Economics Of Southern California’s Logistics Industry John Husing, Ph.D. John Husing, Ph.D. Economics & Politics, Inc. Economics & Politics, Inc.

Economics Of Southern Economics Of Southern California’s California’s

Logistics IndustryLogistics Industry

John Husing, Ph.D. John Husing, Ph.D.

Economics & Politics, Inc.Economics & Politics, Inc.

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

0

2

4

6

8

10

12

14

16

18

20

Source: Southern California Association of Governments

Exhibit 8.-Per Capita Income Rank, 1969-2003SCAG Rank of 17 Consolidated Metropolitan Areas

17th = worst

So. California’s Falling Economic Status Vs. So. California’s Falling Economic Status Vs. Other U.S. Multi-County AreasOther U.S. Multi-County Areas

11.6%17.5% 20.3%

27.6% 28.0% 29.8%34.9% 34.0%

62.1%

50.9%47.8% 47.4%

44.0%

37.0% 36.2% 35.2%

Imperial San Bernardino Riverside Los Angeles So. Calif. Ventura Orange San Diego

H.S. or Less BA or More

Source: 2005 American Community Survey, Cenus Bureau

Education: High School or Less v. BA or MorePersons 25 & Over, 2005

Key Labor Force Issue: Key Labor Force Issue: Adults Without A Single College ClassAdults Without A Single College Class

Path to Prosperity:Path to Prosperity:The Right Kind of JobsThe Right Kind of Jobs

Southern California Based

Blue Collar

Good Entry Level Pay

Defined Career Ladder

On the Job Learning

Tech Dependent

Sectors With Few Training Barriers To Sectors With Few Training Barriers To Beginning EmploymentBeginning Employment

Mining ($90,491)

Manufacturing ($48,397)

Logistics ($47,411)

Construction ($42,714)

Gaming ($29,785)

Retail Trade ($28,108)

Hotel/Motel ($24,108)

Agriculture ($23,474)

Eating & Drinking ($15,132)

Blue Collar

$1,284,396,426

$909,813,831

($118,523,490)

Construction LOGISTICS GROUP Manufacturing

Sources: CA Employment Development Department, U.S. Railroad Retirement Board, U.S. Bureau of Economic AnalysisU.S. Bureau of Economic Analysis, 2002 Economic Census, U.S. Census Bureau

Exhibit 16.-Change in Blue Collar PayrollsSouthern California (7-Counties), 2001-2005

Total Payroll Growth:Total Payroll Growth:Main Blue Collar SectorsMain Blue Collar Sectors

Manufacturing Jobs, 1990-2005Manufacturing Jobs, 1990-2005

Lost: 361,300 of 1,279,600 in 1990 = -28%

(84,500)(73,500)

(64,200)

(19,200)

7,600

24,00033,300 27,100

(13,500)(3,000)

(47,400)

(72,500)

(48,900)

(12,700)(13,900)

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: CA Employment Development Department

Exhibit 4.-Manufacturing Employment ChangeSouthern California, 1990-2005

China & India Now Allowing Their Entrepreneurs To Compete

Manufacturing May Grow Slowing … Manufacturing May Grow Slowing … BUTBUT

Training Will Still Be In Great DemandTraining Will Still Be In Great Demand

• Semi-Skilled Replace Retiring Skilled Baby BoomersSemi-Skilled Replace Retiring Skilled Baby Boomers

• Entry Level Replace Semi-Skilled Moving UpEntry Level Replace Semi-Skilled Moving Up

• New Entry Level WorkersNew Entry Level Workers

• Specific Niches (Green)Specific Niches (Green)

Logistics Sector CharacteristicsLogistics Sector Characteristics

407,771

93,294

53,986

36,425

33,914

25,561

9,023

1,876

661,850

Wholesale trade

Truck transportation

Support activities for transportation

Warehousing and storage

Couriers

Air transportation

Rail transportation

Water transportation

LOGISTICS GROUP

Sources: CA Employment Development Department, U.S. Railroad Retirement Board, U.S. Bureau of Economic AnalysisU.S. Bureau of Economic Analysis, 2002 Economic Census, U.S. Census Bureau

