TGood afternoon or good morning to those of you to the West. Welcome to the Talking Freight Seminar Series. My name is Jennifer Symoun and I will moderate today's seminar.
Today's topic is Freight Productivity Impacts by Natural and Man-Made Disasters. Please be advised that today's seminar is being recorded.
Before I go any further, I do want to let those of you who are calling into the teleconference for the audio know that you need to mute your computer speakers or else you will be hearing your audio over the computer as well.
Today we'll have two presenters, Paul Bingham of IHS Global Insight and Dan Gross of UPS. Paul Bingham, a Managing Director for IHS Global Insight, has 27 years of experience managing consulting projects focusing on the economics of and markets for freight transportation.
Research efforts have included extensive scenario forecasting including of the evolution of goods movement patterns, freight transportation planning assessments, transportation equipment operations, and patterns of domestic and international freight flows, including those subject to disruption. He has contributed to IHS Global Insight's international and domestic commodity trade forecasts, which include the forecasts for the FHWA Freight Analysis Framework and forecasts of the company's own TRANSEARCH North American freight flow data base product.
Within TRB, he served in many roles including as immediate past Chair of the Freight Systems Group of standing committees. He serves on the Board of Directors of the International Trade Data Users group and on the National Council of the Transportation Research Forum.
Dan Gross, a 30-year veteran of UPS, is currently Surface Transportation Network Planning Coordinator for the company's North American operations.
Based at UPS‘s world headquarters in Atlanta, Dan is an experienced manager in all facets of transportation operations. He currently is responsible for all North American ground transportation network planning,
including package sorting, processing, and loading using multi-modal transport of both tractor-trailer and rail.
Additionally, Dan leads UPS's transportation long-range planning. This encompasses building and managing strategies for all contingency planning for natural disasters, adverse weather conditions, and other unexpected and unplanned events.
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Paul Bingham is our first presenters, if you have questions please type them into the chat box, they will be answered in the last half hour of the seminar. With that, Paul, you can go ahead when you are ready.
Thank you very much, Jennifer, I appreciate the kind introduction and thank you to federal highways for being able to participate in this Webinar today. I hope we all collectively gets something out of this. Natural
and man man-made disasters have become a topic of -- and Dan will follow-up with details of living in the every day world.
I will start with my first slide, the big picture of why we care about this. Because of the importance of freight and the economy, dependent on freight productivity, capacity, performance of the freight system.
This has been changing. It's not static in terms of importance of the economy. The importance of freight has been increasing over time in terms of the importance as a facilitator
and as the mechanism by which all other activity in the economy operates. That includes not only domestic within the borders, but across borders. However, the components are changing, not month to month in a visible form,
but over time we have seen dramatic shift that's continue to happen and are affecting our planning horizons and factors we need to take into consideration in decision-making.
An example is NAFTA surface freight, in comparison with sea borne freight.
China has taken over Mexico as the country's number two trade partner.
We have seen trends of higher weight commodities out pacing growth in the large bulk commodities, increasing importance of higher service freight network in the United States and potentially made greater proportion of transport vulnerable.
We have seen continued effort that's span modes of transport to benefit from economies of scale.
We have seen that as examples of larger ships being used, container trade, longer train lengths being employed by the class 1 railroads, all in an attempt to reduce costs to shippers
and improve the productivity of the freight system ultimately for the consumers depending on it, having consequence success in reducing expense to economy as a whole of the freight transportation system.
There's consequences of this, though, that have potential impacts in the case of disasters, that includes the potential number of alternative terminals
and routes available that can handle this larger equipment potentially being reduced in the cases of interruptions from disasters.
We believe interruptions can be more significant to the U.S.
economy in terms of what it can do to transportation system and follow on impacts to the economy; all contingent on how the freight planning community, investors and carriers themselves plan for and deal with disasters as they occur.
If we look at the top level importance of, and logistics, back over the last 15 years this is data from the council of supply complain -- state of logistics on percent of gross domestic product -- it's been roughly 10%,
although we have seen a drop off because of the lowering enter rates. But more than total cost, components of those numbers, the large majority of transportational logistics costs are taken up by the transportation costs themselves,
the system, network, equipment running through the network. Those costs at roughly two-thirds are not changing dramatically in terms of that share over time. They have been reduced but are still by far the large of the costs.
In this slide I will try to summarize, the most important slide for me, the factors affecting freight productivity across a number of dimensions. If we are trying to estimate, look at the productivity impacts, the dimensions matter,
how it effects the network, the consequences for individual modes on the network and individual companies on the network and the economy as a whole.
There are several of these of which there are four I identified that are the most important.
The first is whether or not a disaster can be anticipated.
