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Jennifer Symoun
Good 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 the Urban Freight Transportation: Selected Presentations from the METRANS International Urban Freight Conference
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 four presenters, Thomas O'Brien from the Center for International Trade and Transportation at California State University, Long Beach, Dr. Jean-Paul Rodrigue from Hofstra University, Christopher Lindsey from Northwestern University, and Dr. Miguel Jaller from Rensselaer Polytechnic Institute.
Thomas O'Brien is the Director of Research for the Center for International Trade and Transportation at California State University, Long Beach (CSULB). He is also the Associate Director of Long Beach Programs for the METRANS Transportation Center, a partnership of CSULB and the University of Southern California.
Jean-Paul Rodrigue received a Ph.D. in Transport Geography from the Université de Montréal and has been a professor at Hofstra University since 1999. Dr. Rodrigue's research interests mainly cover the fields of transportation and economics as they relate to logistics and global freight distribution. Area interests involve North America, Latin America and the Caribbean, and East and Southeast Asia. Specific topics over which he has published extensively cover maritime transport systems and logistics, global supply chains and production networks, gateways and transport corridors. He has authored 5 books, 25 book chapters, more than 40 peer reviewed papers, numerous reports, and delivered more than 130 conferences and seminar presentations, mostly at the international level.
Christopher Lindsey is a Ph.D. student in Northwestern University's Transportation Center. His research areas include freight and logistics, land use, and transportation policy. Currently, his work involves the application of behavioral and optimization models to transportation spot market transactions. Prior to coming to Northwestern University, Christopher attended Morehouse College and the Georgia Institute of Technology where he received degrees in Applied Physics and Civil Engineering. He also worked as a Transportation Engineer for the Georgia Department of Transportation. Mr. Lindsey is a past Fellow of the Eno Transportation Foundation Leadership Development Conference.
Dr. Miguel Jaller is a research associate at the Center for Infrastructure, Transportation, and the Environment and at the Volvo Research and Educational Foundation's Center of Excellence for Sustainable Urban Freight Systems at the Rensselaer Polytechnic Institute (RPI) in Troy, NY. He has strong theoretical foundations and practical experience in industrial and transportation engineering and management. His areas of interest are: freight transportation, sustainable transportation systems, city logistics, supply chain management, emergency response management, and operations research. He has several scientific and technical publications and has made presentations at different national and international venues. He has been part of a number of important research and consulting projects.
Today's seminar will last 90 minutes, with 60 minutes allocated for the speakers, and the final 30 minutes for audience Question and Answer. If during the presentations you think of a question, you can type it into the chat area. Please make sure you send your question to "Everyone" and indicate which presenter your question is for. Presenters will be unable to answer your questions during their presentations, but I will start off the question and answer session with the questions typed into the chat box. If we run out of time and are unable to address all questions we will attempt to get written responses from the presenters to the unanswered questions.
The PowerPoint presentations used during the seminar are available for download from the file download box in the lower right corner of your screen. The presentations will also be available online within the next few weeks, along with a recording and a transcript. I will notify all attendees once these materials are posted online.
One final note: Talking Freight seminars are eligible for 1.5 certification maintenance credits for AICP members. In order to obtain credit for today's seminar, you must have logged in with your first and last name or if you are attending with a group of people you must type your first and last name into the chat box. I have included more detailed instructions in the file share box on how to obtain your credits after the seminar. Today's webinar is not yet available on the AICP web site but I will send out a notice once it is.
For those of you who are not AICP members but would like to receive PDH credits for this webinar, please note that FHWA does not formally offer PDFs, however, it may be possible to receive PDHs for your participation in Talking Freight if you are able to self-certify. To possibly receive PDHs, please download the agenda from the file download box and submit this agenda to your respective licensing agency.
Finally, I encourage everyone to please also download the evaluation form from the file share box and submit this form to me after you have filled it out.
We'll now go ahead and get started with our first presenter, Thomas O'Brien from the Center for International Trade and Transportation at California State University, Long Beach.
