Strategic Issues Facing Transportation, Volume 1: Scenario Planning for Freight Transportation Infrastructure Investment (2013)

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6This section provides an overview of the traditional formal process used by most organizations to create scenarios. We also provide several examples of how this was used and the resulting scenarios. We then explain why the development of the Future Freight Flows (FFF) scenarios differed from traditional ones. Finally, we detail the method used and the resulting analysis of driving forces and critical uncertainties. 2.1 Traditional Scenario Planning Process While there is not a single, formal process for developing scenarios, there are generally accepted practices. For an in-depth review of scenario planning methodologies, see Phadnis (2012). The most commonly used, or referenced, method is associated with Peter Schwartz who founded the firm Global Business Network. Schwartz’s method has eight steps, as follows: 1. Identify Focal Issue—What is the central question to be answered? 2. Identify Key Local Factors—These are things that influence the success or failure of the focal issue and usually relate to stakeholders of the organization. 3. Identify Driving Forces—These are macro factors that affect the organization but are neither controlled nor influenced by it. 4. Rank Driving Forces by Importance and Uncertainty—This ranking helps focus scenario creation on the critical forces. 5. Select Scenario Logic—Scenario logic is the set of the most critical driving forces, which are specified to take different values in the different scenarios being developed. The most common method of choosing scenario logic is to oppose the two most important and uncertain driving forces thereby creating a two by two matrix and thus four potential outcomes. 6. Flesh Out the Scenarios—After specifying the logic, the less critical factors are feathered in to create realistic and internally consistent scenarios. 7. Apply the Scenarios and Uncover Implications—Appropriate stakeholders are invited to evaluate the focus issue in different scenarios. The resulting scenario-specific evaluations are contrasted to identify the robust and contingent decisions. 8. Identify Leading Indicators and Signposts—Scenario evaluation separates robust strategies (useful in all scenarios) from contingent ones (useful in some but not all scenarios). Leading indicators and signposts are the variables that help discriminate among the scenarios to suggest which scenario the world may be heading toward. Other methods have similar steps, but with different names. For example, Scearce and Fulton (2004) have five stages: Orient (Schwartz steps 1 to 3), Explore (4), Synthesize (5 and 6), Act (7), and Monitor (8). Garvin and Levesque (2006) also describe a five-step process: Define Focal Issue (1), Define Driving Forces (2 and 3), Create Scenarios with Narratives (4 to 6), Define Options (7), and Integrate (8). Lindgren and Bandhold (2009) have a five-step process they trademarked as S e c t i o n 2 Scenario Development

Scenario Development 7 TAIDA: Tracking (1), Analyzing (2 to 5), Imaging (6), Deciding (7), and Acting (8). The tasks within each step for these different methods are essentially identical. In any case, the development of the scenarios involves a tremendous amount of interviews and discussions with the stakeholders most affected by the scenario. The scenarios are in effect customized to that organization and to that organization’s specific focal issue. 2.2 Criteria of Good Scenarios One of the most difficult questions related to the scenario creation process is how to evaluate the quality of scenarios created by the process. Scenarios are planning aids used to develop long-range plans by considering potentially different futures; they are not predictions. Therefore, their validity cannot be evaluated by seeing if one of the scenarios in a set comes to fruition. In lieu of objective tests, scenario planning literature provides the desired attributes of scenarios. These can be divided into two groups: qualities of good scenario sets and qualities of good scenarios (Lindgren and Bandhold, 2009; Phadnis, 2012). Desired attributes of scenario sets include the following: • Number of Scenarios—Two to four. • Challenging—The scenarios should challenge the organization’s conventional wisdom about the future. If they only reflect the current thinking then the resulting brainstorming will not uncover new insights. These are typically achieved by having multiple, diverse scenarios in a scenario set. • Differentiated—The scenarios should present stark and dramatically different future envi- ronments. If the scenarios are too similar to each other, the exercise will be limited and will tend to stay in the commonly accepted bounds of the projected future. • Contain Alternatives—There should not be a favorite or preferred scenario. Avoid perfect “heaven or hell on earth” scenarios. Also, avoid creating scenarios that reflect either the orga- nization’s established vision or the current forecast of the future. These “unofficial–official” scenarios tend to attract and anchor stakeholders and lead them to ignore the other scenarios. This defeats the purpose of the exercise. Desired attributes of scenarios include the following: • Centered on the Focal Issue—The scenarios should capture the ultimate decision the orga- nization is trying to make. The underlying structure of the scenarios should be based on the decision at hand. • Plausible—The users should believe that the scenario can “grow logically from the past and the present” (van der Heijden, 2005). Having a scenario with “save the world” technology, for example, can be unrealistic. • Internally Consistent—The logic in the scenario should be consistent, that is, the scenario’s internal logic needs to be aligned. One aspect of the scenario cannot contradict others. This also helps improve plausibility. • Memorable—The scenarios should be easy to recall after an event. The names, for example, should be descriptive, evocative, and catchy. The names of the scenarios will ultimately become touchstones for future conversations. They can form a common language or shortcut codes within the organization to connote a certain outcome. • Doesn’t Answer the Focal Question Directly—The material developed for the scenario should not overtly answer the focal question. The purpose of using scenarios is to provide decision makers an alternate vision of the future and to let them apply their knowledge to devise creative solutions suitable for that vision. Prescribing answers in the scenario suggests that scenario- creator(s) know(s) the decision context better than the people who live in it.

