--80 percent of our revenue is from e-commerce,
direct to consumer business, and we held up pretty well during
that period of time and continue to see growth based upon the
growth of e-commerce. I think more recently the general
industry, warehouse-based logistics continues to see good
growth because of the increasing reliance of manufacturers and
others to outsource their logistics needs, and to concentrate
all of their time and effort and capital on the things that are
their core competencies and let someone like a warehouse-based
3PL begin to handle the logistics side of it as efficiently as
possible. And that is why I think you see more activities being
done within the warehouse that were traditionally done at the
manufacturers, whether those be sub-assembly work,
refurbishments, repackaging kinds of activities, is that the
manufacturers are starting to stick to the knitting, so to
speak, and let those that are more appropriately placed begin
to handle those activities. Also, they can save on the
transportation cost. Since you have your products in a
warehouse, don't move them from there to somewhere else to be
repackaged, redone, then moved back to a warehouse to be
delivered to an end customer. Leave them at that point and do
as much of these value-added services as you possibly can
before you move them out to the end user.
But I think the industry continues to be very bright. If
you look at the amount of Fortune 100 and Fortune 500 companies
that outsource to 3PLs, that is going to continue to grow over
time.
Mr. Duncan. Well, thank you. Mr. Fisher, you mention in
your testimony, you discuss the negative impact of regulations
on time-sensitive freight movements, and in another committee
on which I serve, a few days ago there was an expert who
described herself as a progressive or liberal Democrat who
generally is in favor of more regulations, but she said--and I
have got the quote here. ``At the time each rule is created, it
made sense, but over time, the increasing of rules and
regulations ends up costing us money and frustrating the public
and destroying jobs.'' And what I am wondering about, are there
any specific regulations that you see as especially burdensome?
Mr. Fisher. Thank you, Mr. Chairman. My testimony did
indicate that we, as an organization, as the Airforwarders
Association, along with other associations represented here
today, are very concerned with FMCSA's new regulations under
the CSA program. As you know, hours of service are going into
effect on Monday, CSA is one of many acronyms that we deal with
every day. Stands for compliance, safety and accountability,
and within the CSA, there is a measurement system that is being
promulgated called SMS, which stands for safety measurement
system. We are concerned that recent statements by FMCSA stated
that is not the case, that it is actually a prioritization
system and doesn't have as much to do with safety.
The point is, all of us in industry and our customers need
to have a clear idea of what Government wants us to do, and
there is much confusion about the promulgation of this
regulation. In fact, there are a couple of lawsuits pending
against FMCSA on this very subject. So that is just a
microscopic version of one of the regulations that could add
cost, add litigation and slow down the delivery of goods to our
customers.
Mr. Duncan. All right. Thank you very much. We are going to
bring this hearing to a conclusion here in just a minute, but
let me just ask you. One of the big things we are discussing
here now or about to discuss is the Marketplace Fairness Act,
Internet and sales tax. In every article you read, everybody
says that we are going to go more and more with each passing
year to doing business over the Internet. Well, each of you or
some of you tell us what effect you think that will make on
your businesses and what it means for our freight mobility and
for our transportation system.
Mr. Abney.
Mr. Abney. Well, we certainly see the e-tailers growing
their business quicker than most of the brick and mortar
companies. What we are seeing, though, is more and more of our
customers that do have that brick and mortar are moving to this
omni-channel distribution to where they are looking at how they
can utilize their brick and mortar and be able to compete with
some of these large e-tailers.
A good example of that is a retailer with 100 different
stores. If they do have a customer that wants a product that is
not in their store, obviously the second choice would be to
ship it from distribution into that store and then ask the
customer to come back and pick it up. Now, what we see them do
is they have total visibility to their systems and they look at
which is the nearest store that has that product, and instead
of asking the customer to go to that store or shipping store to
store, they will ship it from that other store and then the
next day be able to deliver it to the customer's house or their
residence. That is a way that they are able to compete more
with the large e-tailers. And we are seeing a lot of interest
in that area, and we are tailoring products and services around
that retail part of our business where people can use this
omni-channel distribution.
