Planning Freight-Efficient Land Uses: Methodology, Strategies, and Tools (2022)

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4 Land-use planning is essential to fostering quality of life and harmony among the myriad social and economic activities that take place and compete for space in urban and metropolitan areas. Land-use planning also profoundly affects the commercial supply chains that deliver the goods and services that constitute urban and regional economies, and contribute to the quality of life. If land-use plans are not well-thought out, they can detrimentally affect private commercial supply chains and local communities. A land-use plan that, for instance, artificially increases the physical separation between the distribution centers (DCs) that handle e-commerce deliveries and the intended receivers—households and commercial establishments—in the city center, will increase the vehicle miles traveled (VMT) of the e-commerce traffic. This, in turn, will increase congestion, emissions, and accidents. In such cases, reducing the distance is likely to be socially beneficial, as it will reduce private costs and externalities that impact local communities and the environ- ment. Research has shown that the private-sector objectives of supply chain efficiency and cost minimization are generally well aligned with the social objective of minimizing transportation externalities (Quak and de Koster 2006; Holguín-Veras et al. 2011d). Increasing the efficiency of supply chains benefits the private sector while reducing transportation externalities. This align- ment between private and social objectives is not a coincidence; it is a reflection of the profound interconnections between supply chains, the economy, and the externalities generated by freight activity. The best way to grasp these interconnections is to examine the economic foundations of cities. Urban and metropolitan areas exist because they are efficient markets where goods and ser- vices are traded, individuals can find suitable employment opportunities, and companies can find the personnel they need. At the heart of these activities is the production and consump- tion of physical goods. Without a doubt, the vast majority of human and economic activities— including highly sophisticated service activities—utilize physical goods in one form or another. In this context, the ultimate goal of land-use planning, in relation to freight activity, should be to help achieve a seamless integration of freight activity into urban, suburban, and rural areas in ways that foster quality of life and livability, enhance economic competitiveness and efficiency, and reduce congestion and such related externalities as emissions, crashes, and conflicts with other road and sidewalk users. Achieving this goal, however, requires the implementation of land-use initiatives that seek to 1. Maximize the beneficial impacts associated with the production and consumption of physical goods, while mitigating or eliminating the externalities produced by the resulting freight traffic; and 2. Recognize the dramatic effects of economic and technological trends—particularly, e-commerce and novel freight technologies—that are reshaping, and will continue to reshape, consumer behavior, transportation systems, land use, and the economy. C H A P T E R 1 Introduction

Introduction 5   It is important to consider the production and consumption of goods separately from the freight traffic that is generated. The reason is that freight generation—both freight production and attraction—is, in most cases, an inherently beneficial activity that increases economic welfare and well-being by making it possible for businesses and individuals to access needed supplies. In most cases, the places of production are physically separated from the places of consumption; therefore, the physical transport of goods to consumption locations is required. The resulting freight traffic— a byproduct of the economic transactions—produces negative externalities. Instead of curtailing freight traffic, which is bound to have negative impacts on the economy, the best approach is to use policies to maximize the benefits of the activities that produce and consume goods, while mini- mizing the negative externalities produced by the associated freight traffic. Properly accounting for the effects of e-commerce and emergent technologies on consumer behavior, transportation systems, land use, and the economy is imperative because their interactions determine the amount and nature of the freight activity. The number of deliveries and shipments in the United States, driven by e-commerce, has more than tripled since the time before e-commerce. Signs indicate that the speed of the transformation and the depth of the impacts produced by e-commerce will increase with the eventual deployment of such emergent vehicular technologies as autonomous freight vehicles, including delivery droids, drones, and others. These trends have a direct implica- tion on land use and transportation. The fully or semi-automated freight vehicles tend to increase the distance from facilities to customers and decrease the delivery frequency while promoting long-haul travel. Drones and delivery droids shift the location of facilities closer to customers and increase the frequency of deliveries. Readers interested in the analyses of emergent economic and technological trends should review Appendix A. The term freight activity is used here to collectively refer to all manifestations of production and supply chain systems—the flows of freight (the supplies) and freight trips (the vehicles), and the associated pickups and deliveries—at the urban, suburban, and rural levels. When formulating land-use planning and policy, it is critical to take into account the range of possible impacts on supply chains and freight activity. Considering the impacts on local supply chains and small businesses is particularly important because the vast majority of supply chains and the freight activity generated are primarily local, and are associated with serving the needs of businesses and households (the latter as a result of e-commerce). The analyses in Chapter 5 reveal that the freight-intensive sectors (FIS) of the economy—those for which the production and consumption of supplies are a central element of their business activity—represent 45% of the number of establishments and about 49% of the employment in U.S. metropolitan areas. The service-intensive sectors (SIS)—where service activities are the core of the business—represent the rest. Thus, inefficiencies in supply chains directly impact about half of the U.S. economy (the FIS), and indirectly impact the other half (the SIS), because all sectors consume freight supplies. The estimates of the freight activity generated are discussed in Chapter 5. In considering freight activity, it is important to make a distinction between two sets of metrics: (1) deliveries received and shipments sent out, and (2) the freight vehicle trips that arrive at the establishment (freight trip attraction) and the freight vehicle trips that depart from the establish- ment to deliver shipments elsewhere (freight trip production). While the number of deliveries and shipments are associated with the characteristics of the establishments, the number of freight trips produced depends on the ability of freight carriers to consolidate multiple deliveries and shipments in the same trip. In situations where multiple deliveries are made to locations near each other, they could be made as part of the same trip. In contrast, a single delivery to an isolated location requires a freight trip. Fostering consolidation of deliveries destined for nearby areas, whenever possible, could reduce the number of freight trips and the associated externalities, without materially impacting the production and consumption of the supplies. These metrics do not distinguish between types of vehicles, yet the most common types of delivery vehicles are vans Emergent technologies E-commerce Consumer behavior, private-sector practices

