How much does bad infrastructure cost your business? Does inadequate public transportation investment or aging roads impact your overall costs? Finally, what prices would you (and your customers) pay to correct the problems?
These are broad questions, and the answers demand collective solutions. However, like it or not, infrastructure problems do have a negative economic impact.
Billion Dollar Productivity Crater
Let’s take Auckland, for example. New Zealand’s most populous city and faces a costly infrastructure problem. According to the New Zealand Herald, congested roads cost businesses NZ$1.9 billion a year. That’s 2% of the city’s annual GDP.
The paper cited a report attributing the cost to commuters stuck in traffic. High congestion has also impacted couriers. Some trucking firms refuse to service the most gridlocked areas. Others, meanwhile, add drivers and trucks because slow moving traffic limits the number of trips a truck can make any given day.
The report estimates that infrastructure improvements could reduce the economic impact by 68%.
Bad Infrastructure, Dismal Outlook
It’s a lot worse in the US, and it’s set to get even worse than that if things stay the same.
The American Society of Civil Engineers gave US infrastructure a D+ in its 2017 Report Card. That’s the same grade the US got in the previous report card in 2013. Decaying roads will cause congestion and transportation delays. Consequently, goods will become more expensive to produce and deliver.
The organization estimated if nothing changes, it will cost the economy $4 trillion by 2025, $14 trillion by 2040.
Either Way, It’ll Cost You
According to the National Business Review, Auckland has to overcome an NZ$7 billion shortfall to address regional infrastructure problems.
Back in the US, the underfunded transportation system has an $836 billion backlog of highway and bridge capital needs needed to repair and expand the bridges and roads across the country.
Whether governments address these issues or not, businesses and their customers will have to pay. They’ll pay higher costs for products or higher taxes (presumably) to cover new infrastructure spending.
This reality underscores the importance of company’s to make their supply chain as efficient and cost effective as possible.
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