Collaborative Industrial Optimization

Introduction

What is now commonly called “supply chain optimization” is crippled by its narrow focus, limited to individual company logistics. Consequently, neither the marketplace nor the public sector have been able to design infrastructure for efficient industrial systems.

Collaborative Industrial Optimization (CIO) reconceives planning and investment to serve entire industries and regions. For example, minerals, forest products, glass, and aggregates can be redesigned as “industrial systems” encompassing mines, forests, farms, factories, customers and logistics. The CIO approach facilitates the needed collaboration between shippers, transportation providers, and other stakeholders within a larger design frame than afforded by traditional marketplace interactions. It leads public and private sector stakeholders to integrate knowledge about natural resources, business plans, freight data, land use, logistics, and economic development into productive, sustainable systems. We need to think and plan whole industrial systems so that commercial and public investments solve problems and create new efficiencies, not just move more stuff faster.

Early rail lines in 19^th century North America were envisioned as part of expansive supply chains, from interior resources to coastal cities, from mine to factory, and from farm to table. Before individual local projects were conceived and built, an entire corridor or region as an industrial system was envisioned. Contrast that with 2008 at the height of North America’s ethanol-production boom. Hundreds of billions in investment capital poured into the ethanol industry to fund individual “competing” projects. Unit train loading facilities, for example, were consequently built without matching unit train receiving facilities. Ethanol production skyrocketed while the ad hoc transportation and distribution system remained inadequate.

When closely observing infrastructure development across the continent, it is shocking how often a project's full promise is squandered because one party limits the conception to serve only their business interests. This is not usually from a nefarious intention. The reality is more innocent but just as harmful; no entity or business is at the helm, guiding industry and infrastructure to serve multiple opportunities for shippers and society.

Today, Southern Nevada biofuel producers receive feedstock by truck from the San Pedro Bay area. Then, they truck the product back to the consumers in Southern California through populated areas in both states rather than use energy-efficient railroads available for these movements at origin and destination. Meanwhile, this inefficient commerce is rewarded with California Low Carbon Fuel Standard Credits.

Of the 138 warehouses built in recent years in Western Nevada, only one uses rail, even though they are all on or near a rail line. These distribution centers are essentially there to serve California’s market. This results in high-volume back-and-forth truck traffic on the same roads as commuters and tourists. A similar dynamic is found between each coastal state and its inland counterparts, as well as within metropolitan areas throughout the continent. In these densely populated regions, where collaboration among stakeholders could yield the greatest benefits, we often see the least collaboration.

During OTNA’s work creating the 2021 Nevada State Rail Plan, we were struck by the opportunity of a Mining Materials Logistics Strategy to bring commercial benefits to the state’s mining companies, suppliers, and customers. This collaborative approach to mining’s inputs and outputs would justify new and enhanced rail infrastructure and services that benefit other industries, the community, and the mining industry. This can be done for all industrial systems. See the CAPSI Scope IntelliConference.

Some will claim that Collaborative Industrial Optimization demands more trust and cooperation than our competitive economic system can sustain. From our experience providing this level of collaboration throughout North America, we know nearly everyone embraces it. We are confident that stakeholders are more than ready to work together.

Key Distinctions

1. INDUSTRIAL SYSTEMS DO NOT BEGIN OR END AT POLITICAL BOUNDARIES Supply chains extend across county, state, regional, and national borders. Needed improvements flow from collaborating with entities throughout the supply chain.

2. PLAN WHOLE SUPPLY CHAINS, NOT JUST PROJECTS Infrastructure investments that support whole systems rather than one-off projects deliver meaningful advantages to a region, and its businesses and investors.

3. PROJECTS OF LOCAL SIGNIFICANCE There aren’t “Projects of National Significance” without many “Projects of Local Significance.”

4. INCLUDING ALL PERSPECTIVES MAKES PROGRESS EASIER, NOT HARDER Contrary to the prevailing belief that including all concerns and views is too complex, 360° inclusion of businesses, communities, and projects boosts the productivity of infrastructure plans and investments.

5. PLANS ARE FOR ACTION We can no longer invest in the type of “plans” that sit ignored on government shelves and hard drives. Plans must be designed for implementation from the outset.

6. STAKEHOLDERS ARE PARTNERS, NOT SURVEY RESPONDENTS Stakeholder engagement is often conducted superficially as if it is only a bureaucratic requirement. Effective investments result from honest conversations and co-creation among stakeholders.

7. RAIL AND ROADS ARE ONE SYSTEM It is unproductive to pit highway, air, pipeline, and railway transport modes against each other in public policy or the marketplace.

8. FREIGHT ANALYSIS MUST INCLUDE TRUCK DATA, EVEN IN RAIL PLANS Truck shipment data provides critical visibility into the bulk of a region’s industrial activity, illuminating the path toward an ideal truck-rail balance.

9. THE RIGHT TOOLS MAKE THE RIGHT DATA ACTIONABLE Raw data is one level of usefulness; data made accessible and applicable is another. CIO’s tools enable stakeholders to use freight data for plan implementation and business development.

10. INTEGRATE FREIGHT PLANNING WITH ECONOMIC DEVELOPMENT Transportation departments and economic development agencies work in silos on matters that co-influence industrial system productivity. CIO integrates these efforts into regional strategies.

11. FREIGHT TRANSPORTATION IS INSEPARABLE FROM LAND USE PLANNING Effective land-use planning can optimize economic development and minimize the impact of goods movement. Smart land use is as much about how goods move to and from a property as what happens on the property.

12. BROWNFIELD ASSET REDEVELOPMENT IS FUNDAMENTAL Previous and existing industrial assets, including land, loading facilities, transportation connections, storage, shuttered plants and buildings, and utilities, are keys to our future industrial systems.

13. CAPITAL IS AVAILABLE FOR ALL WELL-CONCEIVED PROJECTS Now holding hundreds of billions of dollars, infrastructure investors and lenders worldwide are poised to deploy capital for industrial and freight projects in North America. They need CAPSI's plans.

Moving Forward

Consider how investment in communities and industries is commonly structured; investments are conceived so that the investor withdraws the benefits that capital makes available as narrowly and quickly as possible, with limited sharing, even with the people whose labor made the profits possible. Moving forward, we must restructure investments to ensure the benefits percolate and synergize among all stakeholders. Then, out of the enrichment of the system and the community, one makes one’s return on investment. This reorientation makes all the difference in creating the profound, long-lasting change our challenges urgently require.