In one of the most anticipated sessions at the Warehouse Education Resource Council's (WERC) annual conference in April, top-level executives from different transportation modes shared some of the key challenges faced by their businesses. In the truckload sector, Jim O'Neal, president of O&S Trucking, a full-service carrier based in Springfield, Mo., who was recently elected chairman of the Truckload Carriers Association, said the biggest current trend has been softening demand. "In the shorter term, the challenge is survival," said O'Neal. There have been 13 consecutive months of contraction, he noted. Marginal carriers will not last long in such a soft market. As companies close their doors, capacity will tighten.
On the subject of collaboration, he said that, as pressure mounts to drive costs out of the supply chain, shippers need to resist the temptation to take out frustrations on drivers. "The driver is someone's father, husband, wife. They want to drive that truck. They want to drive, not stand around and sit around," said O'Neal, adding that driver amenities at shipper facilities need to be improved.
With regard to the rail sector, J. Vann Cunningham, assistant v.p. of economic development for Burlington Northern Santa Fe (BNSF, Fort Worth, Texas), said that rail volume has increased 11% per year over the past 5 years. Despite some recent softening in building products, he said the industry's growth pace will continue in 2007, buoyed by strength in consumer products.
Cunningham acknowledged that road congestion, driver shortages and fuel cost issues in the truck industry are driving the growth of rail. But road and traffic congestion has implications for rail as well in the ability to locate and build new terminals. He said in some regions of the United States, especially where some of the larger DCs are being built, BNSF is running out of places to put people and new facilities.
Looking forward, Cunningham noted that transloading product from imported containers on the West Coast will become more constrained because of space issues, and more companies will have to look at options for moving containers further into the interior of the United States. On a final note, Cunningham urged attendees at the conference to support Senate Bill 3742, which would provide a 25% tax credit for all new rail facilities and allow the sector to increase its investments to meet future volume demands.
In the LTL world, Patrick Reed, executive v.p. and COO for FedEx Freight reviewed how much consolidation the sector has undergone in recent years.He said consolidation in the LTL sector will continue, and customers' desires to see their shipments will expand globally back to Asia.
"Challenges are also opportunities for great companies," said Reed. "If you look at strategic planning and execution, the companies that do that in good, bad and ugly times, that's where you differentiate the good from the great." On the topic of the nation's transportation infrastructure, Reed noted that U.S. highways can't handle current volumes, which is going to lead to very big problems five to 10 years from now.