Kriebel, Wesley R.

Soslow, Neil G.

English

Research Papers in Economics

TRANSPORTATION ISSUES AFFECTING
PRODUCTIVITY IN THE FOOD INDUSTRY
Transportation
Neil G. Soslow and Wesley R. Kriebel
Director of Transportation
National Commission on Productivity and Work Quality
and
Prcfessor, Agricultural Economics Extension
Pennsylvania State University
The “food industry” is one of the
largest and most complex sectors in the
American economy. It is, in fact, a
series of interdependent and compl~men-
tary industries which encompass the
functions of growing, processing and
distributing products from the farm to
ultimate consumer. Transportation
provides the link between these in-
dustries and functions.
The “transportation industry” is
also a complex sector of our economy
and is comprised of a number of in-
dustries. It is both intercity and
intracity. Intercity domestic tran-
sportation can be classified in six
categories: railroads, trucks, Great
Lakes shipping, rivers and canals ship-
ping, pipelines and air. Food and food
products use all modes in significant
quantities except for pipelines and
air, although air freight is indispen-
sable for a limited number of high
value, perishable commodities in addi-
tion to these modes, food moves by ocean
shipping in import and export traffic
and in connecting the mainland with
Alaska and Hawaii. Intracity transporta-
tion tends to follow the dictum that
marketing channels grow more complex
the closer the product moves to the
point of consumption.
Individual modes themselves are not
always homogeneous industries. In the
trucking industry, for example, vast
differences exist among the regulated
common carriers, regulated contract
carriers, exempt agricultural haulers
and private fleets, each of which serves
the food industry.
Productivity in transportation, as
in other industries, has historically
been measured in terms of labor--that is,
output per manhour. Although labor prod-
uctivity in transportation must be
viewed in terms of shifts in commodities
transported, changes in service character-
istics, technological innovations,
capital investment trends, institutional
and managerial changes, etc. In practice,
output per manhour measures are of
marginal use in evaluating the perform-
ance of food transportation.
Service Goals
It is useful to delineate some of
the basic concerns and desires of both
carriers and shippers/receivers in the
provision of transport services. The
carriers strive to achieve high equip-
ment utilization and reasonable rates
for services provided. Equipment
utilization is improved when demand is
fairly constant (that is, limited
seasonality) , when cars, trucks or
barges are moved expeditiously by the
carriers and when release of equipment
by shippers/receivers is prompt. Reason-
able rates means covering variable costs
at the very minimum.
Good transportation to shippers/
receivers means reliable service, avail-
ability of equipment on demand, and
Journal of Food Distribution Research July 75/page 13reasonable rates. Many shippers seem
to be more interested in reliability of
service than in speed of delivery.
Knowing a shipment will arrive 99 per-
cent of the time in 5 days is much more
important than knowing it may arrive 40
p;rcent of the time in 4 days. Ship-
pers also want to have equipment made
available to them when they need it.
This means the right type and number
of pieces in clean, operational condi-
tion. Finally, shippers want rates
that are reasonable for the service
provided.
The movement of fresh fruits and
vegetables provides an illuminating
case study of the difficulty in achiev-
ing an equilibrium between the desires
of carriers and shipper/receivers. The
railroads are the largest single hauler
of perishables between California and
the Northeast.
Perishables are normally shipped
in mechanical refrigerator cars that
today cost in excess of $50,000 each
and the average car carries 10 to 12
loads per year. A number of railroads
are usually needed to handle each ship-
ment. Some railroads do not handle cars
as expedj.tiously as others and some
shippers/receivers hold cars longer than
is necessary. Demand is heavy for
several months and low during the bal-
ance of the year. In addition, most
would agree that perishable rates are
too low. All of these factors ad-
versely affect the rate of return on in-
vestment in these specialized rail cars.
The railroads have not purchased addi-
tional or replacement refrigerator cars
in several years and, under present
conditions, there is no reason to expect
a change in this policy.
Shippers and receivers are faced
with unreliable service and inadequate
levels of equipment to meet peak demands.
Although generally willing to pay higher
rates, shippers and receivers want
guarantees of reliable delivery and
sufficient equipment to meet demand.
The financial difficulties of the rail-
roads, generally poor condition of
tracks, and an industry structure which
requires cooperation and interdependence
in most movements makes such guarantees
almost impossible to obtain.
Recommended Food Industry Initiatives
In spite of this relatively bleak
picture, there are a number of areas
where the food industry should encourage
improved transportation service and, in
several cases, where the industry can
take the lead in implementing change.
The food industry can be effective in
the following areas:
- modularization
- containerization and intermodalism
- long haul and urban distribution
interface
- computer use for problem solving
Modularization refers to the use of
standardized containers in food distri-
bution. It is estimated that the fruit
and vegetable sector of the food industry
in the United States uses 2,400 dif-
ferent container sizes for both packag-
ing and shipping compared to Switzerland’s
use of only 4 related carton sizes to
create a standard palletized shipping
module. A limited number of shipping
modules that can efficiently use ship-
ping container space and that can be
easily handled by mechanical means ;ill
result in considerably improved trans-
portation and warehouse productivity.
This issue is one’that the food industry
can take the lead in.
A second area is containerization
and intermodalism. Containerization
July 75/page 14 Journal of Food Distribution Researchinvolves the use of a container or
trailer as the transportation unit;
intermodalism involves the use of two
or more modes of transportation to
complete a given shipment. Containers
and trailers can be shipped by ~ruck,
rail, water and air. Intermodalism
allows the use of trucks where they are
most efficient (pick up, delivery and
short haul) in combination with rail,
water or air in long-haul where they
are most efficient. Containerization
allows the shipper/receiver to use the
most effective transportation system
without necessitating an unloading and
loading of the product as transportation
modes are changed.
The long haul and urban distribution
interface is a third area of transporta-
tion concern to the food industry.
Movement can frequently be scheduled
efficiently in the long haul portion
only to be faced with the problems in
urban distribution of severe traffic
congestion, pollution, pilferage, prim-
itive handling techniques, duplication
of services, small shipments, congestion
at warehouse receiving docks, etc.
These distribution inefficiencies
result in higher costs that affect every
consumer. Many of these problems can be
resolved and greater research effort
should be expended in this direction.
A fourth area is greater use of
the computer for problem solving. Most
computer installations were intended to
be used primarily for computation and
to some extent for control purposes
(traffic flows, transport expense,
etc.) and to communicate that informa-
tion where it is needed. The early
data processing emphasis on education
of general and administrative expenses
has been realized. Advances in
computer technology and program
development now give transportation and
distribution executives access to a
variety of sophisticated management and
analytical systems to examine and
evaluate route scheduling, site selec-
tion, distribution requirements planning,
freight rates, and other logistical
alternatives. Greater computer use in
solving transportation problems promises
significant productivity improvement in
the food industry.
In summary, the four areas discussed
have great potential for improving
transportation productivity in the food
industry and deserve more concentrated
efforts by the industry. The net results
will be improved service and lower costs
to consumers.
******
Journal of Food Distribution Research July 75/page 15

TRANSPORTATION ISSUES AFFECTING PRODUCTIVITY IN THE FOOD INDUSTRY: TRANSPORTATION

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