Even by a few hours or days. An example there might be a storm, hurricane, weather trackers are at least able to see they are coming. If there's any advance notice there may be opportunity to mitigate by taking advance action.
Many carriers will strike how they take planning into account to be able to deal with disaster that's in any way can be anticipated in terms of location or size or scale or timing.
Now, other factors that matter significantly are the duration.
The duration of interruption impacts, we believe, and have been shown in the past, a non-linear function of time.
As the interruption lasts longer, the consequences and cost are not proportional to how long they last, they are disproportionately increasing through a period of time and then decline through the terms of sustained impact on the network,
system and economy as a whole. A few hours of disruption, impact is pretty low, the system has taken into account the potential for those to hit the system. However,
as the duration increases there will be substantially escalating impacts going from days to weeks to several months. After which over all system operations and even planning to some delay will adjust
and further impacts will increase at diminishing rate and so the duration matters in terms of impacts on the system. That will come into play if we look later in terms of how to estimate, quantify impacts.
The planning warranted in terms of how to deal with. I won't get into all of that, but at least to set up perspectives to deal with contingencies of disaster impacts.
Another factor, seasonality.
Interruption in peak season, say October, December for other type carriers, has a greater impact than one of the same location and scope as in slow season when the volume and velocity of goods moving through the network may be less.
Seasonally across freight it varies quite a bit. In containerized trade there's a swing of 20% volume from the peak to the slow month. The degree of impact matters, when it happens,
obviously agricultural right at harvest is different than the dead of winter.
Lastly, the one we think of immediately always about disaster impacts on freight productivity is geographic location of the disaster. From the perspective I am bringing, the economic geography, not municipal or national borders,
it's what is the business impact in terms of geography, business establishments and value of freight network serving the economy from the business perspective that matters in terms of the scope of interruption
and reserve capacity is affected. All these factors are interrelated. Defining the impact, it's all four that matter in terming of estimating impact and from a planning perspective,
thinking of consequences of potential disasters on the system, what might be done to mitigate it.
Impact on the economy, disaster interruptions and direct and indirect impacts on the economy. The first are the most immediate, the lost economic activity of the freight system, measuring in terms of lost jobs,
depreciated value of damaged or destroyed goods, freight assets.
Indirect impacts oftentimes, if the disaster is large enough, swamp the direct impacts. Those are how the disruption to the freight network, goods immediately lost,
including other transport service suppliers tied to those directly affected, other parts of transportation network, air and ocean, rail freight carriers, spanning modes in terms of impacts.
There's even some indirect impact that's can be benefits for modes potentially used as a substitute.
These are not all negative impacts from impacts.
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Lower velocity, that can consequently lead to increases in total delivered costs, big picture negative on terms of impacts on businesses, consumers in the freight transportation system. Network has to operate in a second preference,
less than optimal mode in terms of routes, equipment, services for extended period of time.
Increased cost can pressure retailers,
other shippers to realign sourcing if the cost through supply chain over a portion of network affected by disaster is significant enough alternative sources can be used to shift country of origin trade.
We see product substitution in some cases, relative costs raised high enough because of consequences of network of disaster we see shifting.
Example might be fuel shifting in the utility sector to serve electric demands of a particular region.
Looking at supply chains, they are adaptive but some of that can be grad gradual. Not easy to change over night; not without what would be viewed as uneconomic and [indiscernible] change happens progressively over time,
consequences of disaster may not my out for several years. We could describe that from the big picture perspectives of 9/11, hurricane Katrina
and as we look at the consequences of almost any other disaster such as what will play out over time to the air freight network from the ash clouds from the volcano in Iceland earlier this year.
Ultimately increased costs are passed through to customers, reduces their spending on other goods, economic performance through changes of consumption, reduces standard of living,
has a real impact working its way through the entire economy.
If we attempt to estimate the freight productivity impact of disasters, actually quantifying it, it requires an understanding of the aspects of how the network is affected,
including the extent of considerations the disaster -- including operating less efficiently, less optimally, perhaps dealing with less reliability to the network
and operations that are more costly than what we were enjoying before the disaster affected the network and the economy.
Quantifying the extent to which loss can be recovered is important.
Many estimates can overstate the long-term true losses to the economy because of such mitigation step that's can be undertaken; the ability of businesses to advance or delay shipments.
Also, the utilization of alternative routing can lessen effects on shippers, and acceleration of production following interruption, you run at higher capacity for a period of time. True in terms of productivity in the freight network,
to make up for some of the lost that happened during the period of interruption on the net works.
From the perspective of the audience today, advance planning can help facilitate loss mitigation steps so when the disaster occurs there is capacity in the network,
understanding of how those alternative operations can be affected in the network to help reduce, minimize the losses that follow from the disaster on the economy.