6 Planning Freight-Efficient Land Uses: Methodology, Strategies, and Tools and small trucks. These vehicles typically represent between 80% to 90% of the total freight traffic in urban areas (Holguín-Veras et al. 2017b). Throughout the Guide, the term business-to-consumer (B2C) is used to refer to the freight activity associ- ated with consumer-oriented e-commerce, while business-to-business (B2B) represents B2C’s counterpart for commercial establishments. The estimates produced using the models from NCFRP Report 37: Using Commodity Flow Survey Microdata and Other Establishment Data to Estimate the Generation of Freight, Freight Trips, and Service Trips: Guidebook indicate that the number of deliveries and shipments associ- ated with B2C is larger than that for B2B (Holguín-Veras et al. 2017b). In a typical American city, B2C represents 55% of all deliveries and shipments, while B2B represents the remain- ing 45%. In terms of the freight traffic generated, however, the story is different. The reasons for this difference are the number of vendors and carriers involved, and the spatial density of deliveries and pickups. An important difference between the freight traffic for B2C and B2B is their geographic concentration. While B2C is spread throughout the metropolitan area in pro- portion to population, B2B tends to be concentrated in commercial areas. Another important factor is the number of competitors in the market: in B2B, thousands of carriers participate in the market; in B2C, a large portion of the market is dominated by a handful of parcel carriers and the United States Postal Service (USPS). Thus, the carriers involved in B2C are able to make multiple deliveries and shipments within the same trip, reducing the number of trips made overall. In contrast, the ability of B2B carriers to consolidate is very limited because typically, a single delivery or shipment creates a freight trip. The challenge in the case of B2C is that there are no publicly available data that can be used to convert deliveries and shipments into freight trips. Complicating matters, the range of potential values in B2C is large, ranging from one— such as a single delivery to a house in the suburbs—to about 100 deliveries or shipments per trip— such as multiple deliveries to a large building. Assuming that the average number of deliveries per route is equal to one for suburban locations, and between five to ten for dense urban areas, the B2C share of the metropolitan traffic would be between 10% to 20% of the total. If B2C were an industry sector, it would be fourth (after the Retail Trade, Wholesale Trade, and Accommo- dation and Food Services) in terms of the traffic generated. The analyses of the composition of B2B traffic presented in Chapter 5 indicate that in U.S. metro- politan areas, the Retail Trade sector is the largest generator of freight traffic, with 30% to 40% of the total traffic; followed by Accommodation and Food Services, with 10% to 30%; and then Wholesale Trade, with 9% to 20%. It is not a coincidence that the top two contributors to freight traffic are primarily receivers of supplies, while the third largest contributor represents the suppliers. These results reflect the fact that the supplies needed by retail stores, restaurants, hotels, and the like, have to come from somewhere. These supplies come from warehouses and distribution centers, and direct deliveries from sectors such as Manufacturing and Agriculture, Forestry, Fishing and Hunting. In commercial areas, the farther the distance traveled from suppliers to their customers, the larger the externalities produced by the associated freight activity, the higher the delivery costs, and the less competitive for business the urban area becomes. The last two impacts are a major concern because the bulk of freight traffic is generated by small businesses, and, increasingly, by households since the advent of e-commerce. As discussed in Chapter 5, between 45% to 65% of commercial freight traffic is generated by establishments with fewer than nine employees. Disregarding the land-use needs of these ordinary supply chains that provide the goods needed by businesses and households will lead to unnecessarily long journeys that increase VMT, adding traffic along large portions of transportation networks, and increasing the frequency of double-parked vehicles, which restrict road capacity and increase congestion, emissions, accidents, and noise pollution. The fundamental tenet of this Guide is that land-use planning should strive to achieve FELU, defined in Chapter 2, as those that “minimize the private and external costs, or social costs,