Thomas O'Brien
Thank you, Jennifer. My job today is an easy one, it is to provide a little bit of background and context for the three presentations that are about to follow. As Jennifer mentioned, I am Tom O'Brien, the director of research for the Center for International Trade and Transportation at California State University Long Beach and our center CITT has been the Long Beach home of the METRANS transportation center which is a partnership of Cal State Long Beach and USC. The Center was established in 1998. Our charge has been to work on transportation problems that plague large metropolitan areas. We have benefited from being a University transportation Center as part of the FHWA UTC program with matching core financial support from Caltrans, the state DOT here in California. Our programs at METRANS involve research education or outreach, with a wide area of focus on all transportation related issues including transit but we have taken a particular advantage of our gateway status here in Southern California to do a lot of work in the area of freight. In Miguel's bio it was mentioned that he is doing work as part of the Volvo Research Center. We are focused on urban freight and we also are partners with UC Davis in the National Center for Sustainable Transport again focusing on freight.
One of the projects that we started in 2006 was the Urban Freight Conference. Our feeling being that there needed to be a forum to share information and research on all aspects of movement within metropolitan areas. That means going beyond the efficiency of city logistics operations to encompass all of the range of issues that are involved in moving goods within and through metropolitan areas. We now do it every two years. We did it for two consecutive years in the beginning, but we now offer it every two years and the most recent conference that you will be hearing about today was just last week, October 8 through 10th. We shifted the name this year from National Urban Freight to International Urban Freight to reflect the range of topics being addressed, where the speakers were coming from, and the general themes that were being addressed. The conference has representation from over 16 different countries. And as I mentioned, it is a forum for us to not only engage researchers but also industry professionals, the practitioners of urban freight, the shippers, the operators, the third-party coordinators as well as the regulatory agencies engaged in urban freight, and those who plan for the infrastructure on which the freight moves. I mentioned that we attempted to cover all aspects of urban freight, the papers and presentations including the three that you're going to be hearing from today reflect a wide range of urban freight issues.
This year and not surprisingly, we had an increased emphasis on local pickup and delivery which is driven in many ways by the rise in e-commerce and home shopping. Environmental impacts and responses, which has always been a focus of the urban freight presentations and urban economics and what drives shippers to use particular shipping lanes, port gateway operations, which given where we are in Southern California, where the conference was hosted, this plays a critical role in the discussions surrounding urban freight, freight and urban modeling and planning and the use of intelligent transportation systems, the applications in urban freight, hubs and city interactions. I mentioned e-commerce, which is reflected in one of the tracks that we had emerging trends in consumption production and spatial organizations, as well as security and vulnerability and best practices, and with best practices being widely defined in coming from all sorts of places around the world, and involving operations, infrastructure development and planning. The keynote presentations came from UPS, Chuck Collins the vice president of engineering, talked about the changing nature of small package delivery. And the impact of different types of urban forms on the ability of UPS to do what it does and Jake Racker who is the regional logistics director for Kroger who talked about food distribution. We had special sessions hosted by the transportation research board urban freight committee, who looked at research and practitioner interaction which continued a dialogue that happened at the annual meeting last January and hopefully set the stage for what they do this coming January. We have an annual state-of-the-art offered by industry professionals which looks at what researchers need to know about what is happening in industry these days, and what research would be useful to support that.
We had spotlight presentations from the two Volvo Centers of Excellence in Urban Freight, which brings a global perspective to the debate. We had special sessions focusing on the unique role of metropolitan planning organizations and councils of government in planning for urban freight. We had a session that focused on different perspectives of the Panama Canal expansion and what it means for metropolitan regions, not only on the East Coast and West Coast of the US, but in other parts of the world. We had site visits to an automated food distribution center at Kroger and the Alameda corridor. I bring these up because it may be of interest to you to know that post conference, the papers, and presentations from the conference will be posted on the METRANS website, which is METRANS.org, so you're getting a flavor today of the three presentations but there will be a lot more online. We will also have a conference summary that is going to be posted as well. Selected papers from the conference will form a special issue of a journal called Research in Transportation Business & Management. With that, I will look forward to engaging any questions at the end about the conference or otherwise and I will now turn it back over to Jennifer to get the heart of the program started.
Jennifer Symoun
Thank you Tom. Our next presentation will be given by Dr. Jean-Paul Rodrigue from Hofstra University. You can get started.