Now, just to illustrate this, I haven't attempted anything in great detail, but as an illustration of system disruption, broad enough scale to effect the economy, the timing, impact duration,
I have an example of the estimated consequences of sample interruption in the United States.
This is specific in terms of definition looking at what I talked about before. Seasonality perspective, we made assumption this happens in first quarter of year, geographic economy, U.S. West Coast, looking at a disruption to the U.S.
container ports on the West Coast.
Then a five-day, 10-day and 20-day, from a business perspective, a one, two or three-week delay in terms of facilities return to operation and the consequences in the economy measured across a couple of indicators.
The first is the full time E E equivalent jobs list, different effects of disruptions, personal income, a initial level measure estimate. Then the top level, what does it do to the economy.
The jobs lost at 10 days compared to five days are close, but if you look at income or real GDP, the loss escalates significantly as we get to the 20-day period,
losses in multiple billions rather than less than a billion after only one week, and real GDP from less than a bill onto approaching $16 billion in the three-week disruption.
This is a rush of the consequences of us sustained duration impact.
This is not entirety of the network.
We didn't run out scenarios for greater disruptions or look at alternatives of other geographies or timing, but did look at full play-out of disruptions.
These impacts take into consideration the recovery period, to recapture losses after this period of time of the disruption, bringing factories back, running the freight network at a higher level of utilization.
These are net impacts that we measure at some point in the future. At this point looking at after several years out what was the consequence on the economy.
So, in summary, infrastructure logistics can amplify or reduce the consequences of disasters for free, the freight system node and links are critical to how a disruption is going to play out across the network and in the economy.
What matters here from a freight planning perspective is what's available as reserve, the limitations wee will run into in terms bottlenecks, alternatives in the case of disaster or for the catch-up period after the interruption is over.
Factors that matter are the geographic concentration of freight corridors and terminals; in other words, how much of your total economic activity related to freight is concentrated in the area that is affected by the disaster.
This is all the eggs in one basket issue as it plays out in terms of where we have freight moving on the network.
Also significantly mattering is the capacity, from a planning perspective on risk minimization, throughput service capacity,
how much more could we put through the network we have in place today in case we need it if some other part of the network is taken out or we are trying to catch up from a period of disruption.
This varies by mode. Trucking can be more dynamic than fixed rail, both face capacity, oftentimes the networks can handle more surge capacity than they can in the very short run.
There's a difference in terms of the amount of impact on individual businesses or industries based on the uniqueness in trucking and trail operation practices today, where the more unique the rail
and trucking practices are the more it's correlated for higher costs for substitutes. A tank truck, liquid bulk chemicals face a very different case than somebody needing drive-in, trucking, more mobile and if you think -- the air
and maritime modes they have no substitutes economically available, especially in the short run. Flexible can be very different than for trucking a rail.
There's logistics practices that matter.
The lean logistics -- using warehousing puts that equipment in storage, or at risk, if only serving a transport function, these resulted that's a limit of impact.
Also serving as warehouse, the distribution function from the supply chain perspective, the consequences can be greater than in terms of the supply chain consequences on the economy.
In summary, disaster impacts on freight productivity are critically important to the economy, but the nature of disaster interruptions are critical to estimating their cost. Understanding those dimensions to the disruptions,
planning for them, matter in terms of what's warranted and the way the disaster should be addressed.
Disaster interruptions for freight have significant potential for permanent economic effects, but can be small short term. Planning is the key to mitigating. We believe the planning,
taking into being the quantification of -- estimating scenario impacts from potential disruptions, tools exist based on freight flowing, bi-mode, timing, to make estimates in planning for disasters.
That concludes my remarks, I look forward to participating in Question and Answer.
Thank you. If you have questions type them in the chat area and we will get to them in the next presentation.
I will turn it over to Dan Gross of UPS. Dan, go ahead and get started when you are ready.
Thank you, Jennifer, and nice introduction there, Paul.
Good morning to those in the West Coast and good afternoon to the rest.
I am going to get right into this. I thought I would share some statistics regarding UPS.
We are a global enterprise. Our corporate headquarters are in Atlanta. In 2009 we had revenues of roughly $45 billion.
We have 408,000 employees worldwide of which 345,000 are right here in the United States.
Our delivery volume, average 15 million packages per day, delivered, and our fleet, over 96,000 vehicles on the road around the world, obviously most of those here in the United States. And in our UPS jet aircraft fleet is 253,
214 presently in service, making UPS one of the top nine in the world in terms of jet aircraft fleets.
I thought it was important to share with the group how -- in fact UPS is global, the fact we take contingency planning and alternative -- planning, the crux of my discussion, seriously, and why we take it so seriously.
I will start with our crisis management mission statement.
