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Metropolitan Chicago’s Freight Cluster Part 2, Innovation

Note:This is the second in a three-part Policy Updates series onMetropolitan Chicago's Freight Cluster: A Drill-Down Report on Infrastructure, Innovation, and Workforce:

Metropolitan Chicago's Freight Cluster Part 1, Infrastructure

Metropolitan Chicago's Freight Cluser Part 2, Innovation

Metropolitan Chicago's Freight Cluster Part 3, Workforce

Innovation -- the process of conceiving and developing new products, processes, technologies and business models that result in goods and services that are faster, cheaper, or otherwise improved -- plays a central role in enhancing the economic competitiveness of regions around the world. Innovation's role in stimulating economic growth is even more pronounced in relatively wealthy regions like Chicago. For the Chicago region to maintain its status as a leading economic center it must use innovation to spur job creation and economic growth.

Metropolitan Chicago's Freight Cluster: A Drill-Down Report on Infrastructure, Innovation, and Workforce, recently released by CMAP, identifies major issues affecting the regional freight cluster in the 21st Century. The major findings of the report are being summarized in a Policy Update series. The first post in this series discussed infrastructure challenges in the region and concluded with implementation action areas to address system coordination, innovative financing, and coordinated land use. This post looks at the role of innovation in the freight cluster and how harnessing the innovative potential of regional firms will best position the cluster for sustained growth. A final post in the series will look at freight and the regional workforce.

Innovation is often associated with fields such as biotech, aerospace, or information technology (IT), yet new products and processes are also essential for the freight cluster. Rail track and haul technology improvements, for example, have enabled the railroad industry in the past 30 years to triple its productivity, double its value, and cut its average cost per ton-mile in half.

Industry clusters can help spur innovative activity as firms within a cluster are better poised to anticipate and respond to new buyer needs, use existing relationships to formulate innovative ideas, and rapidly transform these new ideas into an improved product line, process, or model. Firms within a cluster also benefit from a specialized labor pool that is more flexible to act on new innovations. Freight innovation metrics suggest that firms in metropolitan Chicago benefit from the innovative advantages of participating in a cluster, as the region is a world center for patent output in fields such as railway transportation and logistics.

CMAP's freight report focuses on three emerging trends in freight innovation that will affect future growth in the cluster. The first area, innovations in technology-driven supply chain management, increases efficiency and gives firms greater control over shipments. Innovations in this field also help improve shipment reliability and consistency, which is a primary concern of freight shippers (see chart below).

Technologies in this area include radio frequency tags (RFID), advanced GPS routing, and backhaul utilization systems. Firms that can offer these technologies will capture increasing segments of the freight market. Metropolitan Chicago may be poised to realize innovative supply chain management techniques because of its strength in the logistics sector. Employment in this sector is concentrated in the region, grew by 15 percent this past decade, and is spread among a wide variety of firms ranging from worldwide logistics giants to innovative startups. However, firms in the region have voiced concerns about the difficulty in attracting the high-skilled workers needed to manage complex supply chain solutions, as well as familiarizing existing workers with new technology requirements.

Innovations in terminal and carrier operations include facility management software, intermodal cranes, distributed power systems, and electronically-controlled braking systems. These innovations will improve loading/unloading times, fuel efficiency, and travel speed. Most notably, innovations emerging from within the region allow terminals with the same footprint to lift, process, and store more containers than before, and do so more quickly as well. As a result, new freight investment can be sited where infrastructure and a freight-savvy workforce are concentrated, but available land is relatively scarce, such as the southside of Chicago and the south suburbs.

Finally, "green" innovations in freight will become more important as the price of petroleum continues to fluctuate and firms come under more stringent environmental regulation. Fuel efficiency is the primary focus of equipment manufacturers, while digital sensors can also be used to help carriers conserve fuel. The region's status as the nexus of rail movement bodes well for the cluster as nationwide firms look to mitigate their emissions through more fuel-efficient modes.

To capitalize on the region's innovative potential in freight, the report concludes with targeted implementation action areas. These action areas recommend the region:

  • Maintain comparative advantages in functions such as intermodal moves and logistics.
  • Promote innovative industries including supply chain management, intelligent transportation systems, fuel efficiency and alternative fuels, backhaul utilization, modal transferability, facility operations, and carrier improvements.
  • Bolster underperforming segments of the cluster including couriers, specialized freight, and water freight.
  • Promote university research that leads to commercialization through public-private research endeavors.
  • Expound the region's innovative status by drawing attention to its competitive advantages in freight beyond the well-known infrastructure assets.

For a full discussion on these action areas, proposed implementers, and concrete next steps, check out CMAP's freight cluster summary report as well as a companion technical document.