Exhibit 11.-Employment By Logistics SectorSouthern California (7-Counties), 2005

$71,871

$50,703

$49,011

$48,259

$47,411

$41,797

$39,802

$37,136

$36,317

Rail transportation

Wholesale trade

Support activities for transportation

Air transportation

LOGISTICS GROUP

Water transportation

Warehousing and storage

Couriers

Truck transportation

Sources: CA Employment Development Department, U.S. Railroad Retirement Board, U.S. Bureau of Economic AnalysisU.S. Bureau of Economic Analysis, 2002 Economic Census, U.S. Census Bureau

Exhibit 12.-Mean Average Pay Per Worker By Logistics SectorSouthern California (7-Counties), 2005

Logistics Sub-Sector PayLogistics Sub-Sector Pay

Logistics Sub-Sector Payroll GrowthLogistics Sub-Sector Payroll Growth

23.3%

17.0%

15.8%

13.5%

13.4%

13.2%

13.1%

-1.0%

-29.7%

Support activities for transportation

Warehousing and storage

Wholesale trade

Truck transportation

Couriers

Rail transportation

LOGISTICS GROUP

Water transportation

Air transportation

Sources: CA Employment Development Department, U.S. Railroad Retirement Board, U.S. Bureau of Economic AnalysisU.S. Bureau of Economic Analysis, 2002 Economic Census, U.S. Census Bureau

Exhibit 14.-Percent Gain in Payroll by Logistics SectorSouthern California (7-Counties), 2001-2005

Good Pay Due To Use Of TechnologyGood Pay Due To Use Of Technology

Computerized Order Receiving

Personal Digital Assistants

Robotic Goods Handling

Random Product Testing & Measurement Equipment

Geographic Information Systems Truck Routing

Laser Scanners

Global Positioning System Tracking of Vehicles

Internet Communications

Manufacturing Inside Warehouses

Median Pay By EducationMedian Pay By Education Wholesale TradeWholesale Trade

7.50%6.30%4.70%1.20%4.50%5.60%

26.30%43.90%

100.00%80.60%

5.70%13.70%

Bachelor's Degree $27.87 Work Experience & Bachelor's or Higher $44.14

Associates Degree $21.05 Post-Secondary Vocational Education $19.85

Moderate-Term On-the-Job Training $21.49 Long-Term On-the-Job Training $27.80

Short-Term On-the-Job Training $11.65 Work Experience Related Occupation $20.37

No Schooling After High School $15.67 Wholesale Trade Sector $19.17

Bachelor's Or More $36.72 Trade or Community College $26.43

Entry Level$24,232

Moderate Experience

$44,637

What Drives Demand: InternationalWhat Drives Demand: International

1. Port Container Volume (2000-2005): +8.5% per year

2. Port Breakbulk Tonnage (1995-2005): +2.5% per year

3. Air Cargo Tonnage Forecast (2005-2030): +4.6% per year

Exactly What Shippers WantExactly What Shippers Want

Goods Made in AsiaShipped in ContainersUnloaded at our PortsTransported on TrainsAnd by TrucksTo Distribution CentersTo Arrive at RetailersInternational Supply Chain Management

Soaring Soaring International ContainersInternational Containers Thru So. Calif. Thru So. Calif.

3.7 3.8 4.1 4.4 5.1 5.4 5.8 6.5 7.5 8.2 9.5 9.6 10.6 11.8 13.1 14.2 15.8

42.5

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2030

e

TEU=20 foot equivalent container unitsSource: Port Import Export Reporting Service; forecast: Moffatt & Nichol Engineers

Exhibit 6.-Port Container TrafficPorts of Los Angeles & Long Beach, 1990-2006 & 2030e (million TEUs)

200541.5% U.S. Imported Containers24.1% U.S. Exported Containers

2007 YTDLA up 11.2% LB up 1.1%

So. California Has Strong Competitive So. California Has Strong Competitive Advantages For LogisticsAdvantages For Logistics

• West Coast Location

• Deep Water Ports

• Only Competitors: Seattle, Vancouver

• Better Land Side Infrastructure

• Come To Southern California First

• Retailers save 18-20% of inventory cost managing goods from So. Calif. Not Asia.

