TTCA Freight and Supply Chain Chapter

Transcription

1 TTCA Freight and Supply Chain Chapter Current Situation: Connecting Arizona businesses to the global economy will increasingly be an economic development objective. Using freight and supply chain attributes as enablers to growing Arizona s economy and create sustainable jobs should be integrated into the State s economic development planning. Arizona enjoys a location that benefits from important national transport infrastructure, including two vital transcontinental Interstate highways and two critical west-east railroad lines. Arizona is situated in between the massive Southern California consumption and production market and its vital global logistics connections via its deep sea ports and its global airport connections for passenger and air cargo. To the east is the similarly large Texas industrial market and its distinct global logistics connections. Importantly, Arizona shares an international border with Mexico which is well-recognized but generally underestimated. Arizona sits at a strategic spot for certain supply chains in between the three markets of Texas-Mexico-California, forming a supply network that reflects a T on a map. With nearly 50 million border crossings expected in year 2013 between the Mexican state of Sonora and Arizona, a higher level of efficiency is sought by produce and transport companies. The ability to draw companies to Arizona with capable attributes will yield development beyond what is seen as a pass through state today. The additional of rail products, airfreight capabilities and capitalization of key commerce corridors will be measurement of State investment growth success. Numerous stakeholders in Arizona today show interest in the Freight and Supply chain topic areas. From the private sector, Land Transport, Rail, Multimodal Transport, Inland Ports, Manufacturing, Private Business. Public sector representation includes, ADOT, ACA, Land, business development entities with budgeted KPI s, Counties, Cities, Municipalities, Major Airports. The Transportation and Trade Corridor Alliance has been established to define, link and develop the Arizona Roadmap for implementation. Further details on transportation/distribution jobs, trends and forecasts are being shared by the Maricopa Association of Governments for this chapter development. State highways are well maintained and carry fundamentally good design. Light rail in Phoenix has opened downtown, at Sky Harbor airport and is expanding throughout metro Phoenix. The aforementioned Phoenix airport is one of the most user-friendly in the country with near industry best on time/departure performance. A recent air cargo study portrays that with increased marketplace demand Sky Harbor and Phoenix Mesa Gateway airports are well position for future opportunities in this space, as will Tucson and Yuma. International routes to Mexico, Latin America and Asia may also show promise in the future. Phoenix Mesa Gateway also has

2 opportunities to be an anchor in the freight and supply chain domains with potential for land based intermodal capability. Their infrastructure document will be referenced for the purpose of down line recommendations. Tucson International Airport provides good service for that market and has substantial transport, land and logistics assets in the vicinity and can be a market-specific multimodal hub in conjunction with the Port of Tucson. The Port of Tucson inland container terminal offers international and domestic connectivity that may yield further advances for Arizona and companies with an interest in building land based capabilities. Others, including Rickenbacker in Columbus, OH have demonstrated capabilities investment that has been studied for applicability purposes. In support of US-side economic development, in Nogales State Road 189 requires completion to connect with major highways. Northwest Arizona potential is benefited by access to cross-continental transport infrastructure and good proximity to California and Southern Nevada markets. Southern Arizona enjoys direct proximity to the Mexico market, and in the case of Yuma also the California market. We believe that strategic matching and adapting the State s pillars with global commerce growth and its transport/infrastructure/location advantages will be paramount. Trends Toward the Future: Cargo flow dynamics are showing more directional diversity with increased traffic from South East and South Asia and stable flows from China, Korea, Japan in the Transpacific trade. More north-south cargo (North America) is foreseen; via water, overland and air. Evolved vessel patterns and source points will yield ongoing lengthened delivery times. More foreign cargo is and will be entering from east coast ports with the Suez Canal passage showing a strong growth rate. The Panama Canal s third lock expansion has been delayed until the latter part of 2015 and as such there is an extended window for supply chain planning. Arizona therefore has a concurrent window to define it offer in the context of dynamic supply chain planning. This will be an opportunity. Larger, more fuel efficient vessels will change dynamics of port calls, origin and destination pairs with potentially longer port stays and working hours necessitating the ability to maintain intermodal cargo flows. The Arizona/Mexico Border is critical and the definition of border economics will evolve. More cargo will be entering from Mexico, more exiting to Mexico. As referenced earlier, there will be nearly 50 million border crossings in Border crossing wait times and staffing issues have created much debate as has the ongoing Nogales train gate situation. Security enhancements and Mexico distribution infrastructure will be required advances. More cargo will move on rail generally with a border mechanism to allow for swifter transits. Mexican trade to/from southern California and southern California ports crosses through or by Arizona. Cargo flows through Arizona are predominantly west-east today as flows from West coast ports carrying imported goods travel eastward. Reverse flow is empty or loaded with relatively low value

