Infrastructure Act could redraw the map for transport, logistics and supply chains
What this means for the transportation and logistics sector
The recently approved Infrastructure Investment and Jobs Act ("the Act") seeks to allocate approximately $250 billion to modernize the transportation and logistics infrastructure in the US. The funding is expected to have a significant impact on the many companies involved with the modernization effort, but it also likely would affect any company with a significant supply chain in the US.
A just-in-time economy requires just-in-time logistics: confidence that shipments will occur on time and on budget. Yet, precise and efficient scheduling is often challenging today. Decaying or congested bridges, highways, rail lines, tunnels and airports can cause sudden bottlenecks and lengthy delays. Those challenges could eventually ease as the infrastructure improves, allowing companies’ operations to become more efficient and cost-effective.
The Act also includes money to improve the rural transport infrastructure, which could give companies new geographical and logistical options for sourcing, storing and transporting goods. A safer, less-congested transport infrastructure could also reduce accidents and commute times in certain locations — while improving air quality and boosting employee productivity and job satisfaction in a newly hybrid workforce that combines remote and in-person options.
Where will the money go?
About $110 billion is tagged to fund roads and bridges projects, particularly those that cross multiple states and regulatory jurisdictions, or where revenue streams are uncertain. Historically, these projects have languished. An additional $16 billion is reserved for projects too large or complex for traditional funding programs.
The Act also reauthorizes the 2015 FAST Act for five years, emphasizes rural investments, and establishes climate change mitigation, resilience, equity and safety as priorities. This draws a new map for companies: new places to do business and new paths for supply chains to run.
Business also could benefit from funds invested in passenger and freight rails. Amtrak (the National Railroad Passenger Corporation, a government-owned corporation) is expected to receive $66 billion for maintenance, expansion and modernization, and public transit $39 billion for modernization and improvement. Besides the quality-of-life benefits that could make cities more attractive to employees and consumers, a better-running rail network could help supply chains run more efficiently.
Since passenger trains often share rail networks with freight carriers, when passenger trains are delayed, freight trains often are too. An upgraded network would help make train freight more efficient and predictable.
Air freight has been growing — due in part to e-commerce — and fast delivery sometimes requires air transport. The Act offers airports $25 billion to address repair and maintenance, reduce congestion and cut carbon emissions. That could help air freight achieve fewer delays, lower costs and provide greater sustainability.
The Act includes $7.5 billion to help build out a national electric vehicle charging infrastructure, which also could help both transportation firms and the companies that hire them achieve a goal that more stakeholders are demanding: a realistic decarbonization strategy.
Transportation and logistics could benefit from cyber, ESG and sustainability funding.
The legislation has other significant measures. Its cybersecurity provisions could help transport companies strengthen their own defenses. Its priorities of sustainability and diversity (including measures to encourage more women in trucking) could help companies achieve environmental, social and governance (ESG) goals.
Other provisions could help meet a long-standing demand to streamline and speed up environmental reviews. These include the elimination of certain requirements, the consolidation of decision-making across government agencies and new, speedier deadlines. Since many of these measures build on proven best practices, they could succeed in speeding up permitting without sacrificing environmental protections.
What should companies do now?
We’re still in the early phases of a transport infrastructure upgrade; disbursement will take time. Meanwhile, these guidelines can help prepare for upcoming opportunities:
Companies in transport and logistics can assess the new requirements, especially for environmental permitting, cybersecurity and sustainability. They can also consider new business opportunities, including in parts of the country where the infrastructure gap is largest, and they can upskill workers to meet new digital opportunities.
Every company that does business in the US can assess how better transport in the US could change their optimal global footprint. When combined with the Act’s proposed new broadband investments, better options for supply chains and overall operations might emerge.
This legislation could be a partial solution to the country’s transport needs, and its bipartisan support could signal that further federal infrastructure spending — likely necessary to close the massive infrastructure investment gap — could be politically viable.
Modernize
Billions of federal dollars are allocated to road, bridge, rail and other modernization projects, with significant implications for businesses that depend on this infrastructure.
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Decarbonize
The provisions signal that the drive toward a more sustainable economy powered by low-carbon alternatives—including wind, solar, hydropower and nuclear—is bipartisan and considered to be in the national interest.
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Secure
Cybersecurity is not optional. The bipartisan deal allocates funding for governments to upgrade their networks, and invests to better secure power and water infrastructures.
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Fund new infrastructure
The infrastructure agreement draws on unused pandemic relief funds, strengthened tax enforcement for cryptocurrency and other offsets for funding.
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