8 Scenario Planning for Freight transportation infrastructure investment In most cases, these scenarios are developed in an iterative fashion. The initial scenarios are tested in small groups for plausibility, consistency, and so forth and are continually tweaked until they represent a full set of potential futures from which to work. 2.3 Examples of Scenario Planning Initiatives In this section, we briefly describe some of the scenarios created and used by different organi- zations in their long-range planning. The objective here is to illustrate how critical uncertainties are combined to form multiple scenarios. Note that publication of scenarios used by organizations for long-range planning is rather an exception than the norm, because of their strategic value to the organization. 2.3.1 United Parcel Service 1997—Centennial Scenarios of 2007 The United Parcel Service (UPS) is one of the organizations that has embraced the culture of scenario planning for developing long-range plans. The first reported use of scenario planning at UPS was in 1997. Today, scenario planning is now an accepted and integral component of the UPS strategy development and analysis process. Engagements vary in planning horizon (1 to 3 years versus decades), scope (global versus regional), and breadth (single topic versus multiple) (Rogers, 2011). In 1997 UPS developed a set of scenarios for use in its larger strategy planning process in order to better prepare for its 100th anniversary in 2007 (see Garvin and Levesque, 2006 or De Wit and Meyer, 2010). Extensive interviews of executives, managers, and others were conducted both inside and outside of UPS. The ultimate focal question was: “What is UPS’s global business in this ever-changing competitive environment?” From the driving forces identified through interviews and discussions, two were found to be most critical for the focal question: (1) “Market Environment,” defined as the level of cross-border trade, which could be either “regional/national with border restrictions” or “free-flowing global trade,” and (2) “Demand Characteristics,” referring to the nature of the UPS consumers, which could lie on the continuum between “traditional users of UPS services” and “proactive, sophisticated consumers demanding high value-added supply chain services.” Combinations of the two extreme values of these two driving forces yielded four scenarios: “Tangled Paths” which described a nationalistic world with tight border controls and demanding customers; “Regressive World,” a world with restrictions on cross-border trade and traditional customers; “Global Scale Prevails,” a world with global trade where customers preferred traditional services; and “Brave New World,” a flat world of global trade and customers demanding high value-added supply chain solutions. The use of these 1997 scenarios made the UPS managers aware of establishing a retail presence, to meet the needs of the sophisticated customers—if the world were to evolve that way. After monitoring of the business environment and detailed analysis for a few years, UPS ultimately decided to acquire Mail Boxes Etc.—a network of retail stores providing business services— to gain a retail presence to attract the sophisticated consumers. 2.3.2 United Parcel Service 2004—Horizon 2017 Scenarios In 2004, UPS launched another round of scenario planning to develop a new set of scenarios, as some of the driving forces that were uncertainties in 1997—such as industry consolidation, growth of the Internet—had been resolved, and new uncertain driving forces seemed to be influ- encing UPS’s future business environment. Using a similar process for creating scenarios as it did in 1997, except with input from a broader group of academics, politicians, key customers,

Scenario Development 9 and the like, four scenarios were developed to answer the focal question: “What is the future of UPS’s world market and major regional markets in 2017?” The two driving forces forming the backbone of the scenarios were (1) “Commerce, Business Model, and Demand,” described as either “traditional, proprietary, and incremental” or “proactive, open, and collaborative” business models in two scenarios each and (2) “Business Environment,” described as either “harmonious, aligned, free, fluid, and borderless” or “chaotic, fragmented, and bordered.” The two scenarios with traditional business models were “Company City” (harmonious environment) and “Bordered Disorder” (chaotic); the two scenarios with collaborative business models were “Networks without Borders” (harmonious) and “Connected Chaos” (chaotic). 2.3.3 Cisco 2010—Evolving Internet of 2025 Scenarios In 2010, working with GBN, Cisco developed a set of scenarios to help it answer two fundamental questions: “What forces will shape the Internet between now and 2025?” and “How might the use of the Internet and IP networks evolve?” (Cisco and GBN(Global Business Network), 2010). Cisco conducted several dozen in-depth interviews with Cisco executives and managers as well as thought leaders from across multiple industries and domains. Based on this research they devel- oped 14 “drivers of change” that they felt could dramatically change the environment. These were later grouped into three critical “Axes of Uncertainty:” “Network Build-Out” (either limited or extensive global broadband network), “Technological Progress” (incremental or breakthroughs), and “User Behavior” (constrained or unbridled use of the Internet). Instead of developing eight potential scenarios—the natural result of the combinations of three forces—Cisco created four representative ones, preferring those that were rather novel and divergent, yet still realistic. The four scenarios were “Fluid Frontiers” (technological breakthroughs, extensive Internet use, but limited broadband network), “Insecure Growth” (extensive network, technological breakthroughs, but limited Internet use), “Short of the Promise” (extensive network, but incremental technological developments and limited Internet use), and “Bursting at the Seams” (extensive Internet use, but limited broadband network and incremental technological advances). 2.3.4 Shell Oil 2005—Global 2025 Scenarios Shell has been using scenarios for long-range planning since 1967—beginning with the “Year 2000” Study—and is considered a pioneer user of scenario planning in the business world. In 2005, Shell published its scenarios for the time period up to 2025 (Royal Dutch Shell, 2005). Instead of developing four scenarios from combinations of two extreme values of two critical driving forces, Shell developed three scenarios using a method it called “two wins–one loss.” Three driving forces—“Market Incentives,” “Community,” and “Coercion/Regulation”—form the backbone of these scenarios. In each scenario, two of the three forces dominate the third force, resulting into “Low Trust Globalization” (market efficiency and regulations for security important), “Open Doors” (market efficiency and social justice important), and “Flags” (social justice and regulations important). 2.3.5 U.S. Pharmaceutical Supply Chain 2011–2016 In 2010 and 2011, researchers at MIT Center for Transportation & Logistics (CTL) developed four scenarios of the U.S. pharmaceutical distribution supply chain, for a 5-year planning horizon (Phadnis, 2012). The scenarios were developed for a firm operating in this industry to help answer the question “what supply chain strategy should the firm adopt to support its pharmaceutical distribution over the next 5 years?” The project sponsor (Senior Vice President, Operations) iden- tified a group of 25 middle and senior executives to participate in the scenario study. Through interviews with these executives and industry research, the researchers identified 35 local fac- tors and 14 driving forces relevant to the focal question. The executives evaluated the impact of

10 Scenario Planning for Freight transportation infrastructure investment the local factors on the focal issue and assessed the relationship between driving forces and local factors. This data was used to estimate the effect of driving forces on the focal issue. Two driving forces—“Health of the U.S. Economy” (weak, strong) and “Complexity of U.S. Healthcare Supply Chains” (low, high)—formed the backbone of four scenarios, which included “Frenzy” (highly complex supply chains due to increased points of care, regulations, and so forth—operating in a weak economy where only large firms have survived and consolidated); “Innovo-Nation” (highly complex supply chains delivering temperature-sensitive drugs in a complex regulatory environment and a strong economy in which smaller biotech firms flourish); “Hiber-Nation” (weak economy in which firms have resorted to cost reduction by cutting down innovation, reducing product variety, and simplifying their supply chains); and “Zen” (strong economy that enabled an information technology revolution in healthcare, allowing patients to seek advice and buy prescription drugs online in the U.S.; this reduced the importance of brick-and-mortar stores and greatly reduced the complexity of the U.S. pharmaceutical supply chains). 2.3.6 Chemical Industry Supply Chains in South America—2020 In 2011, a team of researchers at MIT CTL helped supply chain planners at a multi-national chemical firm’s South American business develop scenarios to answer the focal question “what should the firm’s supply chain strategy in South America be to support the business growth planned through year 2020?” CTL researchers identified the driving forces that were possibly relevant to the focal issue via industry research. The local factors were identified in a workshop with the planners, who also evaluated the relevance of the driving forces vis-à-vis the focal decision and mapped the relationship between local factors and driving forces. The resulting assessment of driving forces’ impact on the focal decision and their uncertainties revealed from industry research was used to develop three scenarios. Three driving forces—“Trading Blocs” (little global trade but free trade within South America, or free global trade), “Logistics Infra- structure in South America” (adequate or inadequate), “Sustainability” (high environmental consciousness, environmental concerns secondary to economic goals)—emerged as the most critical for the focal decision. Three scenarios were created: “Home Alone” (free global trade, supported by logistics infrastructure that is adequate to meet demand, and customers are will- ing to pay for green products), “Green South America” (divided world in which trading blocs have significantly restricted trade within South America, where logistics infrastructure cannot support the demand from customers willing to pay for green products), and “Latin Power” (world divided by trading blocs, where flourishing trade within South America is enabled by a developed infrastructure that is adequate to meet demand, and where economic and other concerns have taken a precedence over environmental friendliness). 2.3.7 Other Scenario Studies There is no shortage of scenarios, many of which are publically available. We do not intend to be exhaustive in our illustration of scenario studies. Given below are a few sources of scenario studies the reader may refer to for more examples. • Five scenarios of logistics in 2050 developed by DHL (“Delivering Tomorrow: Logistics 2050— A Scenario Study”). • Four “extreme scenarios” of the future of logistics in year 2025 developed by Supply Chain Management Institute and European Business School. • Cousens et al. (2002) catalog 17 sets of scenarios, developed by organizations such as the Economist, Central Intelligence Agency (CIA), World Energy Council, and so forth. • Ringland (1998) cites organizations that have developed scenarios. • In 2007, MIT CTL developed three scenarios—Spin City, Synchronicity, and Alien Nation— to think about different visions of global trade.

