fastlane
Top 10 challenges for 2011
WHAT ISSUES WILL BEAR WATCHING IN 2011? WITH APOLOgies to David Letterman, I have once again conjured up a “Top 10” list
of developments that should be of concern to logistics and supply
chain managers. Some are positive. Some are negative. But all are
important. In no particular order, they are as follows:
1. The economy. Although the recession has officially been declared
over, there are many who will disagree. With millions of Americans
still out of work, it’s difficult to see a significant recovery on the near
horizon. Until we do, we must be concerned about the financial state
of carriers, shippers, and individuals. It will be years, if ever, until we
get back to “business as usual” in the supply chain.
2. The price of diesel. According to Department of
Energy projections, diesel fuel will average $3.23
per gallon in 2011, or 25 cents higher than in 2010.
While we’re likely to see some fluctuations, I
believe fuel will continue to be a thorn in the side
of both carriers and shippers.
3. Rail regulation. As was the case last year at this
time, there is still a bill in Congress that would
change the way the rail industry is regulated. While
I sympathize with captive shippers, I think rail
reregulation would be bad public policy, leading to
higher prices, reduced productivity, and capacity
constraints. It’s difficult to tell what the new Congress will do, but
hopefully, this bill will collapse under its own weight.
4. Continued deterioration of the nation’s infrastructure. In spite of
stimulus spending, we’ve made little, if any, progress on this front. We
are nowhere near where we need to be to accommodate our growing
volumes of highway and rail traffic. If the economy improves dramatically, it will only exacerbate an already bad situation.
5. The surface transportation bill. Legislation to replace the current,
and oft-extended, highway spending bill is expected to emerge from
Congress this year. It will be interesting to see how it is handled by the
new chairman of the House Transportation and Infrastructure
Committee, John Mica. This bill has been languishing in the House
for 18 months.
6. The national export initiative. In his 2010 State of the Union
Address, President Obama outlined a strategy to double U.S. exports
over the next five years, from $1.57 trillion in 2009 to $3.14 trillion by
2015. This may be difficult given the limitations of our current infrastructure and port capacity.
The nation’s ongoing trade dispute with Mexico won’t help the
cause. Mexico, one of our most important trading partners, has levied tariffs on various imports
from the United States because we can’t seem to
resolve our long-standing differences over cross-border trucking.
7. Higher truck rates. Rising fuel costs and new
regulations governing engine emissions will mean
higher truck rates this year. Some carriers have
already put through rate hikes, but look for more
ahead. We may be shifting to a carrier advantage
position. Much will depend on
what happens to YRC.
8. Trucking capacity. If the
economy improves, capacity
problems could develop. Many
carriers sold off equipment
during the slowdown, and
potential driver shortages
could limit the number of
vehicles on the road. While
new truck orders are up, we
still could experience an
imbalance.
9. Ocean shipping. With the Panama Canal
expansion scheduled for completion in 2014, several steamship companies are ordering new post-Panamax vessels. Look for continued expansion
and retrofitting at some Gulf and East Coast ports
in order to accommodate the giant ships.
10. Security. Following the recent attempt to
blow up cargo planes with package bombs, we
can expect to see further security restrictions on
international shipments. It will be impossible to
plug every leak, but the government and carriers
will keep scrambling to seal up the gaps as they
are detected. ;
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.
