fastlane
10 for ’ 10
ECONOMISTS ARE IN BROAD AGREEMENT THAT
a recovery is under way, but that’s not to say our troubles are over. In fact, it’s likely the logistics/supply
chain community will continue to experience difficulties throughout the year.
What are the biggest concerns? With apologies to
David Letterman, I have developed a “Top 10” list of
issues that bear watching in 2010. In no particular
order, they are as follows:
1. The precarious health of the LTL industry. Weak
volumes and cut-throat pricing have taken their toll
on the LTL sector, which continues to struggle with
inadequate earnings. YRC is the best-known example,
but there are others as well. Con-way, for instance, lost
$110 million in 2009. This will not change without a
significant improvement in the economy.
2. The price of diesel fuel. After a temporary dip, fuel
prices are once again on the rise. According to
Department of Energy projections, the average retail
price for diesel this year will be $3.00 per gallon.
Although that’s way down from a few years back, it’s
still high enough to be a major factor in the cost of
moving goods. And we still have $80-a-barrel oil.
3. Rail regulation. A bill currently in Congress
would eliminate antitrust law exemptions for railroads and change the way the industry is regulated.
While captive shippers certainly deserve protections, I
believe this bill, if passed, could be a dangerous first
step toward more regulation.
4. The nation’s deteriorating infrastructure. In spite of
stimulus spending, we are making very little progress
toward building the infrastructure needed to keep up
with our growing rail and highway traffic. We need to
think gray as well as green. If we don’t, we’ll pay the
price in congestion and delays. It’s been projected that
at current construction levels, highway capacity will
have expanded by 9 percent by 2043. Traffic, however,
will have surged by 135 percent. This is not exactly a
recipe for an efficient national infrastructure.
5. The Mexican trucking dispute. We need to settle
this once and for all. After 17 years of foot dragging,
it’s time for the U.S. government to stop making
excuses and give Mexican truckers what we promised
under the 1993 North American Free Trade
Agreement—full and free access to U.S. highways.
er, shippers may find trucks harder and harder to come
by. Many carriers sold off equipment during the slowdown. And given their weakened financial condition,
it’s unlikely they’ll be able to rebuild capacity quickly as
demand picks up. Operators may be in short supply as
well—many drivers lost their driving jobs during the
recession and moved on to other occupations. The
result could be capacity shortages more severe than we
saw in 2005–2007.
7. The sustainability movement and industrial real
estate. For all its benefits, the
green movement has the
potential to create serious
headaches for at least one
group: real estate investors.
While most new construction is “green,” many existing, vacant buildings are
not. The owners of these
buildings may be forced to
invest in costly retrofits in
order to compete with new,
eco-friendly construction.
8. Quality. Unfortunately,
quality has sometimes been a casualty of the economic
decline. Many of us have cut corners to control costs,
but quality must be restored in the system. This will be
a challenge for 2010.
9. The weakened logistics service provider (LSP) sector.
Like many other service providers, LSPs have suffered
during the past two years. While some have responded
by coming up with new ideas and processes, not all
have. Those who haven’t, must. If they succeed, the
result will be a system of improved, more creative
providers—a plus for the entire distribution system.
10. Vested outsourcing. I believe this concept—
under which clients pay LSPs for results, not processes—will establish a strong foothold during 2010. In
fact, it could change the landscape dramatically. ;
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider of logistics management
advisory services, and author of Logistics Outsourcing – A Management Guide and co-author
of The Role of Transportation in the Supply Chain. He can be reached at cliff@cflynch.com.