Scenario Development 11 2.4 FFF versus Traditional Scenario Development The process used to develop the four FFF scenarios for this project had similarities and dif- ferences as compared to more traditional scenario planning engagements, such as the examples in the previous section. The basic eight step process as outlined in Section 2.1 was followed. However, there were four unique aspects to this project that required us to modify the process somewhat. The first unique aspect is that the FFF scenarios had to be designed so that they could be used “out of the box” by different decision makers than the ones who helped develop them. In the traditional process, the people who help develop the scenario also apply the scenario. This means that the executives become very well attuned to and familiar with the driving forces, key local factors, and critical uncertainties involved. For the FFF project, the users will be exposed to scenario planning and the specific scenarios for the first time when they engage in a workshop. Second, the scenarios had to be flexible enough to be used by planners in different levels of government: federal, state, local, MPO. The scenarios had to be general enough to be used at any level without significant customization. This meant that the scenarios could not drill down to state- or MPO-specific issues but instead had to stay at the national level with macro- economic forces. Third, the scenarios had to be generalizable enough to be used at different levels of regional specificity (nation, state, multi-state, city, county) and geography. We had to make the scenarios flexible enough to be used at any location within the United States and at essentially any level of specificity. Again, this forced us to remain at a national level. We could not include forces or uncertainties that dealt with one state or another. These local customizations could always be added to the formal descriptions. Fourth, the strategic question or focal issue will change with each user. In traditional scenario planning, the scenarios are designed around a core question. For the FFF scenarios, we had to assume a generic question, “Where should investments in freight transportation infrastructure be made in [location TBD] today for the year 2040?” Different users might have slightly different questions, such as, “What should the priorities for the DOT be?” or “How should we fund different port investments?” The project dictated that the development and use of the scenarios be divided into three phases. Each of these phases can be mapped to the eight steps discussed in Section 2.1. The first phase focused on the analysis of the critical uncertainties and the driving forces (covering steps 1 to 4). The second phase was dedicated to the writing and full development of the scenarios (steps 5 and 6). Finally, the third phase involved testing the scenarios in six workshops across the United States (steps 7 and 8). Figure 1 illustrates the steps taken in each of the first two phases. The details for phase three are discussed in Section 4. The process started with the FFF Symposium at which thought leaders from five primary dimensions (social, technology, environment, economic, and political) presented potential future trends to a hand-picked group of expert practitioners. The selection of the expert practitioners replaced the one-on-one interviews used in traditional scenario development. This led to a brainstorming session during which the attendees generated potential Driving Forces and critical uncertainties. These were then analyzed, harmonized, and consolidated into 12 representative “Snapshot Scenarios.” These Snapshot Scenarios were presented back to the practitioners in an interactive setting in which they developed estimates of each force’s influence/uncertainty over time, its impact on freight flows, and how it would stress the existing U.S. infrastructure.

12 Scenario Planning for Freight Transportation Infrastructure Investment The results of these 12 analyses were analyzed and translated into 20 more detailed Driving Forces. The Driving Forces were incorporated into a survey that was distributed to a large set of freight stakeholders for further prioritization. The survey respondents came from a diverse set of practitioners to include shippers, carriers, third-party logistics providers, and governmental transportation planners at the federal, state, and local levels. The results of the survey were analyzed to determine the key dimensions or axes that should be used in the development of the future scenarios. The remainder of this section is organized as follows. Section 2.5 provides details on the process and methodology used to uncover the driving forces and critical uncertainties. This includes a discussion of the FFF Symposium, a review of the workshop materials tested, and a summary of the stakeholders survey instrument. Section 2.6 presents the combined analysis of the results from these activities. 2.5 Generation of Driving Forces and Critical Uncertainties This section describes the process used by the research team to develop the underlying logic that will define the scenarios. 2.5.1 Future Freight Flow Symposium The FFF Symposium was held March 11–12, 2010. The final agenda and attendance list is attached in Appendix A. A total of 60 handpicked non-MIT professionals participated as “expert practitioners.” Figure 1. Process used for the development of the FFF scenarios.

Scenario Development 13 The symposium opened with a restatement of the objective of the project as a whole and of the two-day symposium in particular. Additionally, the attendees were introduced to the concept of flow impacts. This was done in order to get the attendees to focus specifically on how any poten- tial force or uncertainty would affect freight flows within a specified region. For the purpose of this symposium, we focused on the United States as a whole. However, all of the analysis and methods can be used on any predefined region or area. 2.5.1.1 Flow Impacts There are an unlimited number of potential events, trends, or occurrences that can happen in the future. It is almost impossible to identify, much less plan for, all of these potential events. Instead, it is useful to translate these into a finite set of outcome types. We refer to these as flow impacts. We created five flow impacts that capture the effect that any potential driving force or critical uncertainty might have on FFF. These are shown graphically in Figure 2. Sourcing patterns capture any changes in the location of the origins for most freight movements. This includes procurement of raw materials, manufacturing, and distribution. Changes to flow destinations capture any shifting in the locations of final demand—such as increased urbanization. Routing impacts capture any changes that affect the path that product will take to move from origin to destination. This could include, for example, changes in mode, such as from over-the-road truck to intermodal or rail. Changes to a region’s flow volume include any increase or decrease to the total tonnage or volume. Finally, value density impacts capture events that change the characteristics of the freight being shipped. The value density is used as a proxy for all of the various changes that can occur since this ratio is a primary criterion for mode choice as well as supply chain network design. Products with a higher value density (think diamonds) tend to be shipped by faster more expensive modes (air) than lower value density products (bricks). In order to illustrate how the flow impacts are used, consider the effect that containeriza- tion has had on business. Containerization has very strong sourcing pattern impacts since it enabled the offshoring of manufacturing across the globe. This shifted the point of origin for most manufactured products from domestic locations distributed across the country to a hand- ful of ports—mainly on the West Coast. Containerization also has strong routing impacts since this shifting increased flow through fewer collection points (ports) and tended to use intermodal transportation to move the product inland to major metropolitan areas. There was minimal flow destination impact since containerization has not really changed location of the ultimate Impact on Flow Destination Impact on Sourcing Patterns Impact on Routing Impact on Flow Volume Impact on Value Density $ Figure 2. Descriptions of flow impacts.

