Logistically Speaking: The Worst May Be Behind Us, but It's Still Kind of Gloomy

Logistically Speaking: The Worst May Be Behind Us, but It's Still Kind of Gloomy

The trucking industry's challenges are slowing down the rate of recovery for the whole supply chain.

What if they revived the economy but nobody noticed? Is it possible that the overall economic situation could brighten considerably and yet still leave shippers in the dark? In her annual State of Logistics Report, Rosalyn Wilson, transportation analyst with Parsons, observes that all of the negative news from 2013 and the winter storms in early 2014 are making it difficult for supply chain professionals to see improvement when it occurs.

Delivered at roughly the mid-point of every year, Wilson's State of Logistics Report (under the auspices of the Council of Supply Chain Management Professionals and sponsored by Penske) is one of the most comprehensive overviews of the supply chain's impact on the U.S. economy, and vice versa. It offers the industry a mostly objective perspective on the freight logistics sector, pointing out the highlights and lowlights in the U.S. business logistics system.

Although capacity has been and will continue to be tight for the foreseeable future, Wilson nevertheless expects 2014 to be "a banner year," partly because the first half of the year saw the strongest freight performance since the end of the recession back in 2009, with freight shipments up 13%. Also, shipper-related costs dropped 1.9% last year as companies increased the productivity of their supply chain, so that's another encouraging sign that shippers are getting a better handle on logistics management.

 

 

Unfortunately, the trucking industry, which moves 70% of all U.S. freight, is having a difficult time meeting the demand for capacity. In fact, "difficult" might be putting it too lightly. According to Eric Starks, president of transportation forecasting firm FTR, truck capacity is so tight right now that there's "little relief in sight until the next recession," meaning capacity won't ease up much until there are either more trucks on the road (not likely to happen) or the economy cools down somewhat (a more likely scenario).

Though not as negative in her outlook as Starks, Wilson admits that the trucking industry faces a number of obstacles that have no easy fixes, with the driver shortage being the top concern of trucking executives. "More and more drivers are walking away from this industry because of the increased burden [of safety regulations] and decreased wages," she states.

While some of the larger trucking companies are responding to the driver shortage by increasing wages, that same tactic is leading to a rising number of companies going out of business. Wilson cites statistics that show that "the increase in expenses and prohibitive cost of adding new drivers reduced truckload capacity by 2.5% in 2013," with nearly 22,000 trucks pulled off the road due to company shutdowns.

Transportation costs as a whole grew 2.0% in 2013, which is actually good news since the rate of growth the previous year was 3.0%. Breaking it down by mode, trucking costs were up 1.6%, rail was up 4.9%, water rose 4.5%, and air remained unchanged from a year ago. Warehousing costs, meanwhile, were up 5.6%.

Given that 2013 was at best a lackluster year economically, Wilson sees enough positive signs so far this year -- particularly, the rise in freight shipment volumes -- to predict that 2014 will be a much better year for manufacturers and retailers, if not necessarily for the trucking industry. "The health of the freight market is a solid indicator of the direction the economy is moving," she says. "All indications are that freight will grow moderately for the rest of the year and the economy should follow suit."

 

 

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