Jean-Paul Rodrigue
Thank you very much. We will start out with a very wide picture of logistics. You can call them global logistics systems. It is joint work with my French colleague, Laetitia Dablanc. Our goal here was to try to find some level of commonality in terms of the logistics across the world. It was I must say a fairly complex endeavor in terms of data availability. For those of you are interested, we just had a couple of interesting publications about this issue. One was released last week by the UN-Habitat for their annual report human settlements and for the first time they actually decided to consider freight as an element of urban sustainability. In the past there was a very clear bias in terms of sustainability issues and urban areas. And I was actually commissioned to write the chapter, I provide here a PowerPoint presentation, and if you want more information, there is also a section about the logistics in my online web book about transportation systems. The point is, and if we look at this book cover, it is a bias. You look at the cover and there are people walking and the bus companies running in the red are driving around. And where is the freight? That is the point of this bias and we looked at the attempts that were made in the past to look at urban sustainability and consider some form of classification system by level of efficiency or level of environmental effectiveness. What we found is there is not a single variable or element when considering urban freight as part of sustainability.
This bias takes many dimensions. We can look at this issue in terms of urban planning and the fact that urban freight planning has not been considered for the reason that most of the realm of engagement between the public sector and the city covers mass transportation systems which are publicly owned while freight remains a private business. Most planners and stakeholders in the public sector are not that well trained to consider city logistic issues. To move on and within that rationale of trying to classify and identify some form of typology, it's a complex endeavor for two interesting reasons. The first one is of course cities across the world have different landscapes and have different morphologies, different levels of density and histories. To this complexity you must add the very wide varieties of supply chains that are intersecting and are overlapping this urban freight distribution issue. We have city logistics that are city specific and in addition city logistics that are supply chain specific.
Let's move on to try to guess what could be the major contributor here: we use classic criteria in terms of urban classification. Spatial structure, governance, income, function, and there is an emphasis between cities that are based upon production such as cities in China obviously. Based upon consumption, there are cities which are more service oriented, and cities in between that are gateways and the distribution clusters. For each, we had some form of city logistic issues.
The first question, that's a pretty tough one. Is there a threshold where a population or a size threshold where cities start to have logistic type of problems? You need some form of approach, some form of intervention, and we will try to get some of that but there was very limited data across the world. We took a data set about urban congestion. And when you look at this from a very simplistic perspective, the rule of thumb and you have to be very careful, take this with a very large grain of salt is when you reach above 1 million, it seems to be a threshold. When you start to have some form of city logistic issues, we have very little data for other parts of the world and we will see when we start to get more information, if the 1 million population threshold holds true or not. I suspect it might be a valid one. Let's start with the density issue which we try to classify. We reach some very easy similarities. There are very specific regional characteristics in terms of the density of cities across the world. We realize is this whole density issue was creating a conundrum, a paradox between what people in passenger urban transportation and from the standpoint, what would be more efficient? If you look at all the urban sustainability literature, most of the literature advocates that the higher the density, the better, which makes sense. From a city logistic perspective, the higher the density once you reach a certain threshold, you start to have more logistic problems. Higher density in terms of logistics does not seem to be that preferable and very high density cities require a lot of intervention. That's an interesting puzzling paradox between what is sustainable or what is practical in terms of urban freight distribution and what is sustainable or practical in terms of passenger transportation. I suspect in the future this will create some kind of debate between what is the preferable density.
This density issue, and we are using a very small sample, is also exaggerated by what is happening within the city itself. Many cities around the world when you get closer to the central business district, you start to have very constraining systems for urban freight distribution. As you move towards suburban area you start having suburban logistics where there doesn't seem to be too much of an issue. That's another issue to keep in mind when you start to classify the whole picture. In addition, there is a whole landscape of what is urban, ranging from suburban areas towards dense central areas. There is a continuum and each element of this involves different aspects, different strategies so you have to be very careful when you start to classify systems that the systems are the only form of regional continuum and one very powerful trend is the emergence of mega regions. We have of course the classic Boston - Washington corridor and Southern California, a well-known mega region. But you also need to consider the Eastern coast of China and what is happening in Western Europe also a major form of a region. In addition to being concerned about urban freight distribution, you have to consider that this freight distribution system is part of a wider region. If you want to service the Boston-Washington corridor, locations could be in Pennsylvania, along the corridor. So this creates a mismatch between logistics and urban systems.