14 Scenario Planning for Freight transportation infrastructure investment demand. There was strong flow volume impact as the number of containers moved through the United States increased dramatically. Finally, containerization has not significantly impacted the value density of the freight. Other technological innovations over the past 30 years have caused the value density to increase. 2.5.1.2 Thought Leader Presentations and Brainstorming Sessions The first day (Thursday, March 11) was a diverging session in which the participants were encouraged to brainstorm potential critical uncertainties and driving forces. The day consisted of seven speakers presenting different visions of the future along standard STEEP themes (social, technological, environmental, economic, and political). The expert practitioner participants were also asked to brainstorm their own potential driving forces during the sessions. The seven topics and keynote speakers were as follows: • A Nation Of Floridas: Aging, Changing Lifestyles & The Future of Freight, Dr. Joseph Coughlin, Director, MIT Agelab. • After The Storm: New Challenges for the Global Economy in 2010–2030, Sara Johnson, IHS Global Insight. • Public Policy and Freight, David Luberoff, Harvard University Kennedy School of Government. • Transporting Bits and Atoms, Professor Neil Gershenfeld, MIT Center for Bits and Atoms. • The New Age of Sensing, Prof. Sanjay Sarma, MIT Mechanical Engineering. • Wired for Innovation: How IT Is Reshaping the Economy, Prof. Erik Brynjolfsson, MIT Sloan School of Management. • Measuring and Managing Sustainability, Dr. Jonathan Johnson, The Sustainability Consortium. Complete summaries of each of the thought leaders’ presentations are in Appendix B, while video and slides are available on the companion DVD package and online at www.trb.org (search for “Scenario Planning for Freight Transportation Infrastructure Investment”). After each speaker, the attendees were asked to write down the three most critical drivers from that presentation that they thought might impact the FFF for the United States. Additionally, they were asked to classify which of the five Flow Impacts this force or uncertainty fit into. A sample sheet is shown in Figure 3. The attendees were asked to complete a separate sheet after each of the seven speakers as well as an additional one at the end of the day to capture any factors that were missed. Over 1,200 individual candidate drivers were collected. The sheets were collected after each session and the team began harmonizing them. As expected, there was a fair amount of redundancy in the responses. Also, many of the responses tended to mirror the speakers’ specific points. Beyond this, however, we were able to collect a large number of interesting and oftentimes unexpected responses. Unfortunately, we found that the respondents’ classification of the specific flow impacts for each driver was not worth capturing. In most cases, the attendees simply checked all of the boxes for each driver. The team boiled the submitted drivers down into 12 representative snapshot scenarios. The snapshot scenarios were then used in Friday’s interactive workshop. 2.5.1.3 Interactive Workshop The objective of the Friday session was to merge all of the different ideas and concepts that came up in the previous day’s discussions. The attendees were divided into six cross-industry

Scenario Development 15 groups and assigned two snapshot scenarios. Each team, facilitated by an MIT researcher, worked through a series of five tasks, as follows: • Definition—the facilitator makes sure the team understands the Snapshot Scenario they are assigned. • Adoption/Influence Matrix—the team estimates when and if the specific driver will influence the market. • Flow Impacts—the facilitator asks the team to provide insights into how the specific driver would affect the freight system: sourcing patterns, destination distribution, routing, flow volume, and value density. • Stress Map—the team allocates its assigned poker chips (used choice indicator) to a set of predetermined areas on an infrastructure map of the United States based on how it would be stressed under the given driving force. • Wrap Up—the team can provides any detail on what was missed. The facilitator’s guide with instructions is shown in Figure 4 and Figure 5. The participants each had a worksheet outlining these steps, as shown in Figure 6 and Figure 7. For the adoption matrix (see the middle section of Figure 6), each participant had poker chips— one for each time frame—and they had to place them according to the level of adoption or influence of that driver by that time period. They did this individually and then, after discussion, Figure 3. Potential driving forces/corresponding flow impacts data sheet. emaN ______________ ________________ ______________ ______________ :noisseS A“ noitaN fo ,”sadirolF eoJ nilhguoC revirD swolF thgierF no tcapmI noitpircseD / stnemmoC So ur ci ng Pa tt er ns Fl ow D es tin at io n R ou tin g Vo lu m e Va lu e D en si ty om eerht eht nwod etirw ,noisses siht ni draeh uoy tahw no desaB ierf erutuf eht tcapmi thgim kniht uoy taht srevird lacitirc ts .setatS detinU eht rof swolf thg f dna snoisnemid tcapmi tnaveler eht ni kramkcehc a ecalP .revird hcae fo noitpircsed trohs a edivorp ot eerf lee From the Thursday brainstorming sessions

16 Scenario Planning for Freight transportation infrastructure investment Note: The yellow circles to the right of each section contain the number of minutes each section is expected to take. Figure 4. Facilitator’s guide to interactive workshop (part 1). were allowed to change their choices. We found very little change in the individual versus team based influence curves. For the flow impacts task, the participants wrote specific impacts for that scenario on sticky pads and classified them under the appropriate flow impact. This was not a very fruitful portion of the exercise as the attendees had a hard time clearly separating the flow classifications. Finally, on the stress map, each participant placed three chips on the communal map. This was very successful—the participants tended to discuss this with each other as they placed their chips. A refinement would be to have them set a benchmark or baseline level of stress prior to “betting” on the impact of the scenario under question. There were also recommendations on how to modify the stress map to include more and different investment options. The adoption/impact matrices and summaries of the flow implications for each of the 12 snapshot scenarios are shown in Appendix C. Additionally, a description of the discussion and debate arising from two of the snapshot scenarios is captured in Appendix D. 2.5.2 Stakeholders Survey Following the workshop, the team created a web-based survey containing a set of representative driving forces that were culled from the analysis of the workshop results.

