After years of fits and fumbles, Congress is finally getting serious about the nation’s crumbling infrastructure, moving forward with a $1 trillion funding package. What’s at the top of the list, and where do truckers and logistics service providers fit in?
Gary Frantz is a contributing editor for DC Velocity and its sister publication CSCMP's Supply Chain Quarterly, and a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
For the past several years, the running joke in Washington was that “infrastructure week” basically was a collection of PR stunts: White House meetings and congressional hearings that got a lot of press coverage but accomplished little; industry advocacy groups making recommendations that went unheeded; and officials inside and outside the Beltway warning of impending doom from the state of America’s critical infrastructure, which the nation’s top engineers graded overall as a C-.
Yet as we enter the fall of 2021, a $1 trillion infrastructure policy package—with $550 billion in new funding for transportation programs—has successfully cleared the U.S. Senate, passing with a solid 69–30 bipartisan vote on Aug. 10, and is now headed to the U.S. House of Representatives for deliberation. If passed by the House, the more than 2,000-page measure will go to President Biden’s desk for signature.
For trucking and logistics service providers, it’s a sign that the nation’s infrastructure, particularly roads and bridges, is finally getting the attention—and new investment—it deserves.
Within what would be the largest infrastructure investment package since the U.S. Interstate Highway System was created in the 1950s are some $110 billion for roads and bridges, $39 billion for public transit, $66 billion for freight and passenger rail, $46 billion for projects related to improving resilience to severe-weather events, and $55 billion for projects to upgrade and expand clean water resources and manage wastewater. Also included are billions in funding for airports and seaports, electric vehicle charging stations, and the expansion of broadband internet.
Among the trucking-specific components of the bill are sections requiring automatic emergency braking systems on new commercial vehicles, improved rear underride guards on freight trailers and studies on side underride guards, and the establishment of a truck-leasing task force. The bill also would mandate a Department of Transportation review analyzing the cost and effectiveness of electronic logging devices (ELDs) and a review of processes to protect personally identifiable ELD data, and, in an effort to address the driver shortage, establish a CDL (commercial driver’s license) apprenticeship pilot program for CDL holders under 21 years of age.
ADDRESSING THE BACKLOG
The package has garnered praise for its scope, if not its scale. “The breadth and depth [of the legislation] is very encouraging,” observes Brian Tynan, corporate vice president of government relations for Aecom, one of the nation’s largest engineering and construction firms with experience across virtually all elements of infrastructure. “The strength of it is that it’s a comprehensive package that addresses roads, bridges, transit, freight and passenger rail, electrification, resiliency, clean drinking water, and broadband. It’s an opportunity for a generational investment.”
However, Tynan is quick to point out that it shouldn’t be seen strictly as an infrastructure expansion package; much of the funding will go toward the decidedly less-glamorous work of shoring up existing roads and bridges. The biggest challenge today is dealing with the severe backlog of aging infrastructure “that is living beyond its useful life,” he says. “We have to get rid of this backlog as well as continue to upgrade and expand our capacity” across all major infrastructure categories. “This is about … having an infrastructure that a growing economy can operate on.”
Troy Rudd, Aecom’s chief executive officer, has been actively advocating for critical infrastructure improvement and making it more resilient as well. In testimony before Congress earlier this year, Rudd stated: “Pursuing more resilient infrastructure is an important area … where government can make a significant impact. In 2020 alone, the United States faced 22 natural-disaster events with losses exceeding $1 billion each—the highest number ever in a single year.”
Rudd went on to say that building resilient infrastructure and unlocking innovation not only can yield significant benefits, “[but also] plays to American ingenuity and a bipartisan spirit in supporting transportation infrastructure that keeps our country moving forward.”
SET CLEAR OBJECTIVES, FIX WHAT’S FAILING FIRST
From a trucking company perspective, executives welcomed the bill’s progress but cited the need for clear objectives and echoed the emphasis on building in more resiliency and addressing the backlog of deficient, pothole-ridden highways and overtaxed bridges—all of which slow the nation’s truckers, increase greenhouse gas emissions, create delays, and raise costs for everyone.
“Traffic is increasing every year; there are more vehicles on the road than ever before,” notes Greg Orr, president of truckload carrier CFI, adding that CFI, whose trucks run some 200 million miles annually, is willing to pay its fair share toward highway repair, improvement, and expansion.