Another measure we assess is the intensity of urban GDP which is linked with the level of consumption. This map pretty much represents the GDP per capita and it is very clear within the triad of Western Europe, East Asia, and Japan where most of the consumption is taking place. You have to be very careful when you consider siting in cities from a GDP perspective or as opposed to considering cities from a population perspective. On the next slide, we will try to identify and classify the major gateways cities that are also acting as interfaces between the global freight distribution system and regional and metropolitan systems. We could measure the level of freight intensity of areas around the world by using proxies in this case which is the level of intermodal port traffic and the level of air transportation traffic by urban areas. This is in a sense the outcome of this exercise. Trying to assess the major gateway cities of the global freight system and you will notice a very high level of concentration across these gateways and Tom was quite right, Los Angeles as you can clearly see here is a major gateway for America. And I was shocked while we were assembling this data about the level of intensity by city or gateway regions that the Pearl River Delta itself was accounting for about 11% or 12% of all the activity of this planet and has a very high level of concentration of freight activity along the city regions, or mega-regions if you wish. The next slide we look at this issue in terms of the gateway region and their gateway intensity and this you see the usual in terms of Shanghai, Singapore, Hong Kong, all the major exports oriented economies.
Also, that's an interesting thing, we start with a global gateway index, and two patterns emerge. Gateways that are focusing on global city activities while we have also the other gateways that seem to be focusing very substantially on this pure gateway function. Large commercial global gateways such as New York, London, Paris and so on and so forth. Then we try another exercise in many of you have heard about the LPI, which is called Logistic Performance Index, but let's call it the logistics perception index if you wish. We try to see if we could cross-reference this between let's say the LPI observed within a country, and cities, it's very crude, but that's the best we could come up with. There is no metropolitan area specific measures of logistic performance. That is the goal we would like to achieve at a metropolitan level. As a starting point, cross-reference countries and LPI and the metropolitan area, that is something close to 75% of all the urban population of this planet, the urban population more than 1 million people which were in countries qualified as logistically deficient, and only 26% of the global population was living in countries which was labeled efficient with LPI higher than 3.5.
And we get four categories that are not that complicated. All the metropolitan areas in emerging economies which are very large urban those often are characterized by what we called dual freight distribution systems. Modern freight distribution systems such as UPS, FedEx and a massive informal sector which takes care of a lot of distribution within metropolitan areas, which is a category that is very interesting to the gateway cities. Large metropolitan area are consumption related that is for sure but in addition to this problem on that last slide, is that there also embedded in global freight distribution system and regional freight distribution system because they act as gateways in the system of circulation. Some kind of a problem because the freight is one way or the other will enter and exit the metropolitan area. There was an important category to acknowledge; the medium-size cities, and in this case most of the logistic programs are very specific.
We notice when we classify logistic systems you will notice that we put central China, India, Africa, and many Latin American cities in the same category and of course this is completely wrong. At this point we have not yet acquired information to categorize which logistics are involved. We compare it and see that it is completely different ballgame. Behind this classification if you would like to establish a form of commonality in terms of approach and policy, to understand logistics across the world you have to classify these cities to see what they have in common and what distinguishes them. If we are achieving a classification we will be better able to understand what they mean in different urban or metropolitan areas across the world.
That will be it for me. I have four more slides in the presentation which I won't discuss, but which presents a little bit more details about this classification. That is about it for me for today. Thank you.
Jennifer Symoun
Thank you. The next presentation will be given by Christopher Lindsey from Northwestern University. Christopher, I will bring up your presentation and then you can go ahead.
Christopher Lindsey
Thank you, Jennifer. The presentation today is on freight transportation activity and its connection to the demand for industrial space. To begin, a key supply chain decision is where to locate logistics facilities. Approximately half of a distribution centers costs are related to freight transportation. This has led global industries to strategically reconfigure their supply chains in order to decrease transportation costs and increase flexibility. Both sides of the marketplace, both the customer firms that require logistics facilities and the supply firms that build them must now increasingly consider the geography of freight flows, as well as regional dynamics in management decisions.
The assumption in this research is that macroeconomic, demographic, freight flow measures and the demand for industrial space are interconnected. Many of you do work in transportation policy. So, to give you some clarification, the angle that I am coming from is that of a private developer who is looking to build logistics facilities in different metropolitan regions and attract customers to those developments. So the insights and the value of this work to the public policy community is that it gives insight into that private sector process. Often times, these private sector developments actually lead the public sector development of transportation infrastructure. Those insights are the value of this work to the audience today. The two primary research questions are: Can the demand for industrial space be predicted in terms of the demographic, macroeconomic, and freight flow measures of various regions; and, do regions with greater freight flows exhibit higher levels of industrial space consumption?