This pertains to the worldwide UPS.
We seek to maintain a constant state of readiness should UPS become exposed to any unexpected act of a critical magnitude.
We maintain a crisis management strategy model which I will talk to going forward here to, assist us in the prevention, response and restoration of our accident. We strive to protect the reputation, interests of UPS, our people,
customers, share owners and communities.
We want to conduct ourselves, responsibly, sincerely, honestly and with the utmost integrity to ensure the safety, security and well being of our folks.
The fact we are a global enterprise, our crisis management team is headed up by department heads from our corporate group and/or some attendees, designees of those folks.
It's cross-functional, department heads from all functions within UPS operations, human resources, communications, et cetera.
The part I play in this is ideal with the operation side, as Jennifer mentioned, I have North America ground, so there are many facets to what we do with crisis management.
The crux of this discussion will deal strictly with what we do from a transportation side here in North America. Certainly if you have questions about other elements I will attempt to answer them, but again,
I am personally more involved with the transportation side here on the domestic side.
At UPS we break down planning into two different modes, firsts being contingency, the second being alternate Ops. Contingency is the one that probably we're all more familiar with.
That would be something short-term in nature as Paul talked about, and typically weather related.
For example, today we're dealing with a small contingency, folks on this call from Illinois or Iowa, you may be aware there was flash flooding in western Illinois, eastern Iowa, tornadoes, we had trains -- do use trains, by the way.
We had trains that are dealing with the flash floods.
I had a call earlier today to talk about did we need to put the contingency plan in place.
We determined we did not. I talk about these plans, something we talk about on a daily and weekly basis, as needed. Our alternate Ops are those long-term type of things. Pandemics, for example, could be included.
If we lose a facility for a long period of time, longer than two or three days, would fall under contingency. Anything longer, weeks, months or permanent lotions of facility we label under alternate Ops.
An example of that would be hurricane Katrina, we lost our New Orleans facility for a considerable amount of time, several months.
I will get more into that as I go through the presentation as well.
Contingency planning, how we do that, our short-term operating disruptions, typically winter storm and hurricanes.
The one I will talk about during this presentation will be the winter storm in past winter in central, eastern Pennsylvania, state of Maryland, Delaware, and D.C.
if you recall, upwards of two foot of snow in that general area. The contingency plans we have in place first and foremost, to make sure our people and our customers packages are safe.
We never want to put our employees into danger. Then, secondly, our goal, and as Paul mentioned, when the network gets out of kilter, and contingency turns from one to two to three days,
the more days involved is certainly more cost involved with that. So with that, we believe at UPS that our note work is extremely efficient and tight. Because of that we need to maintain our network.
We will do many things to keep our net work intact. The snow storm I am referencing, we were not able to drive the North/South Korea /South corridor, I-95, we have -- [indiscernible] amongst that 20 districts.
The districts involved in this were headquarters out of Philadelphia area. We could not drive through those corridors during this winter session.
The contingency plans we put in place were in order to minimize the effect to our highly efficient network was to change the mode of transportation. Theoretically, if you look at a map you could say we could have drove around this,
and although that's costly, more importantly to us, it would have taken people out of our network, then had a ripple effect, causing a one-day event to become a two and three-day event.
Whoo What we do in our plan is change the mode of transportation, put our loads on a train, stopping in southern Virginia and northern North Carolina, and in stopping in the South New Jersey area, putting loads on a train
and train through there.
You take a one-day service hit, which in itself is bad in our business, but in effect, it protects the second, third and fourth days, because we get to maintain the network once the highways opened up.
One thing to mention, I did notice that many of the folks participating on this call are from local and state governments. When we have contingency plans, we do make every attempt to include the local government officials.
For example, the crisis, contingency plan I am talking about, the snow event, our district manager out of Philadelphia was in constant contact with mayor [indiscernible] mayor of Philadelphia, his office throughout the weather event.
We do that to see how we can assist and secondly, so we can know where, where we can put drivers safely on the road.
That way we can also inform our customers of where the packages are, come is critical to both them and to us.
We diverted in this case to a train. We have plans, a case where we will work out of an aircraft because of contingency, service in that way. As we continue to be concerned for employees,
we also want customers to know where their packages are throughout.
Continuing on with the planning, typically contingency planning is handled locally.
The plans they enact from a local level have been created by corporate contingency planning group, of which I am a member.
Those plans are out there, available at any day, for example, as I mentioned, the flooding that, flash flooding that occurred in western Illinois. The plan could have been enacted very quickly to divert,
but fortunately for us we were able to get through with the trains we have in place now.
There's certainly support from the three regions and from a corporate level.
The determining factor for how many folks are the scope of support that the district would need is really determined by the event itself.