3 commodities. This will present and opportunity for Arizona as it can take advantage of extraordinary truck and rail capacity that is heading westward and joining Asian-bound ocean carriers. The current market is identified with strong motor carrier service to/from California and Arizona, because of its relatively short haul distances and extremely poor rail connectivity to Phoenix metro at present. Truck moves account for approximately eighty-five percent (85%) of intermodal cargo moving to/from Arizona. Road congestion at and around peak hours are an ongoing concern. Changes to distribution center delivery appointment times are contributing to a litany of pain points the trucking community faces. In addition, a paucity of drivers in the market will necessitate enhancements in recruitment, training and education, in both public and private sectors. Transport providers will continue to emphasize equipment management dynamics, reverse flows and demonstrate increasing importance on asset balances and profitability enhancements. Water ports and rail facilities will require cargo to move from the properties faster to enhance asset velocity. The term intermodal is evolving; which is leading to smaller intermodal centers and more diverse intermodal solutions. Shorter haul rail runs are becoming more interesting to rail carriers as replacement of highway mileage is encouraged. Using the potential I-11 to facilitate more efficient cargo flows to/from Mexico by connecting I-10 and I-40 is an area of further exploration. The need for equal driver and container/trailer sized equipment access may need to be addressed under the auspice of NAFTA, in addition to work done by Arizona. Regulatory, Environmental and Public-Private Finance are areas of important influence as we evaluate trends. Motor carrier cargo across border will need to be more fluid over time and take in to account bilateral box size applications. Federal Motor Carrier Safety Administration hours of service requirements, clean air regulations and other important policies will increasingly impact motor and ocean carrier business, such as the need for additional and refurbished rest stop areas. Increased public sector recognition of the necessity of private investment solutions for transport infrastructure will be important. State by state infrastructure funding solutions will be critical (CA ibank, e.g.). Attraction of private risk capital will be a major and often overlooked requirement for success for property ventures and related utility and transport infrastructure. Connecting economic growth directly to transport finance will be one of the enablers outlined to develop sustainable business and employment opportunity. Increasing corporate environmental awareness and concern will encourage different supply chain facility locations and transport options. Distinction in state to state regulatory policy will become more pronounced. This could be to Arizona s advantage with respect to renewable energy and trade policy.

4 Challenges and Issues: Research indicates that the number one challenge Arizona faces is alignment among leadership and stakeholders. The State must lead and urge constituencies and the private sector to work in unison towards agreed upon goals and objectives. The ability to develop private public partnerships will lend to that objective. In addition, the ability to generate risk capital and investment from the private sector will lead toward building economic growth and sustainable job creation. The Arizona Commerce Authorities outlines five (5) pillars of industry: Advanced industries: Aerospace and Defense, Semiconductors Nascent industries: Bioscience, Optics, Renewable Energy In addition to these, but without diluting their impact, strong consideration needs to be granted for current business such as agriculture, automotive, produce, retail distribution, air traffic and the wider array of manufacturing industry segments. Branding of the State to align development and recruitment strategies will be of paramount importance. Resources and Opportunities: Job creation and Economic Development Economic development and job creation are the priorities. The outstanding and unanswered question: Where does Arizona compete best and how will that evolve? The State needs to find its sweet spot markets today and in the future. (For manufacturing) precisely where we do best compete with evidence beginning with supply chain placement and then including cost, supply chain efficiency, tax/regulatory, labor, key infrastructure, weather, congestion, etc. Opportunity: Position Arizona to risk capital investors, corporate targets, ports/railroads, 3PL s, ocean and air cargo carriers, federal government, as a state that has developed a fully detailed and integrated business plan: Market clarity where we compete and how that will evolve Railroad partnerships for business development, service and infrastructure/facilities Seaport partnerships Arizona as an extension of LA/LB marketing and hinterland Air cargo and airport tight connection between higher value cargo development, industry attraction in related segments Infrastructure plan that matches our economic development plan Public initiatives and private investments Export initiative: fundamental to US competitiveness ED is about making things - includes a range of products including natural products such as agriculture This is not the generally the case with other states and Arizona can assume a leadership role in this regard and be widely recognized for this.