The decision to consume space in one place over another is rooted in regional science and location theory. Many of the early seminal location theories and several empirical studies have confirmed that the relative accessibility of a location is a primary determinant of a firm's decision to locate in one space over another. As you move from the regional science literature into the industrial space literature, a particularly relevant theory is the "Path of Goods Movement" theory. This theory basically asserts that the demand for warehouse space is highly correlated with the path that goods flow from sources, which are manufacturers, to destinations, which are population centers.
In this research, we explore the demand for industrial space and its connection to macroeconomic, demographic, and freight flow variables using a regression model for longitudinal data. Within our data set we have 20 different metropolitan markets where we observe the consumption of industrial space over time - 11 years to be exact. This is a map showing the 20 areas we use in the study. They're pretty evenly spread between the East and West Coast. However, there is a gap in the middle of the country since this region is sparsely populated. So we mostly concentrated on the East Coast, Southeast, and the West Coast of the United States.
In this slide we show some summary statistics of the data and definitions of the variables used in the analysis. Our measure of demand is net absorption. This is the net change in occupied space within a metropolitan market. It can be both positive and negative. It is positive from year to year if a market constantly consumes more space than is vacated. The value is negative when more firms leave or decrease their footprint. Some of our economic variables include measures of U.S. GDP and national unemployment, which are both at the national level. At more local and state levels we have per capita income, state employment, population growth and - for our freight flow measures - we look at a few different measures: the tons and the ton-miles of freight originating and destined for a particular metropolitan market.
Now, let's look at a few of our results. We have four different models. Some things immediately pop out at us. Population growth, our measure GDP growth, and our employment measures all have a positive impact on the amount of industrial space that it is consumed in a market. Variables that negatively correlate with demand are unemployment - which is expected because that would indicate a region that is not doing too well economically. Another one that is at first surprising but I think makes sense, is per capita income. Our results have shown that as per capita income increases, less industrial space is consumed in a market. What I think that suggests is that as labor is getting more expensive in a market firms are less likely to consume space.
The main focus of our study is the freight flow measures. As I said, this research endeavor was started to see if there is some positive correlation between freight flows and the actual amount of industrial space consumed in the market. Across the board we're seeing that we do get very positive and statistically significant correlations between our freight flow measures - destination tons, origin tons, destination ton-miles, and origin ton-miles - and the demand for industrial space. It confirms the investment strategy that targeting markets that have heavy freight flows is good for business. This is likely the case because these are hub markets for logistics activity.
When we apply our model results to a couple of markets to get visual confirmation of what we are seeing in the regression models, the model does a pretty decent job. Where it does not do such a good job is in the year 2001. Of course, in that year there was a terrorist attack in the U.S. followed by a recession. We missed that in our model and it is not too surprising considering the external factors. Overall, however, I think that we did a good job in capturing the market dynamics affecting demand.
So, at this point a preliminary conclusion is that freight flows are an indicator of demand. Also, there are strong associations between demand and macroeconomic and demographic variables. Earlier I mentioned the precipitous drop in demand in the year 2001. This observation sparked some additional questions. The first question: Does this represent a structural change in the industrial space market? The answer is yes it does. We conducted a Chow test and found that there is structural change and it's very significant. The second question: Is there a difference between inland and port markets? The answer is yes there is a difference between inland versus port markets. When a regression model is run using an indicator variable to distinguish between port and inland markets, in every case the effect of the freight flow variables is larger.
I'm going to show you a few slides on the results from asking these questions. When we examined pre- versus post- 2001 demand, the biggest difference was in the population growth variable. The smallest change was in national unemployment. We think that these results imply that after recession, demand depended a little more heavily on local conditions than national conditions. For port versus inland markets, one result was that inland markets exhibited larger and more statistically significant parameter estimates for freight flow measures than port markets. This suggests that the freight flow variables we developed capture demand in inland markets better than the port markets. In future work, we would like to examine some additional freight flow variables for those port markets. Likely, there are other dynamics in those port markets that were not captured as well as we would have liked.