If it's a one-day in nature type of thing it's a communication, typically a conference call thing. If something else is needed we will certainly fly into the area, the team we would put together and assist in that way.
The biggest thing we want to do, though, is get back to normal operations, the normal network, as quickly as possible.
This is beneficial for our customers, as well as us, from a cost perspective as well.
Some consequences you have, such as staffing, and Paul mentioned this. Certainly there's a disruption in staffing, number of people that can get to work. Facilities are located in major metropolitan areas typically,
folks use mass transit, and those are the first things that go away when there's a snow emergency, for example.
There's certainly a disruption in our people's lives, how they get to and from work.
Then after the event there's a post-disruption and that's typically caused by the fact that now we have this abundance of packages we need to get processed and out for service, typically the next day, now we're working extra,
longer shifts, trying to increase productivity in an effort to make service on packages. This can be disruptive to our employees.
As with any company, the cost of this is important to us. There is certainly a cost impact to the affected areas during a contingency operation.
Staffed operations, when there's no work, in the event referenced with the snow, we had people who tame to came to work the first day but because of highways being closed we were not able to get trucks into the facilities,
we had people there, no packages to process. That's a cost impact.
The impact to cost from catching up, running extra shifts, paying overtime. And most appropriately from a customer's perspective is the service, there's typically a one-day service disruption, but again,
our focus is getting that network back up and running as quickly as possible to minimize to a one-day.
I can't stress enough how we don't want to care the network apart for a one-day disruption to not impact to make a greater one, two and three-day.
With the contingency portion of it, our keys to success are first and foremost, communication. We review our contingency plans annually at a corporate level and take them all the way to the district level, review them.
Our contingency plans typically don't change from year to year. The only reason they would change is if we have a service change, corporately, and/or we have building closures, which is not typical of UPS.
Then certainly managing the expectation of any contingency plan, making sure the folks know what their tasks are.
I will move to alternate Ops, typically much more serious, and fortunately for us, very seldom do we have to enact these.
The most recent being Katrina, in our New Orleans facility, which was flooded. We simply had to close the facility for some time in order to get it cleaned up and back up and running.
These alternate Ops plans are something we do annually at a high level in the organization.
We have 32 HUBS which are large sortation facilities around the country, alternate Ops plans for all 32 of these facilities.
In other words, if the facility in Denver, Colorado were to take fire or something odd that would take the facility down; we now know and would enact our alternate Ops points.
We have a team that would gather in one of two locations initially, that would be in Louisville, Kentucky where our air sortation facility is, or Atlanta, where corporate headquarters are.
The team would talk with folks at the site, local folks, district folks and region folks, and we would work through all necessary modes of communication in order to determine what impact, first to our people; secondly, to our packages,
and thirdly, to the service and how we're going to minimize the disruption and get the network back up and running as quickly as possible.
Typically these alternate Ops plans are much more costly than, obviously, than the contingency plans. Once the team meets and we evaluate the situation we go to the site and operate from there.
The things we look at are quite similar in nature to the contingency planning.
We look at alternate locations.
In the example of Katrina in the New Orleans facility, we simply took the packages, started processing in the Jackson, Mississippi facility.
That led to problems in Jackson, Mississippi in that now we were over capacity, more packages than the facility could hold. It had a ripple effect all the way back to Chicago where now our major sort facility,
automated sort facility in Chicago was creating new loads to bypass Jackson, to go directly to the smaller delivery facilities. You can imagine the cost of that was quite considerable.
But it was necessary in order to get the network back in shape, as well as maintain service to our customers.
We also take a look at different modes of transportation, work with the class 1 railroads, ask them for new trains, we will re-route as mentioned, ground feeds and aircraft. Some of these moves, for example, back to New Orleans,
we still have certain things we put in place for the New Orleans facility that are still in place today. Ironically,
some of these things we're looking at evaluating to see if we can put them back into New Orleans to try to cut some of our costs and we think we can and are moving forward.
We tri- to make all this as transparent to customers as possible in an effort to contain their concerns.
Continuing with our alternate Ops, it's, the planning handled through the corporate office.
We have pre-determined plans, pull them off the shelf and enact them.
We do have, every year we pick a facility and run an exercise. The most recent exercise was in Long Island. We ran a scenario where Long Island was hit by a hurricane and we lost the major facilities in Long Island.
How would we respond the site is selected by the corporate Management Committee and then we enact our plan, literally in this case hundreds of UPS management people are involved and we run the plan from A to Z, critique ourselves
and are highly critical of ourselves so we do not make unnecessary errors were the event to actually occur.
The plan is to become normal as quickly as possible.
Some of the consequences from an alternate Ops situation in terms of our people, in many cases, and the case of New Orleans, people have to move out of the area and you lose those people as employees.