Then there’s the impact of Amazon and the pandemic-induced explosion of e-commerce shipments. Truckers are hauling more goods more often over shorter routes, and there are more cargo vans on the road making more residential deliveries than ever. “And we’re doing it dealing with congested, 50-year-old roads and bridges that stress out our drivers, beat up our equipment, and stifle productivity,” says Orr.
To illustrate, he cited the average speed for a truck on a 1,500-mile run. “Even with route optimization technology and doing all we can to avoid poor roads and congested areas, we’re hitting an average speed of 48 miles per hour,” reflecting the impact of construction delays and heavy traffic over longer periods of the day. Five years ago, that average was 51 mph, Orr notes.
“There is no doubt that congestion is the enemy of on-road productivity in parcel, LTL (less-than-truckload), and truckload,” says Dick Metzler, president and chief executive officer of regional parcel carrier LSO. That’s especially true as the use of crowdsourced drivers for last-mile deliveries increases, he says. And it’s a factor in the overall shortage of qualified truck drivers. “No driver finds sitting in traffic to be a great lifestyle, be it in a parcel cargo van or a Class 8 rig,” he notes.
One benefit of renewed infrastructure investment over time, Metzler believes, is more efficient supply chains and better transportation networks to support them, potentially forestalling significant ongoing increases in trucking rates. There is much debate over how to pay for improvements, but at the end of the day, “You pay me now, or pay me [a lot more] later,” he says.
SOLVING THE FUNDING RIDDLE
As Metzler’s comment suggests, financing has long been a sticking point in discussions surrounding infrastructure. “The key question is how does [infrastructure improvement] get funded,” notes Michael Regan, cofounder and chief of relationship development for transportation spend management software company TranzAct Technologies and chair of the advocacy committee of NASSTRAC (National Shippers Strategic Transportation Council), an association for transportation and logistics professionals who manage freight across all modes. “We were given a gift in the ’50s when the Eisenhower administration built the Interstate Highway System. But we have not [substantially] built upon it since.”
He cites overwhelming support among NASSTRAC members and other colleagues in transportation for infrastructure initiatives—and paying their fair share. Yet the primary funding mechanism—a federal tax on diesel and gasoline fuels—has not been updated since 1993. That tax generates revenues for the Highway Trust Fund, which finances the maintenance and construction of the nation’s roads and bridges. Without additional resources, the Highway Trust Fund is projected to run out sometime next year.
The gas tax “is based on a model that clearly is not relevant today,” says Regan. While more vehicles are on the roads now, gas tax receipts have not kept up. The reason: More-efficient vehicles and improvements in fuel mileage with today’s commercial vehicles and passenger cars, causing less fuel to be consumed (a good thing for the environment). Then add to that the impact of gas/electric hybrids and the proliferation of all-electric vehicles, which use the nation’s highways the same as a fossil-fueled car but pay nothing into the Highway Trust Fund.
Regan suggests several alternative or additional funding methods that could be considered, such as a vehicle-use or “mileage traveled” tax, or even a tax at the “barrel level” on crude oil. He also points to the potential for technology—such as automatic toll collection tags that work in multiple states—to ease the funding challenge. “I use my Illinois I-Pass in at least five states,” Regan says.
“The immediate return [on infrastructure improvements] is fundamentally making sure our road systems are upgraded to a point where they are safe and effective,” says Brent Hutto, chief relationship officer at freight marketplace operator Truckstop.com and a member of NASSTRAC’s advocacy committee. “If Covid taught us anything, it’s that we need trucks as consistently and frequently as possible.”
He also believes an increase in the gas tax is long overdue. “How much is a nickel or 10 cents going to make in a person’s decision [to buy] fuel?” he asks. “It’s not a rational position. You have to be able to pay for [infrastructure]. It’s an investment, not a cost.”
WELCOME PROGRESS
The legislation’s recent progress is a welcome and positive development, notes Darren Roth, vice president of highway policy for the American Trucking Associations (ATA). Between rising congestion and the 60,000 bridges around the country that are either deficient or closed, trucks are running more miles and traveling on the highways for longer than ever before. The current bill’s allocation of about $7.5 billion for new bridge grants as well as provisions to streamline environmental review into a two-year path (down from seven) all will help address and resolve bottlenecks.
“We are generally supportive of the bill moving forward,” says Sean McNally, the ATA’s vice president of public affairs and press secretary. “It’s not perfect, but we are ready to help whoever is at the table to get this across the finish line.”
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.