Scenario Development 17 The objective of the survey was to prioritize the set of driving forces and critical uncertainties that were generated by our industry experts. A wider net was thrown to incorporate a larger set of perspectives. Because this was going out to a large number of individuals, it had to be self-explanatory and short. Based on the 12 snapshot scenarios in combination with the feedback received from participants at the end of the March 11–12 Symposium, we developed 20 comprehensively described driving forces and asked each respondent to assess both the impact (assuming it occurs) and the probability of it even occurring. For the impact, respondents rated each force on a scale of 1 (no impact at all) to 5 (tremendous impact). For the probability, they indicated how widespread the factor will be over the next 10 to 20 years by selecting from the following choices (on a 1 to 5 scale): 1. Unlikely to Happen (0–20%). 2. Present at Fringes Only (20–40%). 3. Generally Present (40–60%). 4. Widely Present (60–80%). 5. Omnipresent (80–100%). The survey also collected information on role, industry, company size, and other demographic information. Note: The yellow circles to the right of each section contain the number of minutes each section is expected to take. 15’ 10’ Figure 5. Facilitator’s guide to interactive workshop (part 2).

18 Scenario Planning for Freight transportation infrastructure investment Group Number: 1 Shipper Carrier 3PL Gov. Acad. Driver 1. Definion XXXXX 2. Adopon Matrix Timeline Place one chip per column. Adopon 0 – 2 yrs 2 – 5 yrs 5 – 10 yrs 10 – 20 yrs 20 – 40 yrs 0 8 - % 0 0 1 0 6 - % 0 8 0 4 - % 0 6 0 2 - % 0 4 0 - % 0 2 3. Freight Flow Impacts In this secon, you will be asked to describe how this driver will impact sourcing paerns, flow desnaon, roung, flow volume and value density. Capture your thoughts on post - its and place them in the relevant bucket on the table. Figure 6. Adoption matrix/flow impacts from participants’ sample form (front).

Scenario Development 19 The survey instrument was completed and sent out in April 2010. A total of 264 complete and usable responses were collected from professionals across multiple industries and backgrounds. The results are discussed in Section 2.6, below. 2.6 Analysis of Driving Forces While the initial brainstorming session yielded over 1,200 potential critical factors to consider, most of these were repetitive or obvious. It became apparent that most of the attendees were heavily influenced by both their current work situation as well as the topics addressed by the specific speakers. For example, Professor Gershenfeld’s presentation on personal fabrication generated many suggestions of this having an impact—but, since we did not have a specific pre- sentation on nanotechnology, for example, no one mentioned it. Similarly, the rising and volatile cost of oil was another common submission—which is predominately a current concern. However, several potential factors came out of the analysis of these responses. We harmonized the responses and generated 12 factors that we called snapshot scenarios. Each of the snapshot scenarios is essentially a bundle of common driving forces. It is worth noting that the snapshot Figure 7. Stress Map of the United States from participants’ sample form (back).

20 Scenario Planning for Freight transportation infrastructure investment scenarios were formulated as end states rather than trends. Indeed, our experience proves that people react better to a description of what the future may look like rather than a simple direction it may take. 2.6.1 Snapshot Scenarios The 12 Snapshot Scenarios were as follows: 2.6.1.1 Aging of the U.S. Population The majority of the aging U.S. population lives alone in non-urban settings and still has very specific product and service needs shared within their extended social network. Women tend to exhibit a willingness to remain involved in the workforce. 2.6.1.2 Increase in Global Trade Global trade has made the majority of the countries strongly interdependent. This leads to higher volatility and extreme swings in GDP growth. Protectionism occurs but is only reactionary and is not permanent. The system is generally resilient with fluid trading blocks. 2.6.1.3 Rising Power of Emerging Markets The dollar and the Euro have weakened. Emerging markets gained in affluence and purchasing power as well as political stability and financial strength. They are less focused on exporting as a means to grow and thus, are importing more. 2.6.1.4 International Climate Regulation Climate change proved to be a reality with rising sea levels and higher overall temperature. However, the major disruptions actually stemmed from the higher variability in weather systems leading to more extreme and abrupt manifestations. A sense of urgency shared across developing and developed countries led to the creation of a Global Environment Council, which redefined business rules and regulations globally in alignment with the World Trade Organization (WTO). 2.6.1.5 Rise of Protectionism Following the COP15 debacle and a longer than anticipated recession, countries reacted by raising tariffs and duties to protect their own industries. (The COP15 was the 5th session of the Conference of the Parties from 15 countries that met in Copenhagen in December 2009 to discuss climate change policies. It was noted for its failure to come to any conclusions or consensus.) While the U.S. tried to save the WTO, internal debates between the states led to the U.S. also adopting protectionist measures—sealing the fate of the WTO. 2.6.1.6 New Technology: Personal Fabrication Fueled by the innovative high-tech tools, personal fabrication has become a reality. Open-source design and social network platforms empower people with creating the products that best reflect their personal universe and needs. Although more manufacturing will be done locally in the U.S., automation limits the number of jobs created. 2.6.1.7 New Technology: The “Senseable” Network Cheap wireless technology enables ubiquitous presence of sensors on products, vehicles, and the infrastructure. This allows collection, transmission, and analysis of multiple attributes such as temperature, humidity, location, and the like.

Scenario Development 21 2.6.1.8 Increase in Sustainability Regulations Several layers of all-encompassing regulations at the international, federal, and state levels are enacted. These regulations cover at varying degrees social responsibility, environmental emissions, resource usage, and trade practices. This results in a patchwork of often conflicting rules and penalties. 2.6.1.9 Increase in Sustainability Customer Demand Consumer demand for sustainable products is a reality led by different segments of the popula- tion including aging baby boomers, young mothers, and so forth. This is further fueled by innovative technology that enables consumers to make real-time decisions at the point of purchase. 2.6.1.10 Rise in Global Security Concerns Due to heightened security concerns, federal regulations now require 100% scanning and tracking of all flows within and across the country. These procedures require state-of-the-art technology that both consumes time and is costly. 2.6.1.11 Rise in Commodity Prices and Availability Unreliable supply or unpredictable demand has led to dramatic increase in volatility and price of commodities, including oil, metals, grain, and the like. Financial markets have further exacerbated the situation and new technologies have failed to solve the issue. 2.6.1.12 Additional Points of Entry Open Up The Panama Canal is completed. The Northwest Passage is now open during summer. Manufacturing is no longer concentrated in the Pacific Rim as regions such as Africa have emerged as reliable suppliers for Europe and North America. 2.6.2 Impact Matrices/Influence Curves The influence curve for each driving force is a graphical representation of how that factor will influence business (and thus potential freight flows) over time. We selected five time buckets (0 to 2 years, 2 to 5 years, 5 to 10 years, 10 to 20 years, and 20 to 40 years). The 0 to 2 years bucket can be considered current day while the 2 to 5 and 5 to 10 year buckets are more short term and the 10+ year buckets are long term. A k-means cluster analysis was conducted on the influence curves to identify any patterns. We found that all of the driving forces followed one of four types of influence curves: steady growth, rapid growth, peak and crest, and flat. These are shown in slightly stylized form in Figure 8. The steady growth and rapid growth factors tend to start and end in the same places, but the path is very different. The steady growth forces tend to start out slowly but gather steam and eventu- ally have widespread influence. The rapid growth forces have a more accelerated influence that reaches steady state. Peak and crest forces exhibit a rising influence but at some point lose their influence. The idea is that as the factor becomes widespread, the businesses and the economy adapt to it, and it loses any of its individual influence. Finally, there are flat forces that never really influence either the freight patterns or business in general. 2.6.3 Analysis of Snapshot Scenarios The detailed impact matrices for each snapshot scenario are shown in Appendix C. Table 1 provides a summary of the scenarios in terms of the general classification (social, technology, economic, environmental, and political), the flow impact (sourcing, destinations, routing, volume, and value density), and influence type (steady growth, rapid growth, peak and crest, and flat).

