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Outlook 2022: Logical leadership

The concept of the supply chain hit the mainstream media with a bang in 2020, with mentions swelling to a 10-year peak in the fourth quarter. Photo credit: 60 Minutes.

This story appears in the print edition of the Jan. 3, 2022, Journal of Commerce Annual Review and Outlook.

As Aurora Almendral, a journalist covering global supply chains, recently observed, “If a good supply chain is one you never talk about, as the industry saying goes, in 2021, we’re finding out that a supply chain in crisis gets memed .… In recent months, the phrase has figured in an Onion headline, a New Yorker cartoon, and in flurries of tweets and TikToks from people who have nothing to do with logistics.”

According to Almendral’s research, mentions of “supply chain” began hitting new highs in 2020 and swelled to a 10-year peak in the fourth quarter. Firms in the S&P 500 logged a record 342 mentions between Sept. 15 and Nov. 15 as shipments limped toward Black Friday and Christmas.

This attention has spread to the mainstream press, which has failed to address this complex issue with any sort of seriousness, with few exceptions. Bill Whittaker’s 60 Minutes segment, for example, was truly horrifying in that it attempted to address the problems arising from a lack of freight movement without talking to a single mover of freight.

The general response has been for industry “leaders” either to blame the “three Cs” — COVID-19, chassis, and China — or to lay the failure on the Biden administration and Secretary of Transportation Pete Buttigieg for taking parental leave. This cacophony of blame makes as much sense as Tea Party members demanding that the government “stay out of Medicare.”

While there are many issues beyond the government’s scope — or ability to remedy — what should we look to the government for?

First, there needs to be a clear acceptance that because freight moves through local, national, continental, and international networks, we must recognize the preeminent federal role. These networks are, by definition, intertwined to the point where the constriction of any single “node” in the network impacts the entire network.

While certain nodes have been identified as major failings, much of the current gridlock arose from the inability to interconnect system components. We must reinforce the importance of intermodal connectors: the short but essential links that interconnect the freight transportation system. These connectors have been orphaned because they are not the specific domain of any of the legacy modal interest groups.

The industry must solve the “outside the gate” problem. Operating terminals 24/7 is pointless if the rest of the system has a different cadence. This requires a change in approach from end-to-end — i.e., door-to-door — to side-by-side — i.e., ensuring sufficient capacity for both freight and passenger traffic at the same time — while simultaneously addressing issues such as job creation, land use, zoning, and environmental justice.

Federal leadership should encourage intermodal solutions that eliminate negative externalities such as congestion and pollution. If we can “internalize the externalities,” we can cease arguing over whether externalities are addressed “fairly.”

Reregulation of railroads may be appealing to some, but it would cause more problems than it solves. Formulaic pricing, for example, would be disastrous for intermodal. However, the government could do a better job of collecting service metrics, especially for intermodal.

Unlike other parts of the world, the US lacks a comprehensive understanding of how freight flows across geographies, modes, carriers, and intermediaries. The technology exists to “put Humpty back together” to measure and manage system performance more effectively.

Talk of “shippers of choice” is just that — talk. The federal government should establish some baseline rules about dwell and other accessorial charges that cannot be forcibly negotiated away by a large shipper or carrier. These are tapeworms insidiously consuming capacity without recourse.

Allowing drivers between 18 and 21 years old to acquire commercial driver’s licenses (CDLs) is wishful thinking because they likely would not be insurable. But the federal government has a long history of being the insurer of last recourse when it benefits society, so why not do it here?

The federal government also needs to determine how to deal with marijuana in the truck driver population; otherwise, legal users will be excluded by the Federal Motor Carrier Safety Administration (FMCSA) Drug and Alcohol Clearinghouse and the pipeline for younger drivers entering the trade will slowly disappear.

Finally, engineering and economics are not the same. The federal government should explore ways to undo “white elephants” that adversely impact the network. The landlord port model in Southern California and the Chicago cross-town methodology are two entrenched examples that are clearly obsolete in today’s world. The ownership issues are complex, but not insurmountable.