A customer walks into a store to purchase clothes or groceries. A manufacturer pulls raw materials off its inventory shelves for inclusion in an end product. A driver pulls into a gas station to fill up for the trip home after a long day at work.
All happen millions of times per day, yet few people understand the complex processes businesses undertake to make everyday goods available to the masses.
“When I give a presentation, I ask people, ‘when you get into a grocery store and see something on the shelf, where did the stuff come from?’ They usually answer, ‘from the back room,’” said Rick Blasgen, president and CEO of the Council of Supply Chain Management Professionals (CSCMP), a national organization for professionals working in the supply chain and logistics fields.
The fact is, product just does not end up on store shelves by happenstance. Many people, even hundreds in some cases, are involved in the logistics of moving goods. According to a 2011 study conducted for CSCMP, $1.3 trillion is spent annually on logistics, which represents only a small portion of the overall supply chain.
To understand how logistics impacts the movement of goods, it’s important to understand what logistics is. CSCMP defines it as the “part of supply chain management that plans, implements, and controls the efficient, effective forward, and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.”
Typically, this includes activities like inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management and supply/demand planning.
The movement of goods can occur by truck, train or even water, and in some cases, a combination of the three, referred to as intermodal shipping.
“When oil prices reached their high and diesel prices skyrocketed, people looked to the rails,” Blasgen said. “One rail car can carry three to four truckloads of product. The railroads have gotten a lot better at providing service and getting goods to where they need to go on time.”
Agricultural and food products, chemicals, coal, paper, lumber and cars are just some of the items moved on the rails. According to the U.S. Department of Commerce, every railroad job supports 4.5 additional jobs in the economy. There are over 180,000 employees working the rails as of April, the Association of American Railroads (AAR) reported.
AAR said that the average train can carry the freight of several hundred trucks. In 2012, for example, about 1.7 million carloads of agricultural products and 2.2 million carloads of chemicals were transported via the rails.
Goods can also be shipped via water. According to the American Waterways Operators, a national trade association representing the tugboat, towboat and barge industry, 20 percent of the U.S. coal and 60 percent of the nation’s grain exports are moved over water. Barges also move the majority of home heating oil and gasoline for New England, bringing it into ports where it is then shipped via truck to its final destination.
There are more than 28,000 barges operating in the U.S. moving an estimated 800 million tons of raw materials and finished goods each year across a 25,000-mile waterway system. A typical inland barge has a capacity that is 15 times greater than a rail car and 60 times greater than a semitrailer truck.
Commodities typically moved over water include petroleum, coal, food and farm products, chemicals and waste.
In Connecticut, there is also another entry and exit point for freight — Bradley Airport. Bradley ranks 33rd in the nation among 127 airports in yearly cargo handled. It is the second largest cargo handler among New England airports behind only Logan Airport in Boston, according to Kevin Dillon, executive director of the Connecticut Airport Authority, which manages Bradley.
“Cargo is a very important business for Bradley,” he said. “Not that it returns a lot in terms of [direct] financial impact … but cargo is so important to us because it is a big generator of employment.”
Between 20 and 25 freight forwarders work out of Bradley, including package delivery giants UPS and Federal Express. In 2012, more than 244 million pounds of cargo moved through Bradley, although it’s difficult to say how much originated in or was destined for locations in Connecticut, Dillon said.
Regardless, though, the air cargo business is important enough for Bradley that the Airport Authority is planning a “Freight Forwarders Familiarization” event in September to, as Dillon put it, “get freight forwarders up to speed in terms of what Bradley has to offer.”
“I believe there is a lot more opportunity in this market,” Dillon said. “As the Airport Authority, we have the ability to market the airport.”
In addition to cargo planes, Dillon said there is great opportunity to expand Bradley’s cargo reach through “belly cargo.” This is cargo, generally smaller packages, that is flown on commercial aircraft. This service has received a big bump in available capacity thanks to American Airlines recent decision to add non-stop service to Los Angeles.
“That will give us the ability to fly cargo directly to the West Coast,” Dillon said.
The Airport Authority is also looking at adding “appropriate refrigeration” for temperature-sensitive cargo.
“That’s why we want to sit down with those freight forwarders [in September],” Dillon said, “to see what services they need and what we need to do to get their business.”
But what barges, railroads and even planes can’t do is deliver product the “final mile.” For that, businesses still rely on trucks. In Connecticut, there were 60,270 people employed by the trucking industry in 2011, according to the American Transportation Research Institute (ATRI). There were 6,880 trucking companies in the state in 2012, the majority of them small, locally owned businesses, ATRI said.
ATRI also noted that a five-axle tractor-trailer paid Connecticut an average of $9,954 in state highway user fees as of January 2013, on top of $8,906 in federal user fees and taxes. In all, the trucking industry in Connecticut paid $289 million in federal and state taxes in 2009, representing 31 percent of all Connecticut highway use taxes in that year despite accounting for only 7 percent of all vehicle miles traveled in the state.
“I like to repeat what Tom Donahue (former president and CEO of the American Trucking Associations and current president and CEO of the U.S. Chamber of Commerce) once said: ‘It would be a good thing if the sides of all trucks in this country were glass so people could see what’s inside them so they know how important trucks are,’” said Michael Riley, president of the Motor Transport Association of Connecticut, which represents trucking interests in the state.
Riley said that the state brings in two trucks worth of goods for every one that leaves. In 2010, 87 percent of freight was moved by truck in Connecticut, and 86 percent of Connecticut communities depend exclusively on trucks to move their goods, ATRI said.
Managing this movement of goods takes manpower, and in some cases, specialized training. A logistics professional can make upwards of $60,000 per year just out of college, Blasgen said.
Because logistics can involve people from many different areas of an organization, pinpointing an exact salary is difficult, but the U.S. Bureau of Labor Statistics reports that a transportation professional in Connecticut made an average of $24.33 per hour, as of March of this year. That is relatively unchanged from three years ago.
BLS reports that 294,400 people worked in transportation in the state as of March. This includes all job categories related to transportation, including rail and air.