22 Scenario Planning for Freight transportation infrastructure investment 20% 40% 60% 80% 100% 0-2yr 2-5yr 5-10yr 10-20yr 20-40yr Steady Growth Rapid Growth Peak & Crest Flat 0% In flu en ce o n Fu tu re F re ig ht F lo w s Figure 8. Types of influence curves. Classification Flow Impact Influence Type Driving Force So ci al Te ch no lo gy Ec on om ic En vi ro nm en ta l Po lit ic al So ur ci ng D es tin at io ns R ou tin g V ol um e V al ue D en sit y St ea dy G ro w th R ap id G ro w th Pe ak a n d C re st Fl at Comment Aging of the U.S. Population X X X X Predetermined element Increase in Global Trade X X X X Tight consensus—potential blind spot Rising Power of Emerging Markets X X X X X Tied to global trade International Climate Regulation X X X X X Low uncertainty in short and mid term – high in long term Rise of Protectionism X X X X X High uncertainty with decreasing impact Personal Fabrication X X X X X High uncertainty in the long term The “Senseable” Network X X X Predetermined element Increase in Sustainability Regulations X X X X X Moderate levels of uncertainty Increase in Sustainability Customer Demand X X X X X Uncertainty and impact increases with time Rise in Global Security Concerns X X X X X Very low uncertainty and impact levels—potential blind spot Rise in Commodity Prices and Availability X X X X Too general for commodities—need to isolate fuel Additional Points of Entry Open X X X X Uncertainty and impact increases with time X = classification; ⇑ = flow impact increases; ⇓ = flow impact decreases; ⇔ = mixed flow impact. Table 1. Classification of the 12 single-shot driving forces.

Scenario Development 23 Note from Table 1 that the scenarios were a mix of social, technology, economic, environ- mental, and political forces. The flow impact and the influence type ratings were culled from the workshop responses. Some key takeaways from this analysis are as follows: • The participants tended to be overly influenced by current events and situations. The “Rise in Commodity Prices” force included fuel along with other commodities. The influence of fuel on the transportation professionals overwhelmed the other commodity effects. We separated out fuel from other commodities going forward. • The attendees classified the “Aging of the U.S. Population” force as being a steady growth type. While this force will have tremendous effect on freight flows, it can be considered a predetermined element. That is, it is a force that is slow changing and will occur regard- less of the scenario. The idea is that while this might be a driving force, it will occur in any and all futures and thus is not a defining or differentiating factor. We further refined the demographic forces for the stakeholders survey. Specifically, we focused on two of the more contentious aspects of demographic trends for the survey: life expectancy and urban density. • The “Senseable Network” force, like the aging force, was also seen to be a predetermined element. The presence of easily accessible sensor data should be included in all future scenarios. • The “Increase in Global Trade” force was interesting in that it had tight consensus in the group for being rapid growth. This implies that there might be a blind spot in the participants’ forecast of the future. This force is essentially an extension of the situation today—so it can be considered the “unofficial-official” future. It was important to further refine this in the survey to understand the dimensions of global trade that might have severe implications. • The “Rise in Protectionism” force was unique in that it was thought to have peak and crest type of influence. As protectionism increases, it has less of an effect over time. This was the only force that fit this pattern. • The three environmental forces (international climate regulation, increase in sustainability regulations, and increase in sustainability customer demand) were designed to capture different aspects of the environment’s impact on freight flows. The first captured the impact of interna- tional regulations and bureaucracy, the second captured the impact of domestic “top-down” green rules, and the last captured “bottom-up” or demand-driven green practices. The top-down forces were viewed as being more likely to occur and have more impact than the consumer- driven force. • The “Security Concerns” force was viewed as having little to no impact or influence on business. It was thought that this is more of the current situation and might be considered a predetermined element as well as a potential blind spot. 2.6.4 Stakeholder Survey Based on the results of the interactive workshop, a set of 20 more refined driving forces were created as shown in Tables 2 and 3. As shown in Table 4, there was a wide range of responses in terms of the expected impact and probability of occurrence. The average value (for both impact and probability) is the average ranking from 1 (low) to 5 (high). The standard deviation is a measure of the dispersion around the mean or average value. The coefficient of variation is the ratio of the standard deviation to the mean—it essentially normalizes the variability. The columns with the rank are simply the ranking of each of the forces by average, standard deviation, and coefficient of variation, respectively—having a score of “1” respectively means having the highest average, the lowest standard deviation, and the lowest coefficient of variation.

24 Scenario Planning for Freight transportation infrastructure investment Driving Force Description l a i c o S y g o l o n h c e T Ec on om ic En vi ro nm en ta l l a c i t i l o P o u rc in g S s n o i t a n i t s e D g n i t u o R e m u l o V y t i s n e D e u l a V Re - domestication of manufacturing Substantial re-domestication of manufacturing back to the United States X X X X X Reduction in global trade Sustained reduction in global trade volume (both imports and exports) possibly due to rise of protectionism, pandemics, etc. X X X Increased security threats Large increase in both the number and magnitude of security threats (domestic and abroad) X X X X Green regulations Stringent environmental and sustainability regulations adopted and strictly enforced by the United States and most other countries X X X X High and volatile fuel prices Dramatic increase in price and volatility of all oil - based fuels X X X X X X Rise of BRIC markets Ascendancy of consumer markets in Brazil, Russia, India, China, and other countries leading to increased demand for products manufactured in the United States X X X X Low-cost batch manufacturing Widespread adoption of technologies enabling efficient and low-cost small batch manufacturing for most consumer goods X X X X Online retailing Dramatic shift towards online purchase and point-of-use delivery leading to reduction of physical retail stores X X X X X X “Senseable” network Widespread ability to capture and monetize real-time sensing data on all products, vehicles, and facilities across a supply chain at essentially no cost X X Recycling regulations Omnipresent enforcement of regulations and rules requiring recycling and re-use of all manufactured products X X X X Average age of 100 Average life expectancy reaching 100 years in the United States X X X Note: BR IC = Brazil, Russia, India, China. Table 2. Candidate driving forces for stakeholders survey (part 1). Figure 9 plots the impact against the probability for each of the 20 driving forces. The driving force in the upper right corner (high impact and high probability) is the high and volatile fuel price force. Another way to look at the driving forces is to compare how they rank. Figure 10 plots the rankings of each of the driving forces for impact versus probability. Note that most of the forces have correlated probabilities and impacts. There are some anomalies, however. Reducing global trade and the re-domestication of manufacturing are both viewed to be very impactful (ranked 4th and 6th respectively) but are viewed to be extremely unlikely to occur (ranked 25th and 24th respectively). This implies that these might be blind spots worth includ- ing in the potential scenarios. Conversely, the recycling regulations, online retailing, and battery vehicles forces are viewed as being very likely to happen (ranked 5th, 4th, and 2nd, respectively) but will have next to no impact (ranked 10th, 12th, and 17th, respectively). These appear to be forces that are already having an effect today and should probably be considered as predetermined elements. Figure 11 shows the driving forces grouped into their STEEP classifications and plotted for impact versus probability. Note that the political forces are both the least impactful as a group, and the least likely to occur. The other four categories are fairly similar in location.