Mr. Duncan. All right. Mr. Rosser, you know, I am a big
baseball fan, but I have said for a long time that I don't
believe the national pastime is baseball. The national pastime
is going to Walmart on Friday or Saturday night, and I have
found out that that is a really good place to campaign. You may
not realize it. I don't set up headquarters there, but if I
have some free time, I can always go in to buy some toothpaste
or shaving cream and see a lot of people. Tell me how is
Walmart--what effect Walmart is going to have if----
Mr. Rosser. First of all, Mr. Chairman, thank you for your
business, and we hope you had a great experience at the store,
too. I will tell you in conjunction with what Mr. Abney said,
it is a rapidly growing segment of business just in general, e-
commerce network, and in my testimony I stated that we have
over 100 distribution centers. Well, what we are finding is
exactly what Mr. Abney said. We have over 4,000 distribution
centers when you think about the role of e-commerce in our
network to help support our customer needs. In the e-commerce
channel, generally what you will find is that customers expect
immediacy in terms of response, and from the time they order
their product to the time that they want it delivered, but what
we are also finding is that customers want a degree of
flexibility. There is some items that they do need quickly and
there is some items that they can actually wait to get, maybe a
little bit longer than today. But what we are trying to do is
come up with solutions and a menu that allows us to meet
whatever the customer's needs is. And I would just tell you
that the solutions are out there in terms of delivering from
our supplier through our distribution centers to our stores,
what we call site-to-store. We have options out there for our
customers so that we can actually order fill from our stores
and send product directly to the customer's homes. So there is
a variety of different solutions that we are actually testing
right now across our entire network. So we are learning each
and every day how to meet that customer's needs and I will tell
you that we are working with all of our suppliers, our
transportation partners to understand how we accomplish that
mission to solve that equation for the customer. But it is a
rapidly growing opportunity for the American consumer.
Mr. Duncan. All right. Anybody else?
Mr. DeFabis. I would say that the e-commerce segment is
probably one of the fastest and most entrepreneurial segments
of the economy right now. E-commerce entrepreneurs are coming
up every day and we see them all the time. That is who
basically our customers are. I think that what is driving e-
commerce is convenience for the customer. Some of it is price.
It is selection and being able to shop over multiple vendors
conveniently at home on multiple devices is what is driving
that. If you want my personal opinion in terms of any impact
that an e-commerce sales tax may have, I don't know that that
is a big driver of e-commerce sales one way or the other. I
think there are other factors that are driving the e-commerce
economy.
Mr. Duncan. You think that is being somewhat exaggerated,
huh?
Mr. Fisher, do you have any suggestions on how we could
make the TSA or the CBP operations a little more efficient or a
little less time-consuming?
Mr. Fisher. Thank you for that question, Mr. Chairman. I
have been afraid you would ask me that. I can tell you that
both of those agencies believe in stakeholder involvement, and
as an association the Airforwarders Association has been the
go-to association for both TSA and CBP, more recently CBP under
different programs, but we have found the private-public
partnership with TSA to work very, very well. CBP historically
has been known for their sharing of stakeholder information and
using stakeholder information to develop programs. We are
working currently with other organizations on the ACAS program,
which is an advanced cargo air screening program, which is
combined authority with TSA and CBP, and that program is coming
along quite nicely.
I don't have any really other suggestions as far as those
two agencies are concerned.
Mr. Duncan. All right. Mr. Lipinski.
Mr. Lipinski. Thank you, Mr. Chairman. I know that we have
some witnesses who have some time constraints here, so I will
just be pretty quick here. Projects of National and Regional
Significance, which I had mentioned before, do you--I just want
to ask all of you, do you believe that it is important that we
do what we did in SAFETEA-LU, have such a program and pay for
it out of the Highway Trust Fund? MAP-21 had a program for
2013, subject to appropriations. There are no appropriations.
