CSCMP's Supply Chain Quarterly
October 24, 2018

At a crossroads

The United States has a choice: Invest now in infrastructure and make it a powerful tool for development, or ignore it and watch our roads, bridges, and ports become a roadblock to business success.

Infrastructure provides American businesses with opportunities to grow and compete, but at the same time, it can be a risk, a limitation, or even a roadblock.

When it fails—a bridge collapses, a water main breaks, there is a blackout, or the Internet is unavailable—there is an acute awareness of the importance of infrastructure to business and the economy. And yet, in the United States, there is a lack of ongoing, sustained attention to maintaining, modernizing, and expanding infrastructure in general—and transportation infrastructure in particular.

The need for greater investment in transportation will become apparent as the economy recovers and demands for goods and services grow. Supply chain professionals will find it harder to move more and more goods, information, and people through the transportation system. With increased economic activity will come congestion, which translates to more risk, more unpredictability, and more cost.

The recovery won't be the only source of economic growth. An increase in exports will also add to the amount of goods moving through our supply chains.

In January, Tom Donohue, the president and CEO of the U.S. Chamber of Commerce, called for a doubling of U.S. exports within five years; that is a goal that President Obama also embraced in his State of the Union address. As the U.S. economy increases its focus on exporting to the 95 percent of consumers who live beyond U.S. borders, more and more goods will have to squeeze through the supply chain.

The rationale for expanding exports is clear: We cannot rely on domestic consumption (private or public) to generate more demand for the goods and services we produce. The American consumer has been cutting back and directing more income toward savings, and the federal government faces an unsustainable budget deficit equivalent to roughly 10 percent of U.S. gross domestic product (GDP) this year.

But is the U.S. transportation network ready for a doubling of exports? The answer clearly is no. There is not enough capacity to safely, quickly, reliably, and cost-effectively move goods to markets at that level of demand. In fact, before the recession, every transportation mode except the inland waterways system was already reaching its capacity limits in hot spots around the country.

Longer term, there is no plan for a coherent, rational, balanced transportation system that will support the economic activity associated with both an increase in U.S. population of 100 million by 2050 and increased exports. Instead, the Obama administration is overwhelmingly focused on neighborhoodlevel transportation challenges—a strategy with popular appeal—even as global economic competition gets more heated. Politically it does make sense, because "freight doesn't vote," and it is difficult to put a compelling face on the needs of supply chains.

A better argument
The arguments that infrastructure proponents have used for years have not resulted in action by Washington. Statements such as, "Lack of attention to transportation has real ramifications for America's competitiveness and economic health"; "Highway congestion in metropolitan areas is costing Americans $87 billion in lost productivity every year"; or "Infrastructure investment creates and sustains jobs and drives local economic growth" aren't enough to get transportation infrastructure on any list of priorities, much less near the top.

The real challenge is making those statements come alive by showing when and where U.S. businesses are hampered by the condition and performance of its transportation system. Legislators, regulators, and policy makers are asking for credible, evidence- based research that makes abundantly clear the relationship between infrastructure and the economy. In response, the Chamber is developing Infrastructure Productivity Indexes that together will:

  • Define what businesses need from infrastructure in order to grow and succeed (as opposed to what government thinks is important).
  • Look across categories of infrastructure and consider their relationships.
  • Correlate infrastructure performance to economic growth. Historically, calculations have focused on expenditures, jobs, or local economic development.

The indexes will also show that infrastructure doesn't have to be a problem. Rather, it can be a powerful tool for economic development and offer a competitive advantage to U.S. business. (For more information on the project, see the sidebar on "How you can help.")

In the near term, the project's findings will be used to shape legislation pending in Congress. In the future, these indexes will help the Chamber write the "business plan" for infrastructure—making recommendations on how to drive investment priorities, remove barriers to getting projects done, and boost public and private investment levels.

For too long, the United States has failed to make infrastructure a priority, relying instead on the investments made decades ago. As a result, our transportation network is deteriorating and will begin to buckle under the economic recovery. Supply chain professionals can help the country move toward a comprehensive plan to build, maintain, and fund a 21st-century infrastructure. There is no more time for delay.

Janet Kavinoky is the director of transportation infrastructure at the U.S. Chamber of Commerce and executive director of the Chamber-led Americans For Transportation Mobility Coalition.

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