Introduction 7   associated with the economic activities that consume and produce goods, at all stages of pro- duction and consumption; including reverse and waste logistics.” The Guide identifies five prin- ciples that should be at the core of effective FELU programs: Principle 1: Minimize the private and external costs of supply chains and their stages. Principle 2: Reduce the distance traveled at supply chain stages, upstream and downstream. Principle 3: Mitigate or eliminate the externalities at supply chain nodes and LTGs. Principle 4: Recognize and account for local conditions. Principle 5: Engage all stakeholders. Principle 1 is that land-use planning should consider the effects of land-use decisions across all supply chains because only focusing on the effects at specific locations could lead to signifi- cant unintended effects. Principle 2 provides a pragmatic and robust rule that operationalizes the FELU decision-making process. The gradual implementation of this rule will result in more compact and efficient supply chains. Principle 3 reflects the social and economic imperative of ensuring that LTGs, such as distribution centers and ports, do not negatively impact the sur- rounding communities. Principle 4 states the importance of context appropriate and sensitive FELU initiatives. Principle 5 recognizes the importance of participatory exercises to ensure that all involved contribute to the development of sound land-use planning and policy. The Guide is rigorous in the treatment of the subject matter and pragmatic in the formulation of the suggested FELU process. It emphasizes the economic activities that create supply chains and freight traffic because a secure understanding of these interconnections will ensure that land-use planners and policymakers are aware of the broader impacts of their decisions. Emphasis has also been placed on the use of the team’s research results. These results are described to help the reader understand the role played by supply chains in the economy, the associated externalities, and the ways land-use planning can play a constructive role in fostering freight sustainability. To ensure the Guide provides a holistic treatment of how to address freight issues, the team included the urban freight transportation decision-making process and the freight transpor- tation initiatives identified in NCFRP Report 33. The freight transportation initiatives from NCFRP Report 33 were combined with the ones designed as part of this project, to form a comprehensive framework that encompasses both land-use and transportation initiatives. The various decision-support tools were expanded to include the transportation initiatives as well. The inclusion of transportation initiatives in the Initiative Selector is particularly important because this tool has been designed to be the point of entry for the exploration of the Guide, and the identification of potential solutions to freight issues from both the land-use and the transportation sides (Holguín-Veras et al. 2021). The Guide and the Initiative Selector allow the user to explore land-use initiatives, transpor- tation initiatives, or both. The team expects that by presenting land-use and transportation initiatives together, transportation and land-use practitioners will be able to familiarize them- selves with the tools used by both areas. Achieving a better understanding of each type of initia- tive’s strengths and limitations will facilitate better coordination. This is particularly important because combining land-use and transportation initiatives may have substantial positive results. That is, land-use initiatives can help achieve transportation objectives, while transportation initia- tives can help foster FELUs. These synergies must be exploited to the fullest. It should be noted that the main emphasis in the Guide is on developing FELU programs— a concrete set of initiatives aimed at improving things in a given time horizon—as opposed to developing FELU plans that describe a long-term vision of land use in a given jurisdiction intended to improve freight efficiency. The emphasis on FELU programs reflects the research team’s desire to ensure the Guide provides actionable guidance to the majority of land use and transportation agencies interested in fostering freight efficiency in the short, medium, and long terms.

8 Planning Freight-Efficient Land Uses: Methodology, Strategies, and Tools The Guide has 10 chapters, including this introduction. Chapter 2 provides basic definitions relevant to the FELU concept and its use. Chapter 3 describes the elements of a FELU program. Chapter 4 discusses the challenges related to the process of stakeholder engagement, and poten- tial initiatives to enhance the effort. Chapter 5 summarizes the research conducted by the team regarding urban and metropolitan economies, supply chains, and freight activity. Chapter 6 outlines the suggested process to analyze existing conditions at a given jurisdiction. Chapter 7 succinctly describes the wide range of land-use initiatives that could be used to foster FELUs. Chapter 8 describes the basic elements of the urban freight transportation decision-making process, the counterpart of the land-use management and planning process. Chapter 9 contains a comprehensive list of transportation initiatives that could be used to support FELU efforts. Chapter 10 discusses a set of case studies. The Guide has four appendices: • Appendix A: Emerging Market and Technological Trends describes market trends and emerging technologies, such as the rise in e-commerce and the use of autonomous delivery vehicles, and how they will alter freight transportation, especially by changing how often and how much freight is moving through our roadways, railways, waterways, and skies. • Appendix B: Interaction Index Research expands on the method of calculating the interaction index and presents results of applying this method to various MSAs. • Appendix C: Clusters of Metropolitan Statistical Areas groups MSAs with similar economic characteristics. • Appendix D: Descriptions of Typical Supply Chains explains supply chains in more detail and examines key supply chains in terms of the role of facilities and the relationship among facilities.