Industry Cluster Opportunity Analysis
Kick-off Workshop
TDL Cluster
Industry Trends
January 2009
ViTAL Economy Alliance
Steve Martin - Steve_Martin@InterVISTAS.us
Rob Beynon - Rob_Beynon@InterVISTAS.com
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©2008 ViTAL Economy, Inc.
Trade and the Global Economy
The proportion of the world economy related to trade has
steadily increased in recent years.
Trade drives much of freight transportation
Trade as a % of World GDP
International Trade
Source – World Bank.
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Total
©2008 ViTAL Economy, Inc.
Growth of freight ton-miles
Freight ton-miles is a standard measure for comparing scale of
activity. This index shows relative growth not total tons.
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©2008 ViTAL Economy, Inc.
Since the 1980s, Rail Rates Dropped
(after adjustment for inflation)
While rail
rates are
generally
lower,
they
increased
in the last
decade.
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©2008 ViTAL Economy, Inc.
Inland Marine Transport Remains
Important and Extensive
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©2008 ViTAL Economy, Inc.
Panama Canal Expansion
Panama Canal expansion will allow larger container ships to reach
US Gulf ports from Asia, increasing the potential importance of
Mississippi waterways.
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©2008 ViTAL Economy, Inc.
Container Ships Keep Growing
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©2008 ViTAL Economy, Inc.
Connect SI
Readiness Assessment
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©2008 ViTAL Economy, Inc.
Logistics, Transportation & Distribution: Overview
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Globalization and the Ten Flatteners open substantial doorways
Trends to watch for include:
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Logistics and transportation is an exploding global market opportunity due
to shifts in supply-chain management
Work has begun on doubling the capacity of the Panama Canal — this
$5.5B project will provide access to wider ships to the East Coast and
Texas/Louisiana harbors to feed the Trans-Mexican-Canadian
superhighway with Chinese goods
Due to capacity constraints, security risks and weather vulnerability at
North American coastal ports, trans-loading/intermodal facilities enable
the effective use of smaller ships via inland waterways
The NAFTA Super-highway is a venture unlike any previous highway
construction project — it is actually a daisy chain of dozens of corridors
and coordinated projects that are expected to stretch out for several
decades, cost $100’s billions and end up radically reconfiguring not only
the physical landscape of these U.S., but our political and economic
landscapes as well — Kelly Taylor, 8/06 “New American”
Sources: Varied (see the rest of this Section); US Department of Commerce, Menlo Worldwide, Plunkett Research, Ltd.
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©2008 ViTAL Economy, Inc.
Key Transportation Trends

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Transportation is one of the world's largest industries — sectors
range from taxis to trucks to airplanes, trains, ships, barges, pipelines,
warehouses and logistics services
In 2007, the U.S. Transportation Industry was about $400 billion

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Includes for-hire and not for-hire sectors, support & repair
Transportation directly employs about 4.5 million Americans — >3% of
U.S. economy
In the U.S. alone, total freight shipment volumes are expected to
increase by 70% between 1998 and 2020
Texas A&M University, analyzed traffic patterns and delays in 85 U.S.
major metropolitan areas

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Total annual cost of traffic congestion in these cities was $63 billion
3.7 billion hours of traffic delay and 2.3 billion gallons of fuel consumed by
delays
Well-positioned rural regions have a strategic advantage
in becoming a “traffic-free” hub
Source: U.S Bureau of Economic Analysis, U.S. Department of Transportation
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©2008 ViTAL Economy, Inc.
The World and Southern Illinois: Rail
From a regional network
…
•
•
… to a North American one
When originally built in 1850’s, it’s
goal was to connect Chicago with
the Mississippi
Modern rail is truly transcontinental, triangulating major
seaports
SI is now the center of a rail network stretching to the Pacific, Atlantic and Gulf of Mexico
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©2008 ViTAL Economy, Inc.
Container-On-Barge via Inland Waterways

Increasing sea container numbers, lack
of U.S. truckers, cost of fuel among the
factors driving containers to barges

This creates SI Mississippi and Ohio
River terminal opportunities

Container on barge is developing on
the Mississippi (Houston-Memphis) and
will expand

SI centrally located on
the Mississippi & Ohio
River Systems

Barges are less expensive because a
barge can move 45 full-sized sea
containers
These rivers have been key
transportation systems for over 300
years
A ton of cargo can be moved 514 miles by barge on a gallon of fuel as compared to
moving that same ton only 60 miles by truck or 202 miles by train
Source: Transportation for Illinois Coalition Press Release, Investment needed in Upper Mississippi-Illinois waterway for economic
growth and jobs. September 15, 2006
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©2008 ViTAL Economy, Inc.
The Rhine as a Comparison
Like the Mississippi, the Rhine
stretches from ocean ports to the
Continent’s interior