There are a few managerial implications of the research: (1) metropolitan markets with a transportation infrastructure that can handle large freight flows are a critical aspect of demand; (2) markets that are hubs of logistics activity represent superior investment opportunities for the private sector as opposed to others; (3) also, a shock occurred in the year 2001 that resulted in a change to the nature of demand. However, it is unclear whether or not this change is permanent. Though the correlation between freight flows and demand is clearly established, we have not established causality. So we cannot say that increased freight activity cause firms to consume space in one market versus another, but there is a clear positive association.
Jennifer Symoun
Thank you, Christopher. The final presentation will be given by Dr. Miguel Jaller of Rensselaer Polytechnic Institute. I will bring up your presentation, and you can go ahead.
Miguel Jaller
Thank you. Good afternoon everyone, my name is Miguel Jaller. Today I will talk about large urban freight traffic generators and what we have found in terms of opportunities for city logistics initiatives. The presentation is divided into three key parts. First I will talk about what we mean by urban freight large traffic generators; second, the opportunities for city logistics initiatives; and third, how we can to identify these large urban freight traffic generators. When you hear the words "large traffic generators", the first thing that may come to your mind are images of ports, airports, intermodal terminals, etc. They do generate a lot of traffic and a lot of freight. As you can see in the picture, most of that freight is moved through large trucks, bulk cargo, and they are mostly located on the fringe of urban areas. When you go into a city and experience traffic, you normally don't see those many big trucks. Traffic is coming from those smaller trucks, vans and so on. I will be talking about these types of traffic generators. What I'm interested in is what is going on inside the urban area. In New York City, for example, you have "Central Terminal" where there are more than 180 establishments. In a single day, altogether, this one specific point generates between 150 and 200 trucks. You can see the large conglomerate of buildings in this picture. For instance also, in the lower right side you can see deliveries made to a Midtown hotel in Manhattan. You can see for Monday more than 15 trucks make deliveries and that can happen every single day.
This is what we mean by urban large freight traffic generators. It doesn't have to be big areas but these large establishments, large buildings, and large conglomerates of buildings together make up the bulk of the traffic. Most of us work in an office building or a group of buildings and I don't know if you have made the exercise of seeing what happens every day. How many trucks are attracted by your building? How many deliveries do you receive? Who is ordering office supplies, such as ink, printer toner, and are you ordering from the same supplier? Those are the things that we may not think about but they create a lot of traffic. They may be smaller packages, but they will need to make it to your location.
The difference between the two types of trucks, if we look at this graph probability of selecting a type of vehicle depending on shipment sizes and shipment distance shows the probability of using different trucks, small to large for different distances of shipments. On the right side of the graph, you can see larger distances that will easily involve larger shipment sizes. And they will ultimately use large trucks. Whereas on the left side of the graph, where you see mostly urban areas, the probability of using those large trucks is not the same. We are not doing that much consolidation. In essence, in urban areas we're looking at the traffic coming from the smaller trucks.
To conclude this section, we talk about large urban freight traffic generators, those establishments, and those big buildings that together generate a lot of traffic. To compare them, you can see in the top table estimates for deliveries and truck trips produced by establishments in New York, all the trucks that made trips to Manhattan in one single day. They account for roughly about 300,000 delivery trucks between the ones that are private and the ones that are for-hire. Estimates for truck traffic from the New York and New Jersey Ports and you can see the number of trucks, only 9000 trucks. They only account for 2.6% of Manhattan traffic. Who is producing the traffic? Large buildings and landmarks that house a lot of establishments and that together generate a large amount of traffic.
What do we find in terms of opportunities for use? The first one we analyzed was deliveries. Central receiving locations, what is the advantage of one of these locations and at what time of the day? This type of combination of alternatives will reduce traffic, but there are also issues such as they will require a lot of coordination efforts. As you may know, for large urban areas, space is limited. And the price and the cost to allocate the space for value adding activity is constrained. But we have been working with some of the developers and trying to develop this to improve the creation of these and other receiving spaces.
The next city logistics opportunity we looked at was pickup and drop-off points. Pickup and drop-off points are those drop-off lockers such as the ones they are using now by the USPS, or you can also see Amazon using these in different super-markets. What is the advantage? They can be placed in one of those large units and they can mitigate some of the traffic. In addition, unattended deliveries, we have seen that we need to provide a balance between what the customer needs and what the suppliers or the carriers have. We can divide that space allocated space for goods/drop-off points for the different carriers. To drop-off so the receiver does not incur any extra cost. We can do that using a different type of technology. If a receiver has a vendor, they can give the key to the carrier, and the carrier can go in at different times, nobody has to be there. Implementation is the only coordination between the receiver and you, and the delivery areas where space is available. Some of these are low investments. They will reduce congestion.
