[Figure 2] Self-propelled river ship used on European rivers
(Photo: Freek van Arkel; courtesy Port of Rotterdam)
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[Figure 3] Containers on self-propelled river ships on Yangtze River in China
(Photo: courtesy of the author)
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[Figure 4] Barges being pushed by towboat; barges can easily hold containers
(Photo: Wikimedia)
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In the central United States, there is a magnificent stretch of waterway that is ready and available to be put to greater use: the Mississippi River between New Orleans, Louisiana, and St. Louis, Missouri. This unique segment of open river has no locks or dams, and it is ice-free all year round.
This presents opportunities to move ocean containers from Asia to the U.S. Midwest entirely by water. From ports in Asia, containers could travel through the Panama Canal to the Port of New Orleans, and then via river vessels up the Mississippi to the St. Louis region for further distribution into the Midwest (Figure 1).
North of St. Louis, the river—like most other waterways in the U.S.—is full of locks and dams, which restricts the size of the tows and vessels and complicates transit time and the predictability of shipment deliveries. For these reasons, the New Orleans-to-St. Louis segment is ideal for getting container activity started on the waterways.
This route offers easy access to a large consumer market as well as an opportunity to lower costs, diversify and manage risk, and build a supply chain network that matches, and takes advantage of, the actual supply chain requirements of their products. It's also greener than other modes of transportation. The New Orleans-to-St. Louis portion of the river is already a major traffic lane for bulk commodities carried by barge. Much of that volume consists of agricultural products; in fact, the St. Louis region is often referred to as the "Agricultural Coast" of America.
Yet shippers of containerized cargo are not taking advantage of this option. Given all its advantages, why are shippers reluctant to make use of this tremendously underutilized resource? And what will it take to make the New Orleans-to-St. Louis stretch of the river a more attractive and viable route for both shippers and carriers of containerized cargo?
A "chicken or the egg" problemThere are several reasons container shippers have not embraced the Mississippi River route. One is that the transit time for this routing is longer than coming through West Coast ports and moving via intermodal rail to the Midwest.
Speed is often less important than people assume, however, and it turns out that many items do not require fast transit times and would be good candidates for using a river container service. For example, seasonal items generally are purchased well in advance of need, and products are received over time and held in storage until the season arrives. Another category is items having highly predictable demand. If a company can reliably sell one container's worth of an item per week, and it can reliably receive one container per week, then (if we ignore carrying cost) the in-transit time doesn't matter. Low-value items, particularly bulky ones, and project freight, which includes items that are accumulated and staged for specific projects, are also good candidates. Examples of the latter include construction material, machinery, and inventory for new manufacturing locations, distribution centers, or stores.
Another roadblock for shippers is the lack of service options. Other than a shuttle service between Baton Rouge and New Orleans, there is virtually no container service on the Mississippi River. At present, ocean container service from Asia to New Orleans also is limited. The containers that are arriving in New Orleans are primarily destined for the immediate South Central region and are matched with outbound containers from that region.
Clearly we have a "which came first, the chicken or the egg?" problem—in other words, a vicious cycle. Without regular, reliable service, shippers won't commit to moving their containers on the river. And without sufficient, guaranteed container volumes, carriers won't commit to providing service. The carriers also worry about imbalances between inbound and outbound containers. But this may not be a major problem, as the region is already generating international outbound containers, particularly of agricultural products, that could balance the inbound containers. These exports currently are going out of West Coast and East Coast ports and could instead be routed through New Orleans.
There is a way to break this cycle. What we need now is a consortium of shippers who are willing to commit to route sufficient volumes of inbound and outbound containers between New Orleans and the Midwest. That will prompt more ocean carriers to call on New Orleans, and more frequent and faster service will emerge. With enough demand, container service could quickly develop on the Mississippi.
Why should shippers be interested?It would be to shippers' benefit to support such a service. Arguably, the St. Louis region can serve as the natural gateway from the south for nine states: Minnesota, Wisconsin, Michigan, Ohio, Kentucky, Indiana, Illinois, Iowa, and Missouri. These nine states make up 20 percent of the U.S. population—a sizable and attractive market.
There are over 20 million 20-foot equivalent units (TEUs) entering the United States annually, with maybe 4 million of those destined for the nine-state region mentioned above. Even if just 5 percent of the containers bound for the Midwest were routed through New Orleans, that would be about 200,000 TEUs annually—enough to draw river and ocean carriers' interest. Considering that large river container ships hold approximately 500 TEUs, we are talking about 400 trips per year, or eight trips per week (Figures 2 and 3). In reality we would expect a mix of large, medium, and smaller river container ships, and the overall frequency of service would be higher. Alternatively, barges hold 72 TEUs, which equates to 2,800 barges per year, or 56 barges per week. These container barges could be combined with barges carrying bulk commodities in a tow (Figure 4).