Scenario Development 25 The full distributions and plots of the probability versus the impact for each driving force are shown in Figures 12 to 16. Further analysis of the driving forces did not reveal any significant correlations in the rating of probability and impact to background (shipper, carrier, government, etc.), position (C-level, vice president, director, manager), sector, or firm size. The following insights were gathered from the survey results: • Most of the driving forces had highly correlated probabilities and impacts. This indicates that the survey respondents did not separate out the two different dimensions. The cases where there were anomalies stand out. • The following forces appear to be predetermined and therefore will be included to some degree in each of the proposed scenarios: high and volatile fuel prices, battery vehicles, “senseable” networks, and online retailing. • The two forces that seemed to be the most impactful without the corresponding high prob- abilities are reducing global trade and re-domestication of manufacturing. These are related Driving Force Description l a i c o S y g o l o n h c e T Ec on om ic En vi ro nm en ta l l a c i t i l o P o u rc in g S s n o i t a n i t s e D g n i t u o R e m u l o V y t i s n e D e u l a V East Coast ports Shifting point of entry for a majority of imports to the East Coast (e.g., due to rise in manufacturing in Africa, more ships using the Panama Canal, etc.) X X X X New agriculture powerhouses New countries (such as Russia or India) emerging as agricultural powerhouses supplanting the United States in some food commodities X X X X X Water scarcity Pervasive water scarcity in some regions leading to a reduction in exporting products that either contain water (e.g., fruit) or require a water intensive manufacturing process (e.g., soda, electronic chips) X X X X Green customer demand The sustainability and environmental “friendliness” of a product becoming the dominant factor for consumer demand for most products supplanting cost X X X X X Mega cities Over 90% of the United States consumers living and working in mega-region cities and built up urban areas X X X X Zero immigration Immigration into the United States reduced essentially to zero X X X Battery vehicles New battery technologies dramatically reducing the cost and increasing the efficiency and range of electronic vehicles X X X X Commodity price volatility Shifting geopolitics and other factors leading to tremendous price volatility for almost all commodities such as wheat, copper, and lithium X X X X Increased value density Advancements in manufacturing, materials and other technologies increasing the average value per ton moved in the United States from ~$700 per ton (in 2008) to over $2000 per ton X X X X Table 3. Candidate driving forces for stakeholders survey (part 2).

26 Scenario Planning for Freight Transportation Infrastructure Investment Impact of Driving Force Probability of Driving Force Driving Force A ve ra ge V al ue St an da rd D ev ia tio n Co ef fic ie nt o f V ar ia tio n A ve ra ge R an k St an da rd D ev ia tio n Ra nk Co ef fic ie nt o f V ar ia tio n Ra nk A ve ra ge V al ue St an da rd Co ef fic ie nt o f V ar ia tio n A ve ra ge R an k St an da rd D ev ia tio n Ra nk Co ef fic ie nt o f V ar ia tio n Ra nk Re-domestication of manufacturing 3.63 1.23 0.34 6 8 8 2.20 0.78 0.36 18 3 12 Reduction in global trade 3.70 1.23 0.33 4 9 7 2.20 0.84 0.38 19 7 17 Increased security threats 3.68 0.95 0.26 5 4 3 3.19 1.08 0.34 7 16 10 Green regulations 3.73 0.89 0.24 3 2 2 3.20 0.93 0.29 6 9 4 High and volatile fuel prices 4.44 0.67 0.15 1 1 1 3.94 0.83 0.21 1 6 1 Rise of BRIC markets 3.43 1.24 0.36 8 11 11 3.10 1.09 0.35 9 17 11 Low-cost batch manufacturing 3.22 1.31 0.41 14 15 13 2.79 1.04 0.37 12 12 15 Online retailing 3.26 1.54 0.47 12 18 16 3.21 1.07 0.33 4 15 9 “Senseable” networks 3.74 1.02 0.27 2 6 4 3.36 1.20 0.36 3 19 13 Recycling regulations 3.35 0.99 0.30 10 5 6 3.20 0.99 0.31 5 10 6 Average age of 100 3.05 1.30 0.43 15 14 15 2.39 1.27 0.53 17 20 20 East Coast ports 3.02 1.27 0.42 16 12 14 2.63 0.83 0.31 15 5 7 New agriculture powerhouses 2.62 1.64 0.63 20 20 20 2.54 0.80 0.32 16 4 8 Water scarcity 2.92 1.57 0.54 18 19 18 2.80 1.04 0.37 11 14 14 Green customer demand 3.32 0.95 0.29 11 3 5 2.71 1.04 0.38 13 13 18 Mega cities 3.24 1.14 0.35 13 7 10 2.91 1.11 0.38 10 18 16 Zero immigration 2.72 1.50 0.55 19 17 19 1.58 0.70 0.44 20 1 19 Battery vehicles 2.93 1.39 0.48 17 16 17 3.43 1.00 0.29 2 11 5 Commodity price volatility 3.53 1.24 0.35 7 10 9 3.11 0.86 0.28 8 8 2 Increased value density 3.38 1.28 0.38 9 13 12 2.65 0.75 0.28 14 2 3 D ev ia tio n Table 4. Stakeholders survey summary of impact/probability rankings. Figure 9. Driving forces plotted as average impact/average probability.

