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Focus on the American Southwest

Sept. 24, 2003
One of the hottest markets for sourcing right now is Asia — China is certainly leading the way, but Vietnam and India are also developing rapidly. The balance of trade is on moving goods from Asia to the U.S.,
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A look at the most logistics-friendly locations in North America

One of the hottest markets for sourcing right now is Asia — China is certainly leading the way, but Vietnam and India are also developing rapidly. The balance of trade is on moving goods from Asia to the U.S., and that isn’t expected to change. The result is a strong focus on U.S. West Coast gateways, and that naturally leads logistics professionals to look at Southern California.

Asia is not a simple map, according to Rick Moradian, president, Asia/Middle East for APL Logistics (www.apllogistics.com), a provider of supply chain management services. Siting decisions in Asia are becoming more dynamic because trade agreements, technology, cost and politics can make a once desirable site unworkable. Balancing capabilities within Asia against time-to-market presents a logistics challenge because the infrastructures of sourcing countries vary.

The issue is only slightly less complex on the U.S. side. Population density in Southern California is a double-edged sword for logistics — while it creates local demand, it also adds to congestion.

As a destination market, the Los Angeles area has a highly developed infrastructure for reaching the rest of the nation. Prospects are usually quite good that equipment inbound from Asia can find a backhaul load to get back to the port area. Not surprisingly, L.A. is the nation’s busiest trade port, and two-way trade volumes rose slightly in 2002.

One challenge to the area, though, is that the rail and highway corridor connecting the ports of Los Angeles and Long Beach with the rest of the U.S. is very narrow. A recent trade impact study commissioned by the Orange North-American Trade Rail Access Corridor Authority (OnTrac) quantifies the corridor’s impact on other state economies. Four states — Illinois, New Jersey, New York and Texas — trade more than $50 billion worth of international goods through Southern California ports and the rail trade network, according to Chris Becker, OnTrac’s executive director.

Becker is asking Congress for funding under H.R. 1617, the National Rail Infrastructure Program and the Transportation Efficiency Act reauthorization (TEA-21) that would provide access to freight-related infrastructure. This includes rail grade separations improvement, enhanced funding for the Section 130 grade crossing program, and he is seeking clarification that funds can be used for maintenance. OnTrac estimates the cost at $400 million.

The group has generated $45 million through the Orange County Transportation Authority, State of California, and the city of Placentia. It wants $200 million in the reauthorization of TEA-21.
With 35% — or more than $200 billion — of U.S. waterborne trade
moving through the area, the Alameda Corridor project was developed to provide easier access to Los Angeles from the ports of Los Angeles and Long Beach. The eastbound volumes are about four times that of the Alameda Corridor.

Dubbed the Alameda Corridor East, the trade link with the interior U.S. includes two sections following both the Union Pacific (UP) and the Burlington Northern/Santa Fe (BNSF) railroads. Each railroad carries roughly 45% of eastbound rail container traffic. Together they run 172 trains a day.

“By the year 2020, even at moderate rates of economic growth, the total domestic tonnage of freight carried by our intermodal system, including freight rail, will increase by over 60%,” says Becker. At the same time, international trade will nearly double. He sees this as a crisis in the making, especially for Southern California.

The eastbound corridor out of L.A. carries about four times the cargo of the Alameda Corridor because intermodal railyards in Los Angeles add containers brought in by truck from area ports to those carried from the Alameda Corridor. Locally produced goods also are added to the rail mix. In the next seven years, OnTrac estimates rail delays will increase from the current 31.9 minutes per day to more than three hours.

Some trains could be delayed as much as four to six hours. Volumes are expected to continue to grow until the eastbound corridor will see a train every eight minutes — 24 hours a day, seven days a week, says OnTrac’s Becker.

September, 2003

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