It is not authorized for 2014. But this is a way--there is some
major projects in the country such as CREATE, but that is not
the only one that can only be really--we can only really get
completed, I believe, with large sums of money, and they are
not going to go through formula funds for the States, they are
not going to get it done that way. So does anyone have any
thoughts on that, the need for such a program?
Mr. Hamberger. Mr. Lipinski, I think you have it spot on.
Yes, there is a need for such a program. I don't think you can
expect a county in southern California to be able to deal with
all the commerce coming through L.A.-Long Beach. You can't
expect Cook County to deal with all the commerce coming through
Chicago. So there needs to be Projects of National and Regional
Significance. Whether or not they are funded in or out of the
trust fund is an item that can be discussed, but the concept of
recognizing that there are such projects was an important step
forward when Congress did take that step.
Mr. Lipinski. Does anyone else have any thoughts on that?
And I certainly think it needs to be in the trust fund or else
we are subject to the whims of the appropriators who aren't
likely, just like we saw in 2013, to--it was zero funded there.
Just very, very quickly, what I raised earlier, Mr. Fisher,
Mr. Abney, the effect of if there are nighttime closures of
towers, I don't see how we, right now, avoid doing anything but
a CR for next year, so on October 1st we will once again be
faced with, you know, FAA is going to have to make cuts, tower
closures may again be out there. So how would those nighttime
tower closures impact you?
Mr. Fisher.
Mr. Fisher. Well, closures would likely affect UPS more
than members of the Airforwarders Association, but there would
be delays for us as well. Any tower closure, regardless of the
time of day, is going to affect transportation of air cargo,
but particularly nighttime closures would affect the
integrators more than forwarders who are putting their
shipments on passenger aircraft, although there would be,
obviously, some effect on those passenger flights, but our
shipments are time critical. We cannot afford any delays, and
tower closures anywhere would cause us a problem.
Mr. Lipinski. Mr. Abney, you have anything to add to that?
Mr. Abney. I do. For UPS, our biggest area of concern by
far was Ontario. That is our western United States air hub. We
have 27 operations that come in or out of Ontario between 9:30
at night and 7:00 in the morning, and so from the west coast
standpoint, it is the most important location we have. It was
on the original list as a midnight closure. The FAA adjusted
that list. They took Ontario off to our pleasure, but it is
something that is an ongoing concern that will it come back and
be on the list, and that would far out shadow any of the other
facilities that were on that list as far as affecting our
customers' packages.
Mr. Lipinski. Again, I want to thank all of our witnesses,
and we have a unique opportunity with this panel and under the
chairman's leadership to really, when we come out with our
recommendations that we are asked to do in October, to have a
major impact on reauthorization of MAP-21. We know that there
is a lot that has to be done, and so I thank you for your
testimony here today.
Mr. Duncan. Well, thank you very much. I will just close
with this.
I just, you know, for many years we had so many countries
that were just completely underdeveloped. We had many, many
other countries that were under the thumb of communism or
socialism and we really didn't have much competition throughout
the world.
Now, you know, I have traveled all over the world and I
remember, been to Vietnam a couple of times, and boy, they are
just going gangbusters. I mean, you want to start a business
over there, you just go out and start it, and it is a little
bit harder to really let the free enterprise system work the
way it could in this country, but we are going to have to. We
have got much more competition now from all over the world than
we ever had in years past, so we have got to do more, we have
got to do better, we have got to be constantly seeking ways to
improve, and we have to do that in all areas, but particularly
in this area in regard to freight mobility, and so that is what
we are trying to do with this panel.
And I appreciate all your testimony, your suggestions. If
you think of other things that you think we need to know about
or take a look at, you certainly can submit that to our staff.
But that will conclude this hearing. Thank you.
[Whereupon, at 3:00 p.m., the subcommittee was adjourned.]