In this case we tried to take displaced employees and put them in another, but a lot have not returned to the New Orleans area.
Existing workers are not available because of disaster, for example a pandemic. We did have a practice alternate ops situation, if you will, with the birds flu,
we talked about how to handle that with people how to handel the situation if we had to close the facility. When you lose a facility, have to start run other facilities at higher capacities, training involved, we have to move vehicles,
it's very high-cost.
Service, which is one of our primary concerns, initially is high.
The service levels, and as we move to get back to the network as quickly as possible the service is starting to come back to normal.
Our keys to success from alternate Ops and contingency plan are that the communication is critical, both to people and customers, and manage the expectations of people and customers are of utmost importance.
In summary, maintaining good contingency and alternate Op plans are critical. We update both plans annually, and/or as operating plans change, and whenever necessary.
We make sure all our employees understand the plan. We do this through both communication in writing, conference call and through our exercises for alternate Ops for larger facilities. We role play,
highly critical of ourselves during that scenario.
As always, I guess with any organization, you hop you never have to enact any of these things.
Contingency planning becomes second nature to us now, but the alternate Ops, we certainly hope we never have to. There's been very few, fortunately, occasions where we had to, but we are well-prepared and believe that preparation,
when the next event does occur, will allow us to cut the costs that may have occurred, maintain our service, get the network back up and running as quickly as possible and keep our people safe.
With that, Jennifer, that concludes my presentation. I will turn it back over to you and look forward to questions that folks may have.
Thank you, Dan. As of now I only see one question. We will get to that, but please keep typing in questions. We have time and will open the phone lines momentarily.
The first question, Paul, it's for you. I would like to hear Paul's perspective regarding winter closures, for example I-80 in we Wyoming.
From a state DOT perspective, the long-term handling of winter closures is something falling into the area of predictable disaster, likely to happen every year.
It's something where a state DOT can take advantage of planning to deal with the inevitable.
The model is to follow best practices that exist in other state DOTs, also the more sophisticated carriers are able to conduct.
What Dan just went through in UPS, that's a high bar in standards for carriers. Clearly a single independent owner operator won't be able to invest or have anything that matches,
even approaching think being what UPS is able to do to maintain the network. That's where the state DOT becomes more important for users of network and the freight system that don't have the sophistication of UPS.
To know when things are close to being restored, how that's going in terms of recovery period, using all media available to do that. I am sure they do that today, but looking back through the lens of the freight industry,
freight community, where individual operators may not be located in the metropolitan areas where, you reach local general media, you may need to reach out through the Internet, other networks to do a better job of that.
Also best practices, looking back for lessons learned after events, a classic part of industry and planning to deal with disaster impacts. It's the best practices of how you can do better next time, better set priorities,
how to deploy resources available and a continual reassessment of the network itself, to see how it's being used, serves overhead functions, as well as the local communities, where the experience of the network is over time
and also at various times during the year. The seasonality factor does matter in terms of which resource priority should be based on how the network is being used at different times of the year.
That's a quick overview, I don't have a good guide book to point you to, but there are many elements you can learn from best practices such as Dan just said.
Dan, I will put it to you as well, do you have suggestions on what local agencies can do to help --
Dan: My first thought when the question was posed was, and we have done this in other states -- I can't speak to Wyoming, but we've sat -- we being UPS, have sat in on state panels to talk about those things.
Certainly the I-80 corridor, as most people know, is prone to snow, all across the corridor. We have sat in, in Pennsylvania, for example, and talked to -- if not the DOT, state troopers, state police,
talked to them about what benefits both the trucking industry and the state when a snow event occurs.
I would suggest that perhaps this question in Wyoming, if you get some of the larger trucking companies, even the trucking companies represented by agencies within the state,
simply ask them what is it we can do better as a state to support the trucking industry as a whole, would certainly support everyone, in order to get highways up and running quicker. What we can do.
Perhaps it's as simple as let us know earlier type of thing, you are going to be closing highways, we can look for alternate means of -- I would encourage any state to include trucking companies,
other type of transport in discussions prior to events.
Thank you. Dan, the next question is for you. Do you find the operational costs of disruption match the example provided by Paul, who ran a trial with East Coast ports.
I would like to hear you talk about how you incorporate environmental -- into planning for disasters.
Well, the scenario Paul talked about with the West Coast ports, interestingly enough, if you recall a couple years ago, there were disruptions at the West Coast ports
and the disruption to UPS from an economic standpoint was fairly good -- well, bad, high in this case, but more importantly from a service perspective, it hurt us very much. Typically the stuff that comes into the port in our case,
most of it goes on a train and we were having trouble getting the volume through the port to the trains, having service disruptions.
