Transportation Infrastructure is the Road to More Competitive US Manufacturing
The U.S. manufacturing industry is in the midst of a comeback. Manufacturers are gladly shifting from securing demand to meeting demand. However, reworking the U.S. transportation infrastructure is essential to the success of this progress.
Today there are more than 4 million miles of road, 600,000 bridges, and 3,000 transit providers in the U.S. that have been impacted from the falling share of GDP dedicated to transportation from federal, state and local levels – while population, congestion, and maintenance backlogs have increased, according to “An Economic Analysis of Transportation Infrastructure Investment,” prepared this year by the National Economic Council and the President’s Council of Economic Advisers.
If this lack of investment and attention persists, it could be a significant roadblock to a flourishing manufacturing industry here in the homeland.
In fact, the United States’ infrastructure is so distressed that the American Society of Civil Engineers assigned it a D+ in its 2013 Report Card for America’s Infrastructure – an assessment of conditions and investment needs for major types of infrastructure, including roads, bridges, water systems, ports, mass transit and the electricity grid.
The ongoing deterioration has not only resulted in consecutive near failing grades from the ASCE (During the last assessment period, the U.S. also received a D), but also in additional expenses for manufacturers plagued with unexpected maintenance and fuel costs resulting from the current state of the transportation infrastructure system.
The cost of congestion has increased to $121 billion, or $818 per commuter, according to the Texas A&M Transportation Institute’s 2012 Annual Urban Mobility Report.
Trucks moving freight throughout the nation’s roadways assume the majority of the cost of that congestion, with $27 billion derived from wasted time and diesel fuel.
Fueling a Resurgence
To transform this aging system into the seamless and safe network it must become for the manufacturers of today and tomorrow, it will require more than simple repairs. It will call for significant improvements and private and public collaboration.
A clear vision will be needed on how to tackle a complex network strained by today’s population and set to be flooded by future generations if it remains unchanged.
While steps are being taken to right the system, however, much more needs to be done before it can truly help fuel an ongoing resurgence of American manufacturing.
A few examples that signal a renewed commitment to reworking America’s infrastructure include:
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The GROW AMERICA Act:
A proposal by the Obama Administration to spend $302 billion over the next four years to make the necessary changes to the current infrastructure system to strengthen its mobility and make the country more competitive within the global marketplace. For example, $199 billion will be invested in the nation’s highway system and road safety, according to the U.S. Department of Transportation.
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Raising of the Bayonne Bridge:
A project funded by the Port Authority of NY and NJ that will substantially increase the distance between the bridge and the water allowing for larger container ships that previously were unable to cross under to do so. The project will open up marine terminals, including Port Newark, Elizabeth and Howland Hook in Staten Island to a greater number of ships. Currently, shippers who rely on these Eastern Seaboard ports for access to a regional transportation network have no other option but to use other smaller, less-efficient and less environmentally-friendly ships to deliver goods into the region.
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The Deepening of PortMiami:
To prepare for the expansion of the Panama Canal, PortMiami is deepening its harbor from 44 feet to 50 feet-52 feet and widening part of its shipping channel. This is part of its approach to increase cargo and efficiency, along with a new port tunnel to speed truck traffic and a rail link to the FCC rail yard near the airport. These post-Panamax improvements were funded from state, local and federal sources.
As more improvements like the aforementioned are made, U.S. manufacturers and the industry as a whole will enjoy a more efficient and smart infrastructure that leads to greater:
- Marketplace Competiveness: Through the development of a more strategic infrastructure that creates greater transportation and sourcing efficiencies, there would ultimately be a decrease in costs associated with getting goods to market. With less costs passed along to consumers, goods will be more competitively priced, encouraging greater consumer spend.
- Job Growth: Increased spending on infrastructure would increase employment as well as real household incomes. The National Association of Manufacturers’ September 2014 Inforum Report predicts that by growing infrastructure investments the U.S. would increase jobs by approximately 1.3 million by 2015 and 1.7 million by 2017. This job growth would be experienced across all levels, from low- to high-skilled laborers, and would be realized both inside and outside of the manufacturing industry.
- Cost Savings: Manufacturers and consumers alike would enjoy cost-savings derived from infrastructure improvements. With the time and money savings realized through the need for less gas and vehicle maintenance, companies would be well positioned to move forward with capital investments that positively impact their businesses and bottom lines.
- Customer Satisfaction: As a result of a more efficient transportation structure, manufacturers would be able to escape gridlock and get goods where they need to be on time. This consistent, on-time performance would allow manufacturers to streamline warehouses and fleets, as well as strengthen customer relationships and satisfaction through shorter lead times.
As the nation’s infrastructure continues to improve, so too will its manufacturers’ positioning within the global marketplace. Manufacturers will be able to take advantage of an infrastructure that paves the way for greater efficiencies, ease of use and ultimately a brighter future for their businesses.
Howard Sosoff is the Manufacturing & Distribution practice leader at BDO USA LLP. He has more than 35 years of experience in the public accounting industry, and has provided audit, accounting and business advisory services. In his business advisory role, he has consulted with companies in a wide range of industries and advised clients on accounting and reporting issues, succession planning and corporate finance, and participated in merger and acquisition negotiations.
