Logistically Speaking: Are Things Getting Better or Are We Just Getting Used to Lousy?

June 6, 2012
The only thing constant about change is that nothing seems to change.

In September 2010, I led off a presentation to a group of conveyor equipment manufacturers with happy news from the government (released earlier in the day): the Great Recession had ended, as of June 2009. This announcement was greeted with, at best, a tepid response from the audience. The general consensus in the room was, “It sure doesn’t feel like it’s getting any better out there.”

Also in 2010, we conducted a survey asking MH&L readers to compare how much they expected to spend on material handling equipment in 2011 versus what they were spending in 2010. Fifty-seven percent expected to spend the same amount, while 31% expected to spend more. When we conducted a similar survey earlier this year, the responses were identical: 57% of you expect to spend the same amount in 2013 as you’re spending this year, and 31% expect to spend more.

So basically, nothing has really changed in two years, despite the fact that we’re officially no longer in a recession. This economic malaise is what some pundits refer to as the “new normal,” which holds that due to situations beyond our control (the Eurozone, natural disasters, the rising costs of raw materials, etc.), we need to get used to the way things are now because this is as good as it’s going to get. I have my own description for this—I call it the “Same Ol’ Lousy.”

When’s the last time we saw any kind of positive economic news that didn’t have a qualifying “but” or “however” attached to it? Seems like it must’ve been at least five years ago.

One of the transportation industry’s definitive benchmark tools is the Freight Pulse report, conducted by equity research firm Morgan Stanley with MH&L. This survey series, which dates back to 2001, examines the current usage of U.S. domestic transportation, and offers a look at what shippers expect to be paying for freight transportation over the next six months. The latest report, Freight Pulse 25, is full of that good news/bad news dichotomy we’ve learned to expect during the past three years of post-recession/pre-recovery. Economic growth expectations are rising among shippers, notes Morgan Stanley analyst William Greene, but fears of tighter capacity are mounting for most transportation modes.

Currently, the majority of the roughly 1,000 shippers polled believe capacity is balanced for truckload, intermodal, national LTL and regional LTL. However, looking forward six months to the fall shipping season and beyond, a drastic swing toward very tight capacity is expected, particularly for truckload freight. Sixty-five percent of respondents anticipate truckload will be tight by the end of 2012, whereas only 36% say truckload is tight right now. It will also be at least 10% more difficult to find LTL capacity, both regional and national, by the end of the year.

Now part of that is due to a belief that the economy will improve and there will be more freight to be hauled, which is good news indeed. But at the same time (and I’m sure you saw this one coming, since it always comes), whenever capacity tightens, prices go up. It’s just the way it works. And the expectation is that truckload freight in particular is going to become more expensive in the near future, with Freight Pulse respondents predicting a rate hike as high as 3.0% by year’s end.

With unemployment ticking back up in May (from 8.1% to 8.2%), with the Eurozone financial crisis nearing the boiling point, with total confusion over the potential effects of the new Hours of Service rules (scheduled to go into effect in 2013), and with politicians already in full-scale campaign mode (meaning no work is being done at all in Washington, which come to think of it is pretty much business-as-usual), the only thing we know for sure is that the surest place to find any help is from within. The smarter you get about managing your supply chain, the less you’ll have to worry about what Washington is or isn’t doing.

Follow me on Twitter @supplychaindave.

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