Rhine River container traffic
increased from 10,000 units in
1975 to 2.3 million units in 2003

Container barges travel as far
as Switzerland

Cost-of-labor favors barge over
truck; albeit somewhat slower
The Swiss Rhine Container Terminal
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©2008 ViTAL Economy, Inc.
SI Has Significant Aviation Infrastructure

Southern Illinois aviation infrastructure includes:

Three airports with instrument landing systems and runways over 6,000 ft

Nationally acknowledged SIU School of Transportation

Including Aviation Management and Technology

Planned new Transportation Education Centre (TEC) at Southern Illinois Airport

U.S. Transportation Command logistics specialist pool at Scott Air Force Base, an
SI neighbor — major “information exhaust” opportunity
SI Airports have capacity to accept large, jet aircraft & air-taxi service
Airport
Largest
Runway
ILS
(Instrument
Landing System)
Airframe/
Power Plant
Services
Scheduled
Passenger
Services
Mt. Vernon
6500 x 150 ft
YES
YES
Not now
Southern Illinois
6500 x 100 ft
YES
YES
Not now
Williamson County
8000 x 150 ft
YES
YES
YES
Two major SI airports located near interstate highway and rail
junctions, create the possibility of intermodal freight
Source: airnav.com
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©2008 ViTAL Economy, Inc.
Warehousing & Distribution: Trade Growth Area

Transportation and warehousing
continues to grow, supporting
international trade

Distribution Centre services include:
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Between 2004 and 2014, the U.S.
economy will add half a million
transportation jobs

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The number of distribution centers
is increasing
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A typical center has over
200,000 square feet, part of an
international chain, focused on
key market sectors, and offers
value-added services
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Pick & pack
Consolidation
Customer system order processing
Returns processing
Quality inspection
Assembly
Damaged returns management
Exporting packing & order processing
Bar code processing
Labeling
EDI services
Kit assembly
Sub-assembly
Build to order
Facility management
Transportation management
SI is situated in the population centre of the U.S., near where FedEx and UPS both
decided to establish their national hubs — Distribution is an investment opportunity
Source: U.S. Department of Transportation
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©2008 ViTAL Economy, Inc.
Logistics: Unmet Opportunity
Illinois in Relationship to Nearby 50 Fastest Growing U.S. Cities

Growth of U.S.
population for 2006
= 0.9%

California, Texas,
Florida contained
most of the fastest
growing centers in
the U.S.

Several centers
within a day’s drive
of SI included in 50
fastest-growing
centers for 20002006 at growth rates
of 12% to 98% (e.g.,
Red Stars)
Source: U.S. Census Bureau and Map Point
Note: Map shows calculated 8 hour driving time from SI
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©2008 ViTAL Economy, Inc.
Logistics, Transportation & Distribution: Implications
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Dramatic reductions in shipping costs via containerization has
enabled globalization of manufacturing
Distribution is conducted close to end markets — Southern Illinois
is near the population center of the U.S.
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Distribution requires good rail and truck connections
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124 million people reachable within 12-hour drive
Trade and distribution is projected to grow rapidly
Will grow rapidly in the Midwest because of its central location
Southern Illinois sits on the ultimate U.S. logistics sweet-spot, the
intersection of major North-South and East-West trade routes:

Will these bypass SI or will the Region be a substantial player?
Through CN (was Canadian National Railway), SI can
potentially interact with three U.S. and two Canadian coasts
SI aviation assets have the potential of serving as a niche market
player within a mid-America Intermodal Logistics strategy
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©2008 ViTAL Economy, Inc.
Logistics, Transportation & Distribution: Opportunities

Globalization has increased importance of transportation and logistics

SI is currently below national and state averages

CN has transformed the Illinois Central from a North-South operation to a strong
East-West orientation serving three North American coasts via one railroad
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SI has strategic geographic location especially to Eastern and Central U.S.
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Distribution centers favor center-of-population location
Multimodal transport: Interstate/Rail/Barge
Opportunities:
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SI global reach potential has significantly increased
For multimodal/transload facilities — address 10 million TEU/year East-West deficit
To attract distribution centers
Range in complexity from simple distribution, to assembly and customization
Explore niche-market opportunities for aviation assets
With the dramatic increase in the cost of fuel:
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Waterborne traffic becoming increasingly more attractive
Key to keeping Illinois grains competitive in the world market
Inland waterways re-opening as a major logics solution for East-West port congestion

SI infrastructure contains HUB facilities for ALL forms of transportation and distribution
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©2008 ViTAL Economy, Inc.