We will need to address parking in Manhattan. We identified zip codes where the demand for freight parking space is much larger than in others. Some of the other issues, it helps to manage between the freight activity. Within the urban freight distribution issues parking and unloading are very important, and we need to enforce them. And that will require extra effort. We also can try to modify this behavior, through limited space.
All of these opportunities for improvement, understand how the operations are done. We can do all that. But, first, how can we identify them large urban freight traffic generators to do so. In Manhattan they have their own zip codes; the USPS has identified them as producing a lot of mail and maybe deliveries. However, they will include freight and non-freight related establishments. In terms of size, that would be another way to identify them. You can say it is a large building but, is that because of area or because of employment? We use both in terms of large buildings. For area, we selected the top 1% parcel areas. In terms of establishments you can select the number of employees, or thresholds in terms of employees by the hundreds, as well as the composition of employment in the urban area. This allows to be comprehensive, because you are selecting from all employee levels. However, we have found that there are some establishments for specific industry sectors that show constant freight trip generation patterns so the size will not matter. Since there are normally no details about individual employment, large building may not be identified at the individual level.
I will show you some of the results for Manhattan and New York. The first one is the large landmark buildings. We identified about 90 landmark buildings. They have their individual zip codes in Manhattan, but from those, 56 generate about 13,000 between deliveries and truck trips per day. If you remember you have only 56 buildings with that amount of traffic that they generate. Large establishments by employment levels The figures show that for the different employment levels 250-499, 500-999, and 1000+ employees the majority of those establishments are in Midtown Manhattan and in downtown Manhattan, and most of the traffic is at these locations. In Midtown and downtown Manhattan, we have black spots of traffic in the city.
To conclude this, this table shows some the summary in terms of freight trips attracted and produced identified by all these three measures. When you compare landmarks, those big buildings, they respond to about 6000 establishments in Manhattan. And they account for about 4% of all the traffic in the city. Just by focusing on those 56 buildings or locations, you would invest more if you go out and just try to identify those 6000 establishments on their own. You can only go to those locations and deal with the landlord. It would be easier to construct or retrofit one section of those buildings. And you can be sure that would be easier. Their size and their location allows to make them on our advantages, space first. We want to consolidate at different times of the day. We will have the space to store it for some time. That involves security management. We're going to take care of these. And the facilities need to increase scale and complexity. If you want to organize and consolidate more activities throughout the day, at all of these facilities you will need to have a large deal of issues in terms of consolidation and scheduling.
In essence, what we wanted to do with this work is to show that we don't need to try to solve all the problems to have a meaningful impact. You can have a different amount of traffic for the same amount of freight, depending on how you optimize that. For the city level and the private level, that will improve operations. That is why everybody here is part of the system; we are part of the problem. As I mentioned at the beginning, we have buildings that have three or four cafeterias in the same building ordering the same product from the same supplier having more than one truck coming in. We can do things at the local level.
If you're more interested, I am providing some of the references for this and I will be happy to answer some of the questions.
Jennifer Symoun
Thank you Miguel. We will now move on to the question-and-answer session with the questions posted online. I know we have had a few of the questions answered. I will ask folks to give a little more detailed responses. And everybody feel free to continue typing in questions, and we will get through as many as we can. The first question I believe it was for Jean Paul, can you please explain what LTI stands for? Or what it consists of?
Jean-Paul Rodrigue
I already provided a link to a detailed webpage which provides the explanation. But just to summarize the LTI is a measure that has been done on a fairly regular basis and by interviewing managers across the world and it's a component that measures and that includes several variables including customs, paperwork within a specific country. It gets done on a regular basis and it is good. Some kind of a basic measure we can use to compare countries around the world based upon the logistic performance. But it's been also criticized because what happens countrywide is not what happens citywide obviously.
Jennifer Symoun
If you can explain how we need the LTI and what will be the difference between the KPI and LTI?
Jean-Paul Rodrigue
Key performance index is KPI. Let's look at something which was globally available before we start with the LTI because it was available. You have to look at deliveries, congestion level, how efficient is the consolation process. There is a question about how we can measure at the metropolitan level the effectiveness of freight distribution systems and also how much time a truck spends double parked in Manhattan. That would be a KPI. People interested in measures, they want to assess that more efficiently, and most of the people involved in this are trying to more or less successfully, I must say.
