Georgia's Mid-American Arc project is a big bet on a profound shift in the country's goods-moving network. But some believe it may have overplayed its hand.
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
In September 2016, the Georgia Ports Authority (GPA), the operator of the containerport of Savannah and the break-bulk and roll-on/roll-off port of Brunswick, announced it would construct an arc-like rail network stretching across the country's midsection. By building 97,000 feet of track linking the two rail yards at its Garden City container terminal, GPA would offer the two railroads that serve Savannah—Norfolk Southern Corp. (NS) and CSX Corp.—sufficient scale to assemble 10,000-foot unit trains to routinely run from Savannah's docks to markets as far west as St. Louis.
Nearly a year later to the day, the largest containership ever to call on the East Coast, the 14,000-TEU (20-foot equivalent unit) CMA CGM Theodore Roosevelt, docked at Savannah after sailing through the widened and deepened locks of the Panama Canal, which accommodates vessels nearly three times the TEU capacity of the canal's original design. (See photo above.)
The two events are interconnected. The $128 million "Mid-American Arc" project, expected to be fully operational by 2020 with the first phase set for completion in 2019, is GPA's attempt to get ahead of what some believe is a secular shift in U.S. goods movement. As larger containerships hit the water and the expanded canal handles more cargo bound for destinations east of the Mississippi, the reasoning goes, East Coast ports can expect to see steady increases in volumes. As a result, the landside infrastructure will face greater productivity pressure as more boxes hit the docks; GPA expects Garden City to annually handle 1 million rail lifts (each container moving on or off a railcar constitutes one lift) by the time the Arc is completed. Meanwhile, there will be challenges making timely deliveries off the ports by truck amid increased road congestion and a growing shortage of qualified commercial truck drivers. Overarching all of this is the task of providing efficient and timely freight movement to a U.S. population inexorably headed toward the 400 million mark.
The confluence of these trends will force massive change on the transport ecosystem, says Walter Kemmsies, head of the North American ports practice at Chicago-based real estate and logistics services giant JLL Inc. The freight network will morph into what will resemble a power grid composed of gateway and inland ports, railroads, and intermodal truckers, all tied together by advanced IT (information technology) systems that maritime users today can't begin to fathom, Kemmsies says. The ports, he adds, will serve as the "generating plants."
The Arc represents an opportunity for GPA to attract more Asian import business transiting the canal and to capture traffic that historically flows to Chicago, St. Louis, and other Midwest points from the Ports of Los Angeles and Long Beach, which remains the nation's busiest port complex but which is plagued by persistent congestion and delays. As GPA Executive Director Griff Lynch sees it, the canal is the catalyst for much that is yet to come.
"Five or 10 years ago, a project like the Arc would not have had legs" because Savannah then didn't have the volumes to justify the need, Lynch said in a recent interview.
Lynch says the Arc is less about capturing market share from East and West Coast ports than it is about minimizing supply chain friction amid growing freight volumes nationwide. "We want to insert ourselves into the supply chain—not as a chokepoint but as an accelerant," he said.
WEST COAST'S ENDURING STRENGTH
GPA is not the only port authority inserting itself into the 21st century transport mosaic. This summer, the Port Authority of New York and New Jersey completed a $1.6 billion project to raise the Bayonne Bridge—which spans the two states—to 215 feet from 151 feet; the rise provides clearance for ships with 18,000-TEU capacities, doubling the maximum vessel size that could be handled before. The Virginia Ports Authority, which runs the Port of Norfolk among other facilities, has been involved for seven years with Norfolk-based NS's "Heartland Corridor" project that expedites double-stack intermodal traffic moving between Norfolk, Chicago, and Columbus, Ohio. In September, the port announced that CSX would link Norfolk and Pittsburgh in what would be the last step in the Jacksonville, Fla.-based railroad's decade-old "National Gateway" double-stack initiative.
Out west, Omaha, Neb.-based Union Pacific Corp. and Fort Worth, Texas-based BNSF Railway operate double-stack services on double-tracked infrastructure from the Southern California ports into the Midwest. Today, 16 unit trains, some two miles in length, run daily from Los Angeles to Long Beach and from there to Dallas, St. Louis, and Chicago.
Joshua Brogan, vice president at consultancy A.T. Kearney & Co., says the Los Angeles-Long Beach complex remains the most cost-effective way to move Asian imports into the U.S. heartland. Freight from Shanghai to Chicago transiting the West Coast arrives at its final stop in as little as 15 days, and 21 days at the very outset if there is significant congestion at the U.S. gateway, Brogan reckons. By contrast, freight on the same vessel transiting the Panama Canal, calling on Savannah, and trans-loaded onto rail for movement to Chicago takes 24 days to arrive, he says. The pricing differential between the two routes isn't significant enough to move the needle, he says.
Brogan says that despite the original canal's smallish size (5,500-TEU capacity), there wasn't much pent-up demand to shift business from the West to the East Coast even before the expansion. Other than a two-month dip in early 2017 for West Coast loaded box traffic, there hasn't been a meaningful decline out west since the expanded canal opened for business in June 2016, according to Kearney data gathered from the ports. This lends credence to the belief that there wasn't any latent demand for the expanded canal to satisfy, he says.
Comparisons between Savannah and the Los Angeles/Long Beach complex rarely arise in discussions with shippers and beneficial cargo owners (BCOs), Brogan says. "It's just not a major issue for them," he says.
ODDS-ON FAVORITE
If one believes, however, that competition among East Coast ports for burgeoning "neo-Panamax" traffic will be fierce, then Savannah holds a strong hand, experts say. Its 1,200-acre Garden City terminal is considered a model for landside operations, and it still has room to expand. All rail traffic exiting Savannah leaves from its docks. Even at Los Angeles and Long Beach, less than one-third of box traffic departs via on-dock rail, according to Jon Slangerup, former executive director of the Port of Long Beach and now executive chairman and chief executive officer of American Global Logistics, an Atlanta-based third-party logistics services and technology provider. The balance is still trucked to urban, near-dock truck-to-rail transload facilities, he says.
Slangerup says the Port of New York and New Jersey has issues in strengthening its IT systems connecting vessels, ports, rails, and trucks. It is also hobbled by the congestion that accompanies being in the country's most densely populated market. Savannah has the technology, it has the space, and it has a multimodal powerhouse just 250 miles to the west in Atlanta, which boasts the world's busiest airport for passenger volumes and is a major aircargo gateway.
While Virginia has components such as multimodal connectivity and inland port operations to optimize its network and keep pace with trade growth, it "doesn't have the infrastructure or push-pull effect of Atlanta to compete on the scale of Savannah," Slangerup says. The Port of Charleston, S.C., meanwhile, needs to get its "arms around the required capital" to position itself as a competitor to Savannah, he added.
Savannah also has another factor in its favor: its ownership. As one of four port-owned and -operated facilities—the others being Charleston, Norfolk, and Houston—it has the full support of the state, as well as access to state funding. By contrast, Los Angeles/Long Beach and New York/New Jersey, being so-called landlord ports, have to deal with often-conflicting objectives of terminal operators as well as multiple political masters.
At Savannah, the dearth of red tape means faster decisions and less time wading through the bureaucratic muck, says Kemmsies of JLL. The GPA's operational structure, he says, means it "can fix things before they're broken."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
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.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.