I know as an organization we worked diligently with folks in the state to see how to relieve and in fact talked to folks in D.C. to see if we could help relieve that. When those type things occur,
it is extremely difficult to overcome and the cost certainly ripples for quite a long time.
It take ace while for UPS in this case to catch up in terms of service, even after the ports opened up, flowing freely again, we still had major service disruptions. Sorry, Jennifer, I didn't catch the second part of the question.
Can you talk about how you incorporate environmental regulations into your planning for disasters.
Our focus, in the mission statement, not only on money, but people, communities.
We want to be, and I believe personally, we are good community neighbors.
You may have seen in the opening slide, we have many modes of alternate fuels in our vehicles out there.
UPS considers itself an environmentally-friendly company and we continue to work hard going forward with that.
Okay. Thank you.
This is in question: Given disaster causes communication disruptions, what alternate methods of communication do you plan to use in long and short-term disruptions. Dan, I am guessing that's meant for you.
Sorry, I couldn't hear you.
What alternate means of communication do you intend to employ in short and long-term disruption?
A great question.
During 9/11, fortunately we had severe problem with communication, towers were down, obviously, and lines were backed up. We do -- our communication department and security function handled that as far as part of contingency planning.
They do have alternate means of communication, many of them are very expensive and most of it is -- we rent type equipment to do this. I don't know the specifics, certainly if the person asking the question would want,
I can get the answer for them and drop them an e-mail or Jennifer, through you, the group, get an answer back to them.
If you want to -- are able to get an answer, I can get that out when I send the follow-up information.
I will do that.
I could add a little bit. From the perspective of methodologies employed, it's more than don't have a single point of failure where you depend on a website to be the sole point of information. Use all available media,
things like broadcast radio, individual truck drivers may have legacy broadcast radios, as well as the satellite radio with traffic reports that are ongoing today. Just, the point is plan for
and have in the contingency planning to use all available media, not assume a high tech website will be sufficient in case of a disaster.
Jennifer, one thing I know the folks that control this for us, is the satellite radio.
We would use that quite a bit actually, going forward.
Again, the experiences during 9/11 in the New York/New Jersey area, we learned a valuable lesson from that.
Thank you. Dan, I think this is for you, but Paul, feel free to jump in as well. Has there been a problem in restoring public roads needed by the freight industry, but maybe not the general public?
Have you or other freight carriers communicated your recovery needs to state and local transportation officials? What about communications from state and local officials about the status of closed roads?
Well, from UPS' perspective, the roads we travel, generally the public is traveling as well. There are very few, I can't think of any we travel the public isn't traveling, so the concern is always that we want it to be faster,
the road to return faster than it typically can. It's the nature of our business, speed. In terms of communication, we like, we work a lot at a local level with the local municipalities and with the states as well when necessary.
For example, the snow emergency I referenced in my presentation, when interstate 95 closes, a major artery North/South; it's difficult.
Most of that occurred in the state of Delaware. We were in constant contact with the state of Delaware. We immediately got off the road. We realized if we're on the road the folks that need to clean up cannot be out there.
We offer as much assistance as we can, I guess selfishly, so we can get the road back up and running.
The second part of the question I don't remember that, Jennifer.
How do you communicate needs to local and state transportation officials and the status of closed roads?
Again, the communication is, during the crisis, we try not to be bother some. We know the local officials and state officials are quite busy, but we have in the past gotten involved, post-contingency plan, talked with local officials,
whether that be local or federal officials, through -- we keep contact with state senators, congressmen, as well as the [indiscernible] DC. That's very rare that occurs.
I can't think of a moment over the last 10 years or so we have had a problem we had to take to that degree.
Paul, anything you wanted to add?
I think the communications, as Dan referenced, has to be more proactive on the public side, and measured. Part of that is communication to the general public, not just freight community,
reviewing communications relevant to a carrier that may not be local, I would add that.
A driver who is not domiciled, operating locally, would understand what it means for him.
Okay. The next question is for Dan. I would like to hear your perspective on balancing the competitive edge with contingency planning.
How do you collaborate with other companies and share equipment and resources?
When it comes to contingency planning, we're not selfish, we, in terms of our competition, we have in fact shared equipment. That's typically more at an airport or gateway facility where we share equipment.
That's just in support of the aircraft themselves.
For example, tugs, dollies, equipment to clean aircraft, yeah, we certainly share and they share with us as well.
From a trucking standpoint, it's not that we haven't -- I don't know of any request from a corporate perspective for that to happen. I am sure we would entertain anything.
Again, we want to be good community neighbors and competition at that point, when you're in a contingency mode really take ace back seat. We try to work through, collaboratively with anyone to get through a scenario.