Ports handle

1/3 of all U.S. containers

2/3 of Asian containers

Over 70% of imports pass through to other markets

1. West Coast Location1. West Coast Location

2. Ports On West Coast Nearest 2. Ports On West Coast Nearest AsiaAsia

Los Angeles Long Beach

Ships Bump Into Us FirstShips Bump Into Us First

3. Deep Water Ports As Ships Need 3. Deep Water Ports As Ships Need Over 50 feetOver 50 feet of Water of Water

3. Deep Water Ports As Ships Need 3. Deep Water Ports As Ships Need Over 50 feetOver 50 feet of Water of Water

8000-Container Panamax Ships

4. Competitors Much Smaller4. Competitors Much Smaller

Port Region Port Region Imports Exports Imports Exports

LA-Long BeachLA-Long Beach 60.5%60.5% 39.7%39.7%

Other US West CoastOther US West Coast 16.1%16.1% 30.8%30.8%

US Gulf + East CoastsUS Gulf + East Coasts 23.4%23.4% 29.5%29.5%

Note: Shares measured on a TEU basisNote: Shares measured on a TEU basis

Source: PIERS, courtesy of MARADSource: PIERS, courtesy of MARAD

5. 5. Best Land Side InfrastructureBest Land Side Infrastructure At At PortsPorts

6. 6. Best Land Side InfrastructureBest Land Side InfrastructureState-of-the-Art On-Dock State-of-the-Art On-Dock

FacilitiesFacilities

7. 7. Best Landside InfrastructureBest Landside InfrastructureSo. California’s Goods Handling So. California’s Goods Handling

ComplexComplex

8. Huge Internal Population8. Huge Internal Population

172,672

825,512

2,028,013

2,031,625

3,098,121

3,098,269

10,331,939

21,586,151

Imperial

Ventura

San Bernardino

Riverside

Orange

San Diego

Los Angeles

Southern Calif

Source: California Department of Finance

Population, 2007Southern California

9. Non-So. CA Handling = Slow Deliveries9. Non-So. CA Handling = Slow Deliveries

ORDER

Nation-wide order placed with Asian

Factory

75 - 100DAYS OUT:

Depart Destination Port

1- 5

Committed 27 - 55 Days

Retail Stores

Arrive at Destination

1- 10

En Route to Destination Port

25 - 40

10. So. CA Gives Faster Deliveries10. So. CA Gives Faster Deliveries

ORDER

Nation-wide order placed with Asian

Factory

75 - 100DAYS OUT:

Depart Destination Port

5 - 9

Committed6 - 18 Days

Retail Stores

Arrive at Destination

1- 9

En Route toTrans-Loading

Destination Ports

25 - 37

Allocate goods just before

vessel arrives

Average of one month advantage

What Drives Demand? DomesticWhat Drives Demand? Domestic

1. Inventory:Sales Ratio

2. E-Commerce

3. Population Growth

4. So. Calif. Retail Per Capita after inflation

5. Local Manufacturing

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

1.60

1.65

Source: U.S. Census Bureau

U.S. Inventory to Sales Ratio, 1985-2007Months of Inventory On Hand At Existing Sales Levels

1. Just In Time Inventory Trend1. Just In Time Inventory Trend

42%

29%

12%

19%23%

29%

39%

31%

27% 26% 27%24%

29%

25%23% 24% 23%

25% 26%23%

26%

2001 2002 2003 2004 2005 2006

Source: U.S. Census Bureau

E-Commerce Percentage GrowthU.S., Quarter Over Quarter of Prior Year, 2001-2006

2. Long Term Sector Strength: 2. Long Term Sector Strength: Domestic E-Commerce SoaringDomestic E-Commerce Soaring

3. So. California’s Population Growth3. So. California’s Population Growth

111,000 216,000618,000 816,000 976,000

1,417,0001,853,000

6,007,000

Imperial Ventura Orange San DiegoSan BernardinoRiverside Los Angeles So. Calif.