Scenario Development 27 Social Environ. Economic Technology Political Figure 11. Plot of STEEP factors for impact versus probability. in that they both signal a retreat from the global trading trends of the past half of a century. These are wild cards that bear inclusion in the final scenarios. • The coefficient of variation is a good indicator of uncertainty or variability. The driving forces with the most variability in the probability of occurring are average age of 100, zero immigration, green customer demand, and reduction in global trade. The high coefficient of variation (CV) numbers indicate a lot of disagreement over the potential outcome and while these forces might not define the different scenarios, they should be included. • While forces previously identified as either predetermined or wild cards will constitute the main features of the future scenarios, the rest of the forces will not be overlooked but rather woven into the storyline to enrich the scenarios on a case by case basis. 2.7 Selection of the Scenario Logic Based on the survey results and the input from the expert practitioners during the FFF sympo- sium, the team began identifying and classifying the different driving forces in order to select the underlying logic for the scenarios. Several ways of looking at the data were used. Figure 10. Plot of impact rank/probability rank.Rank of 1 = most important. 0 4 8 12 16 20 0 4 8 12 16 20 Pr ob ab ili ty o f D riv in g Fo rc e Impact of the Driving Force Reduce Global Trade Re-domestication of Mfg Battery Vehicles Recycling Regulations Online Retailing

28 Scenario Planning for Freight Transportation Infrastructure Investment Figure 12. Histogram of candidate driving forces (part 1 of 5). 2.7.1 Classification of Driving Forces One approach was to cluster the different forces and classify them based on their probability and impact scores. Forces with high impact and high probability were called structuring forces. Forces with low impact and high probability were labeled background forces. Forces with high impact and low probability were called wild cards. And, finally, forces with low impact and low probability were labeled variations to theme. The reason for clustering and classifying the forces in this way is to identify any insights into the practitioners’ “mental models” of the world. 2.7.1.1 Structuring Forces These are forces for which both the impact and the probability of occurrence are rated very high. These can be highly influenced by what the participants are experiencing today. They are important, but might not be uncertain enough to be used to define the scenario logic. These forces were as follows: • Dramatic increase in price and volatility of all oil-based fuels. • Stringent environmental and sustainability regulations adopted and strictly enforced by the United States and most other countries. • Large increase in both the number and magnitude of security threats (domestic and abroad). • Widespread ability to capture and monetize real-time sensing data on all products, vehicles, and facilities across a supply chain at essentially no cost.

Scenario Development 29 Figure 13. Histogram of candidate driving forces (part 2 of 5). • Ascendancy of consumer markets in Brazil, Russia, India, China, and other countries leading to increased demand for products manufactured in the United States. • Shifting geopolitics and other factors leading to tremendous price volatility for almost all commodities such as wheat, copper, and lithium. • Omnipresent enforcement of regulations and rules requiring recycling and re-use of all manu- factured products. 2.7.1.2 Background Forces These are forces for which the impact is low while the probability of occurrence is rated high. These are less critical in the formulation of scenario logic. However, different elements can be woven into the larger background stories for the scenarios. These forces were as follows: • Dramatic shift towards online purchase and point-of-use delivery leading to reduction of physical retail stores. • Over 90% of the United States consumers living and working in mega-region cities and built-up urban areas. • New battery technologies dramatically reducing the cost and increasing the efficiency and range of electronic vehicles.

30 Scenario Planning for Freight Transportation Infrastructure Investment Figure 14. Histogram of candidate driving forces (part 3 of 5). 2.7.1.3 Variations to Theme These are forces for which the impact and the probability of occurrence are rated low. Interestingly, these can become cornerstones of the scenarios. Forces that are viewed as highly improbable can be blind spots. These forces were as follows: • The sustainability and environmental “friendliness” of a product becoming the dominant factor for consumer demand for most products, supplanting cost. • Widespread adoption of technologies enabling efficient and low-cost small batch manufacturing for most consumer goods. • Shifting point of entry for a majority of imports to the East Coast (e.g., due to rise in manufac- turing in Africa, more ships using the Panama Canal, etc.). • Average life expectancy reaching 100 years in the United States. • Pervasive water scarcity in some regions leading to a reduction in exporting products that either contain water (e.g., fruit) or require a water intensive manufacturing process (e.g., soda, electronic chips). • Immigration into the United States reduced essentially to zero. • New countries (such as Russia or India) emerging as agricultural powerhouses supplanting the United States in some food commodities.

Scenario Development 31 Figure 15. Histogram of candidate driving forces (part 4 of 5). 2.7.1.4 Wild Cards These are forces for which the impact is high while the probability of occurrence is rated low. These are even more important to the scenario logic. These forces can represent things that the practitioners believe could dramatically change their operations, but since they have too low a probability of occurring, are most likely not planned for. These forces were as follows: • Substantial re-domestication of manufacturing back to the United States. • Sustained reduction in global trade volume (both imports and exports) possibly due to rise of protectionism, pandemics, etc. • Advancements in manufacturing, materials, and other technologies increasing the aver- age value per ton moved in the United States from ~$700 per ton (in 2008) to over $2000 per ton. 2.7.2 Other Forces In addition to the 20 candidate forces that were evaluated in the survey, we asked for suggestions on other driving forces that were not included. We received over 100 open-ended responses. The

32 Scenario Planning for Freight Transportation Infrastructure Investment Figure 16. Histogram of candidate driving forces (part 5 of 5). three most common were: aging transportation infrastructure, green energy for transportation, and growing labor strength. Others that were collected include the following: • Increased worker and driver requirements. • Increasing disparity of knowledge workers versus manual labor. • World population levels. • Digitization and miniaturization of supply chains. • Level of taxation for businesses. • Stronger non-U.S. trading blocs (less Asian dependence on U.S.). • Changing cultural face of America (Hispanics). • Rising sea levels. • Dollar valuation. • Solvency of airline industry. • Rising power of China. • Opening of Northwest Passage. • Forming of political and trading blocs (Venezuela, Bolivia, and Iran). • Lack of credit availability. • Advances in robotics make logistics workers redundant. Several of these mirrored some of the other forces—such as non-U.S. trading blocs. Some of these were included in the eventual scenarios.

Scenario Development 33 2.7.3 Summary of Scenario Logic Out of the analysis, several key elements arose. These helped to determine which forces and uncertainties should be used to define the scenarios, which to feather in, and which to ignore. A number of the forces (aging population and increasing urbanization) were found to be so exceptionally certain to occur that they were classified as predetermined. This means that the trends are in effect and are exceptionally unlikely to deviate. These forces were to be included in all of the scenarios. The only exception to this is that the specific geographies for the increased urbanization to occur were allowed to vary between mega-cities (New York City, Chicago, etc.) and second-tier cities (Madison, Burlington, Boise). Another group of forces had high levels of uncertainty with two (or more) potential end points. These included the level of trade (ranging from global to blocs to regions to local only); resource availability (ranging from restricted and allocated to available); and manufacturing structure (ranging from highly centralized to decentralized). These became prime candidates for the opposing structure to create the scenarios. In the end, the team selected to frame the scenarios by juxtaposing the global trade and the resource availability forces. The resulting scenarios are discussed in the following section.