Jennifer Symoun
Thank you. I know you also typed in for this but if you could briefly explain dual freight cities?
Jean-Paul Rodrigue
We posted a couple of photos that characterize passenger transportation systems for metropolitan areas in developing countries that have the latest technology available and the modern freight distribution system. And modern warehouses and at the same time we have the whole informal freight distribution system. And from a different origin and destination and supply smaller owner operator shops and that's what I mean by dualism. All we don't have that much because most of the freight distribution is the formal registered company who abide by rules and regulations. That is much less the case. That is what I mean by dualism.
Jennifer Symoun
Do cities like London and Paris function as gateway cities for Europe?
Jean-Paul Rodrigue
Most of my work is maritime shipping and terminal operations. I see a huge variety of extent or market area gateways and go to talk to Paris and London. Paris is mostly a gateway for France. That is most of the gateway distribution. Freight distribution in England itself is to the London metropolitan area. Obviously LA and the freight going to LA is bound to the region but also is bound to long-distance areas. It is by large depending on which gateway you are looking at.
Jennifer Symoun
Thank you. Christopher, you already addressed the two questions at the end of your presentation so Miguel, I will move on to a question for you. Do you really think that the pick-up/drop-off can be effective? When the good is ordered, I believe the consumer expects it to be delivered to his address. How about the extra cost associated to the consumer side if he has to go pick up?
Miguel Jaller
Yes, that's a good question. One of the issues is that most buildings have a lot of people working in both locations. Those are good specific locations that you work at in the building, and there are folks from the building. You can select that delivery point. You're not incurring any extra cost by going there. What I am talking about is from pickup and drop-off points for businesses, most people don't have the risk of the establishment side. What can we do to improve delivery of goods, not mostly on the private goods size but both will be the same answer. If there's nobody there you will not walk extra miles or go extra places. You will pick it up when you are on your way home.
Jennifer Symoun
Thank you. Another question for Miguel: What impact does this off-hour delivery with distribution channels have on transportation cost?
Miguel Jaller
From our pilot tests, transportation costs will be lower. You don't have to deal with congestion. You don't have to deal with parking tickets at night. You can find parking at the establishments you are trying to deliver to. So the transportation costs will be lower. However, not all the companies will be able to do it. There is a break point when it is cheaper for the carrier to switch their operations to the night. If you cannot switch to many customers to the night, having both day and night operations will increase your cost. But the transportation costs during the night are lower.
Jennifer Symoun
Here is a question that I will put out for all presenters. Concerning lack of space: this might suggest possible revisions to building-approval regulations to require minimum cargo storage space, similar to requirements for minimum numbers of parking spaces. Does anybody have any thoughts on that?
Miguel Jaller
We are trying to advocate for regulation in that sense. However most of the cities in Europe were built 100+ years ago were you cannot actually go in now and do those type of developments. But for new developments yes it has been and we are trying to do that.
Jennifer Symoun
Anybody else? All right. Another question thatI will put out to everybody, decades ago, Chicago and possibly New York had underground freight rail tracks. Do you see any value in trying to resurrect the systems?
Jean-Paul Rodrigue
I could say something about that. The work of my colleagues in Europe which have looked at that case and the use of public transit system for distribution and all of them have one thing in common. They all went bankrupt. At this point, public transit system and underground freight trains are very difficult to integrate into some form of city logistics. Eventually we might develop something more efficient but at this point it does not seem to be cost effective. Because you have too many break loads, you have to break down and then reassemble; maybe Miguel has something more to add about this but from what we have seen so far it does not seem to be working. I have not seen any successful implementation of undergrounds.
Jennifer Symoun
I don't see any other questions typed in. I will give one last chance if anybody does want to ask a question over the phone.
Operator
There are no questions over the phone.
Jennifer
Thank you all for attending today's seminar. The recorded version of this event will be available within the next few weeks on the Talking Freight website. The next seminar will be held on November 20. More information about the topic of this seminar and a link to register will be available soon. I will send a notice out through the Freight Planning LISTSERV once it is available. I encourage you to join the Freight Planning LISTSERV if you have not already done so. Enjoy the rest of your day!
