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There is less predictability than ever in marketplace factors, consumer demand, the economy and drivers impacting freight costs. In fact, one can summarize today’s transportation industry in simple terms: “The new normal is that there is no normal.”
This state of mind among shippers was clearly underscored on my recent tour around the country as NASSTRAC convened Transportation Networking Meetings in major cities such as Chicago, Minneapolis, Long Beach and Nashville. Through these meetings, NASSTRAC brought together panels of transportation and supply chain executives to accelerate its educational mission to bring shipper insights and best practices to the marketplace. Here are some of the primary transportation factors having a significant impact on supply chains this year and into 2013, according to those shippers:
|Shipper panelists in Chicago featured Michael Cole, Kraft Foods; Brenda Marasa, The Packaging Wholesalers; Joe Lombardo, Nestle USA; and Carey Skoglund, Ace Hardware.|
Transportation costs continue to rise. Some panelists say their costs are up by as much as 15 percent because of higher rates, not due to increased freight volume. In fact, many of the major trucking companies, Class I railroads and 3PL companies continue to report significant profits and strong balance sheets – partially because they were able to increase rates and revenue. It’s important to note that this happened in a non-constrained market with only lackluster volume and growth.
Some shippers acknowledged that some of the factors having an impact on increasing rates include driver-related challenges, rising insurance premiums, fuel prices, and new equipment costs. Many shippers expressed real concern that 2013 will continue to see significant rate increases — driven in part by these factors and coupled with legislative issues and compliance requirements coming out of Washington. Most agreed that we need to continue to aggressively oppose unwise or excessively burdensome regulations that have a negative impact on transportation and supply chain productivity.
Finding needed capacity can be a struggle. Capacity in the trucking industry is in a tenuous equilibrium state, and available capacity is not abundant in many lanes – particularly during the produce season and holiday periods. Many shippers say they continue to do what they can to make their freight patterns, shipment configurations, and supply chain patterns as attractive as possible to their carrier partners.
As for rail capacity, railroads have invested throughout the recession and recovery to ensure that they will have the capacity to pick up the slack as the recovery gains momentum. Excess capacity continues to be a primary concern for the ocean shipping sector, and load factors due to unused capacity also have been unfavorable for the air cargo sector. Indeed, shippers continue to strategically consider all mode options as they shift and change their freight transportation patterns.
Re-engineering Supply Chain Practices. Many shippers said they are making meaningful changes to their business and transportation strategies in order to make sure their supply chains reflect the realities of the current economy and freight transportation industry. Last year, retailers have reduced their inventories on hand and now require their suppliers to deliver only the product they need. As a result, retail inventories have been relatively stable while wholesale and manufacturing inventories have increased. Yet there seems to be some shifting going on with inventory strategies. Not only are shippers re-engineering their supply chain strategies, they also continue to leverage technology (oftentimes with the support and investment from their providers) to give visibility into shipping patterns, on-time delivery performance, and other important transportation factors. wt