The St. Louis region already offers a complete range of logistics infrastructure. In addition to the Mississippi River, the region has six Class I railroads, making it the third largest rail hub in the United States. Four interstate highways provide direct access in all directions. Other infrastructure advantages include two international cargo airports, readily available warehousing and distribution capacity, and industrial real estate of all types.
There are a number of other reasons an all-water route up the Mississippi would benefit companies that serve markets in the Midwest. They include:
Reduced transportation costs. For items where speed is not important, shippers would have the option of using a cheaper alternative. By matching the routing with the true delivery needs of the product being shipped, they would not have to pay for faster transit times when they don't actually need that kind of service.
Moving containers from the West Coast to the Midwest by rail requires one flatcar for every two forty-foot containers (or transloaded domestic containers), plus railroad tracks, all requiring capital investment and maintenance. Moving containers from New Orleans to the St. Louis region by the Mississippi River, by contrast, has lower underlying costs. This route requires only a barge or a small ship where all of the containers could be stacked on the vessel and secured. There are opportunities to move containers on existing barges and towboats where no modifications would be required, or on self-powered river ships designed for containers. In comparison to shipping through West and East Coast ports, there will be additional ocean miles to New Orleans, but the incremental ocean carrier rates are relatively small.
Since such a river service does not currently exist, all of the costs and benefits are unknown, but we can certainly expect the cost will drop as volumes increase.
Better management of risk. For shippers, an important responsibility is to manage and mitigate risk. Examples of such risks include labor problems at a key port or multiple ports, congestion in and around ports, weather and fires affecting crucial areas where operations are located, and flooding or freezing on rail routes.
Some supply chain risk can be managed with inventory, but it's also important to have multiple transportation options on an ongoing basis. For that reason, shippers need to have diversification and redundancies on the major transportation lanes, like Asia to the Midwest. The all-water route would help to provide that.
Re-optimization of networks. Supply chain infrastructure and distribution and logistics networks are changing. Networks are larger and more complex than ever before, with separate networks that overlay each other at different points and for different purposes. There are different types of facilities based on the physical size of products and frequency of demand: high-volume cross-docks and slow-moving inventory locations, import distribution centers and temperature-controlled warehouses, facilities designed for outbound delivery to distribution centers, to stores, to consumers, or to all of the above.
These ongoing changes mean that many companies will have to re-optimize their distribution networks in the future. Having alternative transportation routes available would help shippers to make the best network design decisions. In particular, it would allow shippers to match the various inbound speed requirements of a company's entire portfolio of products to the most cost-effective transportation options.
Greener transportation. There is growing interest in transportation alternatives that could reduce the need to build and maintain additional highways and bridges. By using an all-water route, which makes use of a naturally existing infrastructure that does not require significant ongoing maintenance like highways, bridges, and railroads do, shippers will have an opportunity to support the build-out of an environment-friendly, national infrastructure of inland waterways specifically for containers. With a growing population expected to lead to even greater infrastructure congestion in the future, expanding the use of the waterways will be a necessity in the coming decades.
What will it take? A group effortIf both shippers' and carriers' needs are met, container volumes could eventually grow significantly. But no single shipper could consistently provide enough volume to meet carriers' requirements. To get things started, we need a consortium of shippers who will, as a group, commit to diverting a sufficient number of containers from the West Coast to New Orleans. By sufficient, I mean two things: enough containers that the availability of ocean services from Asia to New Orleans will increase, and enough containers that Mississippi River service can be developed and sustainably supported.
The consortium of shippers could include a few large companies or a larger number of smaller companies. With their commitments in place, they could then begin to have serious discussions with ocean and river carriers to figure out how to make it work for all parties.
Multimodal transportation, however, involves many different stakeholders. (See the sidebar, below, for a list of organizations that have previously contributed to discussions about container service on the Mississippi.) In addition to shippers and carriers, other key players in this initiative would include the Port of New Orleans; America's Central Port, a container port in Granite City, Illinois, directly across the river from St. Louis; local container drayage companies; and freight forwarders.
But it won't happen without strong leadership. So, who is going to lead?
The answer may depend on who stands to benefit the most from an all-water container service to the Midwest. There are many candidates. Shippers certainly benefit from lower costs and a new alternative to manage risk. The St. Louis region has an opportunity to differentiate itself and enhance its position as a major logistics center. Barge companies have an opportunity to develop a new business adjacent to their current business. Entrepreneurs have an opportunity to create a container business for the U.S. waterways. Ocean carriers can view New Orleans as a potential new market opportunity. Getting containers on the riverways will satisfy the long-term desires of several governmental and industry groups. For appropriate trade groups, this could be a great strategic initiative. A leading management consulting firm may see this as an opportunity to make a big impact.
I think it would be difficult for shippers to provide the necessary leadership, unless one of our very largest shippers decides to take this on. More likely, it would be one of the other groups identified above. But I think for an all-water route to move forward, the critical next step will be for strong leadership to step forward. Regardless of who takes the lead, however, it will still be necessary for the many stakeholders to actively participate in and support the initiative.