It happens somewhat frequently from an air side, but on the ground it's very rare.
Thank you. The next question is to both of you. How can state or regional government best address plan for and mitigate the effects of potential disaster interruptions, such as the West Coast ports example,
using existing plans such as state transportation plans, rail plans and goods movement plans.
Can you suggest good informative sources for management at the state level.
Paul? I will put it to you first.
Those are good questions.
I think some of the planning has to start from the contingency planning that exists to deal with the security and safety issues within a state or metro area.
That's a broader context than what is the freight network impact, it's what is the transportation system ability to deal with disruption, interruptions from a safety/security perspective.
I know after 911 there were a lot of efforts expanded at the state DOT level, at AASHTO there's a committee encouraging research, sharing of best practices in that area. The freight contingency planning,
a sub-set of that sort of research and planning. As far as being incorporated, included in a goods movement plan or state-wide rail plan or some other transportation planning activity which requires
or at least should include a scope to look to the freight network, it's very important to do the stakeholder outreach, include an understanding through staff, consultants, to have an appreciation of the needs
and requirements of the freight system in terms of access, throughput capacity. It becomes a decision on the part of the planners in terms of priority setting, limited resources,
the ability to add extra capacity in the event of some disaster may be limited, yet there may be low-cost option where investment may be made in terms of timing, capacity, to alleviate a bottleneck situation,
especially in the recovery period from a disaster. Some of that already exists in terms of planning for emergencies. States for years had evacuation route planning,
contexts to move people but sometimes there's a freight element relevant in how you look at how you serve the economy, get your area or state back up and functioning following a disruption.
The guidance as far as best practices and ongoing research in this area, since this isn't a static area I would look to traditional sources of TRB and AASHTO for that.
Dan, any thoughts?
I would have to defer to what agencies to include to Paul's expertise on that. I would add that there are companies other than UPS that are good at this contingency type of planning and processes.
I will encourage local and/or state governments to reach out for these companies and just ask them to help assess where they stand in terms of their planning process.
My wife actually worked for both a local and a state government and I have seen some of the activities she was involved with in regard to contingency planning, so oftentimes it seems silly to plan ahead, but boy,
if the event ever occurs you will be so much further ahead had you done that.
Okay. Next question for both of you as well, have you considered climate change scenarios or predictions suggesting there will be increase in intensity and frequency of storms in coming years?
This is Paul. We have not done specific modeling of this.
There's been a lot of discussion around this topic in the last few years, obviously going back to Katrina and before. What is relevant is this idea we see in recent global recession,
the extraordinary measure that's need to be taken into account in terms of planning.
A small variance or standard deviation around some norm, what whatever the context of planning is may not be adequate in planning for the organization. Clearly that's evidence in what Dan discussed at UPS.
This is standard operating practices from risk mitigation in large companies across the transportation sector and should be reflected back in operations planning in the public sector at a metro, state, federal level.
There's a lot of planning ongoing that exists outside of DOT in the federal government and we see this in large organization of all kinds already, the challenge for the economy spread it down further into smaller
and smaller organization where it's more difficult to allocate, dedicate resources specifically to planning for these sorts of problems.
Jennifer, this is Dan. We have not planned specific to climate change, but certainly our plans include some of the thing that's climate change, at least what the experts say climate change would give us, more storms, more hurricanes,
those type of things. Our contingency plans, we feel very comfortable the contingency plans are prepared for those likelihoods, but I don't know that we have done anything in regard specific to climate change.
Well, I will have the operator give instructions on how to ask questions over the phone. But if you think of anything and you want to type it in, feel free to. Would the operator give instructions?
If you would like to ask a question press star 1, record your name at the prompt.
We will wait a minute to see if any questions come in.
Operator: I am showing no questions.
If there are no more questions we will go ahead and end a little early. Thank you, Dan and Paul.
I really appreciate your presentations, good questions and dialogue going. Thank you also to everyone in attendance.
The recorded version will be available in the next few weeks online. I will accepted an e-mail once it's available. As a reminder, if you are an AICP member and would like to receive 1.5 certification maintenance credits for attending,
make sure you are signed in with if I ever first and last name or type in your name in the chat area, fill out the evaluation form, e-mail to me afterwards, and if you aren't applying for the credits, still download the evaluation,
send to me as well, that would be great.
We are always looking for feedback.
I am putting a poll up on the screen right now. Trying to get a better count of how many people were in attendance. If there were others in the room with you, indicate that in the poll, not including yourself.
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The next seminar is August 18, will be about freight performance measures. If you haven't done so already I encourage you to visit the talking fright website and sign up for the seminar. With that, we will close out for today.
Thank you, Dan, Paul, everybody in attendance, have a great rest of the day.