Source: SCAG Preliminary 2008 RTP, SANDAG 2004 RTP

Population Growth, 2005-2030Southern California's Areas

4. Retail Trade Per Capita After 4. Retail Trade Per Capita After InflationInflation

Means More Goods Moving Per PersonMeans More Goods Moving Per Person

$5,608 $5,696 $5,861 $6,037 $6,201$6,589

$6,988 $6,770 $6,604 $6,700$6,984

$1,375

24.5%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1994-2004Percent

Sources: CA Board of Equalization, CA Department of Finance, U.S. Bureau of Labor Statistics

Per Capita Taxable Retail Sales (constant dollar)Southern California, 1994-2004 (1984-1986=100)

5. Local Manufacturing Only Driver 5. Local Manufacturing Only Driver DecliningDeclining

(84,500)(73,500)

(64,200)

(19,200)

7,600

24,00033,300 27,100

(13,500)(3,000)

(47,400)

(72,500)

(48,900)

(12,700)(13,900)

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: CA Employment Development Department

Exhibit 4.-Manufacturing Employment ChangeSouthern California, 1990-2005

Lost: 361,300 of 1,279,600 in 1990 = -28%

Job Growth If Trade GrowsJob Growth If Trade Grows

Activity Job Creation

Logistics Natural Growth 559,000

Construction: Rail Capacity, Grade Separation, Truckway 277,000

Multiplier Impacts: Logistics 334,000

TOTAL 1,429,000

Exhibit 4.-Logistics Investment, Job Creation, 2005-2030

1,000,000 Job Strategy

Multiplier Impacts: Construction 258,000

894,000

535,000

What’s Left To Do …What’s Left To Do …

•Dedicated Truck Lanes

•Expanded Rail Capacity

•Electrified Dedicated Short Haul Rail

•New Intermodal Facilities

•Vetted Projects From Agencies

•Inland Port

1. Agreement On What To Build

2. Agreement On Environmental Mitigation Program

Diesel

•$10 Billion

•SCAG Study

•Cold Ironing, Buy/Retire Trucks, Green Goats, Tier III Engines, Clean Fuels, Retrofits, Carl Moyer …

•Husing: Job Creation Capability & Pay Levels

•Leachman: 18%-20% Cost Savings From West Coast Handling

•Leachman: $200 Fees Not Divert Transloaded Cargo

•SCAG: Clear Time & Reliability Savings Justify Costs

3. Industry Peer Review of Research

$$$

•Caltrans

•LA Metro Transit, OCTA, RCTC, SANBAG, VCTC

•Multi-County ACTA

•Gubernatorial Appointed Multi-County Board

4. Institution(s) To Manage a Multi-County Process

•Design Build To Lower Cost & Increase Construction Speed

•Public:Private Infrastructure Legal

•Tax Credits For Private Investment In Infrastructure

•Voluntary Container Fees & Road Tolls

5. Federal & State Legislation on Funding Tools to Lower Costs

6. Infrastructure Bond Program to Jump Start Process

Can Governor & Legislature Agree?They Did … As Did The They Did … As Did The

Voters!Voters!

7. Federal Funding of Trade Related Infrastructure

•Tariffs Collected at Ports Go to General Fund

•Need Federal Goods Movement Infrastructure Fund

•Use Growth of Tariffs For National Program

8. Private Sector & Union Leadership Support Agenda

SCAG IETC

LAEDC SCLC

LA C of C ILWU

Unions

•Consensus on How to Address Issues

9. Health, Community, Environmental Leaders Support Agenda

Diesel

•Governor

•State Senate

•Assembly

•House

•Senate

10. Elected Official Understand & Move Agenda Forward

Leaders Have Changed The EconomyLeaders Have Changed The Economy

Inter-State Freeway System

President Eisenhower

State Water Project

Governor Pat Brown

LogisticsLogistics Gives Us The Chance Do It Again & … Gives Us The Chance Do It Again & …

We Owe It To Our Blue Collar Workers To Make It Happen!

www.johnhusing.com