5 As an example of the export initiatives, the US feeds the world and the agriculture industry is enhancing this standing with higher value exports. Because of its strategic location, there is an opportunity for Arizona to develop a full-range of investment processing, manufacturing, packaging and distribution. There are other examples in aerospace, the automotive sector (cars and heavy vehicles), industrial machinery, plastics, etc. This requires integrated public strategy: transport infrastructure, workforce, tax policy and incentives. It also requires public investments that are designed to complement and generate new private risk capital investments, public investments alone are insufficient. A detailed understanding of competitive position now and in the future needs to be driven by those responsible for business acquisition. Arizona s economic development strategy must match reality and ensure key stakeholders are aligned (ACA, GPEC, TREO, major cities). Recommendations: Arizona Brand Strategy Develop 1 st mover advantage through alignment across all stakeholder groups. Driven by sustainable economic growth with valued job creation opportunities. Freight and Supply Chain capabilities are the enablers of economic growth. The center for investment in the Pillars and existing industries. Connectivity to global air/sea ports, rail, land transport and industry thought leaders. Strong lead engagement from ACA and enablement by TTCA, ADOT and others. Binational strategy/governing authority with Mexico on Trade, Commerce, Tourism. Advanced in environmental protection, legislation, tax and regulatory engagement. Partner with businesses with global intentions and local requirements. Having sophisticated educational institutions with curriculum aligned to job creation. Infrastructure development A model for the US: public and private adding value through strategic coordination; a joint and integrated strategy. Public investment: roads (including strategic assets like rest stops), bridges, airport, (potentially) rail, etc. should be strategically planned conjoined to specific economic development output. Private investment in logistics asset and property infrastructure should be integrated and planned with public infrastructure. Specific attention to attracting risk global capital to develop the State s infrastructure highlighting that this is a real marketplace of some dimension Direct engagement & recruitment of transportation service providers and investment. Public Works Asset Maintenance of existing assets is 1 st priority which should remain.

6 Border and cross-border connectivity is key. Enhancements are required to the Port and border entry in terms of staffing and operational issues. Binational strategy to yield the appropriate advances in requirements/needs. Tactical Planning ACA to lead a coordinated effort on industry planning, recruitment and arrival. Industry pillars should be expanded. AZ s competitiveness proportion should be developed and refined. Strong focus is to be placed on existing industries. Ag is an example of room to grow in manufactured product. Requiring market objectives (probably centered on export growth) integration between growers, value-add activities, transport providers. Planning for Binational strategy leading to delivery capacity. Preceded by ACA s market and supply chain analytics, create a six month development plan strategy to include high-level corporate players including rail, air, trucking, ocean carriers, finance and global property interests to refine specific market and infrastructure planning, The Logistics Council. Yielding 3P project opportunities Bring national and global attention Develop existing and attract new investments in industry segments that can take advantage of T, growth in Mexico and centrally situated between Texas and California Flow dynamic is evolving MX trade growth, overall market shift, investments by railroads Engagement on implications for asset management of service providers. Measures of Success will be defined as KPI s which should be agreed to by State agencies, all public economic development partners and private partners.