New Year, Same Logistics-Related Challenges

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Logistics Management Jan 10, 2012

Now that we are officially into 2012, it is a good time to assess just how things stand in regards to what is ahead of us.

Compared to recent years, the dismal 2009 comes to mind, it stands to reason that things could truly be much worse. But at the same time we have many things to be concerned about. Here are a few of those:

-The fuel situation at the moment is, surprise, entirely uncertain. Tensions in the Middle East are at sky-high levels, especially in Iran, and any significant event could have a very negative impact on prices. What’s more, oil barrel prices are consistently checking in at more than $100 per barrel and have been there for a few weeks. Meanwhile, the price per gallon for diesel has been down six straight weeks and is now below $3.80 per gallon. It will be interesting to see how long it stays that way.

-Infrastructure: While on vacation over the holidays, I was driving to visit friends and saw a bumper sticker on the car in front of me, which simply said: “Fix the Infrastructure.” I banked that one for future reference. If you are a reader of this Web site and magazine, then you are well aware of the situation we are in—and have been for longer than a little while—when it comes to this. We have the same challenges we have had on this front for so long now, whether it be funding issues, political grandstanding, and the lack of a true freight policy as it relates to infrastructure. I wish I had an opportunity to speak to that person ahead of me on the road. Perhaps he had some ideas.

On a more positive note, the TIGER program completed its third round late last year, and it would be an understatement to say it is not successful. Many of the TIGER programs are freight focused and doing their part to create jobs and help prop up the economy, too, at a time when it is badly needed.

-Hours of Service: As reported by LM, the Federal Motor Carrier Safety Administration (FMCSA) issued its final HOS rule, which is set to take effect in 2013. While this rule is sure to create a host of issues for shippers and carriers, many industry stakeholders maintain it could have been worse. Case in point: the final rule retains the current 11-hour daily driving limit (the FMCSA was considering lowering it to 10 hours).

There are many other things on the horizon, of course. These are just a few which popped into my mind.

In 2012, it seems that freight rates will continue to see steady gains, even while tonnage may not keep pace with that escalation. Fair or not, that is what is happening.

One major reason for this—in the trucking market—has to do with still-tight capacity and an ongoing driver shortage. This is something that is not getting better. Need proof? Consider this: the turnover rate for truckload drivers at large fleets headed north for the fourth straight quarter, according to data from the American Trucking Associations, with the most recent quarter of data tracked by the ATA seeing turnover hit 89 percent following 75 and 79 percent levels in preceding quarters.  The 89 percent turnover represents its highest level since the first quarter of 2008. And since the first quarter of 2010, it has gone up 50 percentage points and averaged 81 percent year-to-date in 2011. Staggering statistics indeed.

But here is a stat that is really good news: the U.S. Department of Labor reported that 200,000 new jobs were added during the month of December and the unemployment rate dropped to 8.5 percent, which is still well above pre-recession levels but also represents its lowest level in about two years.

Other things to watch, follow, and be aware of include things like consumer spending and confidence, housing starts (which are showing signs of life lately), and inventory management. Are running leaner inventories truly the new normal? Also on the horizon could be a renewed push towards near-shoring in the wake of natural disasters abroad in recent years, which altered domestic supply chain operations.

These things are really the tip of the iceberg, and that is what makes covering this industry both exciting and challenging. I am not sure what is going to happen exactly, but it sure looks like 2012 is going to be an exciting ride. One more thing: did I mention it is an election year, too? I guess that will be another blog for another time.

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