New ITS Faculty Affiliate Provides Expertise in Supply Chains, Goods Movement
SPRING 2011 -- As an undergraduate at UC Berkeley in the early 1970s, Rob Leachman was working his way towards dual degrees in math and physics. But during school breaks and vacations, this latest addition to ITS as an affiliated faculty member, was working on the railroad.
Leachman recalls with fondness those weeks and months operating the Union Pacific switchyards or the interlocking control towers, or filling in at the billing and ticket offices. “You name it, I did it. I ran all around Oregon, Washington and Idaho doing pretty much all the blue collar jobs on the trains.
“For me, I would have to say there is more magic in the railroad than in any other dozen industries combined. It’s not inside a building, it’s all out in the open in spectacular country, yet you’re fighting nature and the limits of the technology to try to get the absolute lowest cost and the highest efficiency and good service moving goods. It was a lot of fun.”
Fast forward a decade, and Leachman, who acquired a Ph.D. in Operations Research and a faculty position at UC Berkeley in 1979, found that his railroad knowledge uniquely qualified him for certain transportation projects.
One was the Alameda Corridor. Leachman was asked to compile a proposal and operations analysis for a 20-mile, grade-separated rail cargo expressway running from downtown Los Angeles to the ports of Long Beach and Los Angeles, located side-by-side in San Pedro Bay. The project’s purpose was to move the rapidly increasing amounts of cargo coming into the ports more efficiently, while reducing traffic congestion and pollution. Its centerpiece is the Mid-Corridor Trench, which carries freight trains along a 10-mile open trench 33 feet deep and 50 feet wide.
“It took 19 years and $2.4 billion dollars to get it done,” said Leachman, “but as public works projects go that’s pretty good.”
Not long after it was completed, however, the Southern California Association of Governments (SCAG), became concerned that the fees levied on each container that ran through the corridor might not be enough to retire the debt on the bonds for the project. SCAG contacted Leachman again to develop an economic model predicting how import volume would react to fees for infrastructure such as the Alameda Corridor.
“My suggestion was to first look at that issue from the importer’s point of view to determine if they would stay and pay, or simply restructure their supply chains to use different channels.”
SCAG hired Leachman to find out, and in 2003 he began painstakingly examining the complex web of players and economics involved in transporting millions of tons of furniture, bedding, electronics, machinery, toys, cars, and other goods from Asia annually through the ports of Los Angeles and on to warehouses, retail centers or other ports.
Follow the money
To understand how supply chains are set up, he talked to some of the largest importers—ultra-competitive big box stores like Walmart, Home Depot, Target—as well as the people who run the ports, the railroads, the steamship lines, the dray companies, and the third-party logistics companies to find out how much they were charging one another. He also was given access to customs data in order to understand import volumes and declared values for nearly 100 commodities.
“This is the most fragmented industry I have worked with—by an insane margin. You take all the service providers—the draymen, railroads, third-party logistics people who run docks and import warehouses, the steamship lines, the ports and governments—and essentially none of them understand the big picture of what’s going on,” he said.
The only parties to this complex dance who truly comprehend the big picture are the big importers, says Leachman. “They have to buy services from all these people and they make everybody compete. But because they don’t own the containers, the trains, the import warehouses or the cross-docks—they don’t have any bricks and mortar at stake. If the economics change, they can alter almost everything about their supply chain the next year.”
Leachman began constructing a so-called elasticity model where he examined supply chains from Asia to the U.S. for imported goods, importer by importer. Like fitting together pieces of a giant jigsaw puzzle, a more complete picture slowly began to emerge.
“I was finally able to explain what was going on,” he said. “Better yet, I was able to predict what would happen if you make changes to the infrastructure or add fees or change railroads or steamship lines or what have you. So now we were in a position to intelligently inform government policy.”
He found that slapping a $60 fee on each incoming container—a solution some state legislators were suggesting—would drive about six percent of traffic away from the San Pedro Bay ports. But if importers were offered congestion relief in the form of dedicated truck lanes from the ports to the trans-loading warehouse districts and increased rail terminal and line-haul capacity, a greater number would shift imports from other ports to San Pedro Bay, or stay and pay--up to $200 per container.
In a recent TRANSOC-sponsored seminar, Leachman explained an economic optimization model of waterborne containerized imports from Asia to the USA that he developed in order to predict the allocation of import volumes by port and landside channel as a function of transportation and rates, costs for logistics services, importer scale and scope, inventory holding costs, mean and variance of container flow times, and possible container fees imposed by government.
In his talk he described the mix of supply-chain strategies utilized by various types of importers, as well as changes in import flows that are likely to come with the expansion of the Panama Canal.
More recently Leachman has been formulating a 25-year plan for railroad track capacity in southern California where the growing import/export trade and increasing rail commuter use are coming into conflict within the tangled, crazy-quilt pattern of tracks that zig-zag through southern California’s towns and cities.
“We need to create enough track capacity for freight and passenger operations, but the technologies are very different.”
Commuter trains, he points out, are 600 feet long and travel at speeds up to 79 mph, while freight trains sometimes stretch up to 12,000 feet long and lumber along at speeds closer to 45 mph. Passenger trains stop frequently; freight trains do not. Terminals are located where it made sense to site them years ago. Commuter agencies have contracts to run on one railroad line but not on another.
“If we were starting all over we could manage this quite well,” he explains. “But with all these constraints in place it will require some changes here and there—separating trains by speeds, moving some to other tracks—and this will be unpopular with some parties. But in the end it will be much better than it is now.”
He is also collaborating with ITS Director Samer Madanat and ITS PhD student Sebastian Guerrero on ways to restructure supply chains to reduce wasteful transportation, which will result in deceased air pollution.
“We are very fortunate to have someone with Rob’s background and abilities to work with us on transportation projects that will help the state achieve the reductions in greenhouse gas emissions it has targeted,” said Madanat. “His knowledge of supply chains and freight movement is invaluable.”
In his career at UC Berkeley, Leachman has authored more than 80 technical publications related to operations management and transportation analysis. He has been both a runner-up and a winner of the Franz Edelman Award, the highest accolade from the Institute for Operations Research and the Management Sciences (INFORMS).