Global supply chains rely on fast, responsive, and dependable transportation. Two key issues have arisen, however, that threaten to lengthen transit times, create more frequent and unpredictable delays and raise transportation costs. These issues are transportation capacity constraints and increased transportation security.

Transportation capacity constraints are afflicting several areas in the world as the practice of global sourcing has increased. For example, several European and U.S. seaports are currently operating at or near capacity. In a 2003 report, the U.S. Chamber of Commerce projected that every major U.S. container port will double the volume of freight it handles by the year 2020, with some ports on the east coast tripling in volume and some west coast ports quadrupling in volume. Furthermore, economic "hot spots" such as China are putting pressure on ocean carriers' vessel capacity in specific trade lanes. The heightened security efforts that have been implemented since the terrorist attacks on the U.S. in 2001 also threaten to disrupt the smooth flow of freight and add to the congestion at critical points in the global transport network.

Transportation capacity constraints occur at freight terminals, seaports, motor carrier hubs, and airports as well as on roadways, railways, airways, and waterways. The land transport links that provide domestic inland distribution can compound seaport congestion problems when they do not pick up the imported freight in a timely manner. Conversely, inefficient port operations can increase the amount of time (and cost) required by land carriers to pick up their loads.

Transport system capacity constraints are most severe at high demand times. Shipper facilities and public transportation facilities are frequently not operated at all hours of the day, creating artificial traffic peaks that strain facility, equipment, and labor capacities. Investing in additional capacity to meet peak-demand levels leads to gross underutilization of this capacity during normal or off-peak times. Differential pricing of transportation service may alleviate the problem by enticing some shippers to shift their demand to off-peak times, but it usually will not eliminate the problem.

Regulation Issues

Government policies and regulations affecting transportation have an important impact on capacity. Carrier pricing regulations, as well as social regulations addressing safety, labor, environment and energy issues -- for instance, hours of service restrictions for equipment operators, environmental constraints on port expansion and local noise policies that restrict aircraft landings and departures at night -- reduce capacity, service levels and cost. Engine emissions controls, energy efficiency standards, hazardous materials regulations, speed limits and numerous other rules and policies are necessary to protect the public or to promote social objectives, but they have an impact on transportation and trade that must also be considered.

Rather than targeting public policy and funding on individual transportation modes, policy makers are advised to develop a national freight policy that integrates the needs of shippers with those of multi-modal transportation concerns to establish cohesive and efficient national and global networks. A broader geographic perspective, i.e., regional or national planning rather than local, will improve the efficiency of the transportation system.

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