September 13, 2004

Transportation, distribution the road to state's economic future

By Martin C. Jischke and William D. Friedman

There's an old story about a frustrated border guard who every day must search a man who comes across the border with a wheelbarrow full of sand. The guard is certain the man is a smuggler but can never catch him with the goods.

Finally, it's the guard's last day on the job before he retires. He tells the man with the wheelbarrow he has to know what he's been smuggling all these many years.

"Wheelbarrows," the man replies.

The point of the story is that sometimes the best way to hide something is right out in the open. So those aren't just semi trucks on the road or trains on the rails you see from the windows of your car. Trucks, trains and ships cumulatively equal transportation-distribution-logistics (TDL), an important highway to Indiana's economic future. Because as Indiana competes with other states for an economic future, we have competitive advantages in the huge and growing TDL industry. We are at the point in Indiana now when we need to move from enjoying TDL to exploiting it.

Our first advantage is our central location. Manufactured goods – and agricultural products – still must make their way from Indiana and the rest of the industrial Midwest to other locations. Here in Indiana, our manufacturing and agricultural sectors both require lots of TDL, not only for outputs, such as products and crops, but also for inputs, such as fertilizer and parts.

Imported goods, which are growing, must find their way from (mainly) West Coast ports into stores all over the nation. Indiana – located within a day's drive of 60 percent of the U.S. population – is a prime location for distribution centers. TDL, in short, is critical to every other industry. A product doesn't serve its purpose until it reaches the end user. And how fast and efficiently you deliver products makes a huge difference in profits – time is money.

Indiana's second competitive advantage is a solid transportation infrastructure of highways, rail and three ports. Think of Indianapolis as the hub. Think I-65, which runs the whole length of the state – from Gary to New Albany; I-70, which transverses the heart of Indiana, from Richmond to Terre Haute; and I-80-90 in the north and I-64 in the south.

Consider that Indiana has three ports – two on the Ohio River, one in Jeffersonville and one in Mt. Vernon and one on Lake Michigan in Portage. Then, think of what the logistics professionals call "intermodal" transportation, which combines more than one mode, such as ship and train, for moving freight.

Finally, we have a third competitive advantage – Indiana's colleges and universities. We have the intellectual capital to develop plans, policy and the sophisticated software increasingly used for logistics planning. We can teach TDL personnel at many levels of our university and college system – from Purdue to Indiana University to the University of Indianapolis and Ivy Tech State College.

The stakes are big. Nationally, TDL is a trillion dollar annual industry. Michael Huerta, senior vice president and managing director of transportation systems and services for Affiliated Computer Services, was the keynote speaker at the second TDL summit in Indianapolis on Sept. 14. In 2002 testimony before the U.S. Senate, he said freight traffic within U.S. borders will increase 100 percent by 2020. Foreign trade moving through American ports will increase 187 percent, with containerized cargo increasing 350 percent.

On the income side of the national TDL ledger, Huerta testified that U.S. freight railroads contribute more than $14 billion per year to the economy in wages and benefits to about 200,000 employees, as well as billions of dollars of purchases and supplies. U.S. ports generate 13 million jobs and annually contribute more than $743 billion to the gross domestic product and $200 billion in federal, state and local taxes.

A recent Purdue study found that TDL jobs are 130 percent above retail in wages and only 13 percent below manufacturing in wages, and TDL wages are keeping pace with inflation and manufacturing wages.

So there is both need and opportunity here. What we have not had in Indiana until recently was a statewide approach to TDL that included all the stakeholders. We began to get a better picture when the General Assembly in 2003 charged the Ports of Indiana with getting the players together. The Ports of Indiana approached Purdue early on, and we were the co-hosts for the first statewide TDL summit last September.

The 2002 Battelle Institute study, commissioned by the Central Indiana Corporate Partnership, proposed an economic future for Indiana based on four pillars: the life sciences, advanced manufacturing, information technology and TDL.

We've made good progress putting into place the intellectual and organizational foundations of the first three pillars with coordinated public-private organizational efforts. It's time to tackle TDL and put the thought and structures in place so it can play a solid role in the economic future of Indiana.

The second TDL Summit was a good place for us to grow our ideas for the future. We need to look at regional needs of TDL providers around the state. The state needs input on TDL policy, such as the changes that are coming about in globalization and outsourcing, and what the ramifications for delivery and distribution of goods are and will be. The state needs technical evaluation and planning assistance in TDL.

Now is the time for Indiana to get on the TDL road – and rails and ports – to the economic future.

Martin C. Jischke is president of Purdue University. William D. Friedman is executive director of the Ports of Indiana.

To the News Service home page