DC Velocity - January 2014

s p ec i a lre p or t OU TL OOK

As for what services they plan to buy, the lineup hasn’t changed much in recent years. As has been the case with the past three surveys, less-than-truckload (LTL) services topped the list of planned transportation expenditures. Sixty-seven percent of respondents said they would purchase LTL services in 2014. Fifty-six percent said they would use truckload carriers, while another 55 percent said they would buy small-package shipping services. (See Exhibit 1 for the full breakdown of planned transportation expenditures.)

Trucking costs are closely tied to diesel prices and shipping capacity, so our survey asked respondents for their take on how these were trending. Despite declines in crude oil prices to under $100 a barrel at the time of the survey, respondents are not convinced of the oil market’s stability. Seventy-one percent said they believed oil prices would rise in 2014, leading to higher diesel fuel prices. And in spite of a barrage of media reports about a looming freight capacity shortage, 53 percent of respondents said they expect capacity to remain ample. Thirty-one percent are unsure, and only 16 percent expect a freight capacity crunch.

When asked for their reasons, about one-third of the respondents said carriers would find a way to maintain adequate capacity and deliver on their service commitments. Another one-third said the sub-par economic recovery has muted freight demand and kept supply flush.

CONTROLLING COSTS THROUGH AUTOMATION

Survey takers were also asked about their planned use of contract logistics services in 2014. Fifty-two percent will not use third-party logistics services, compared with 48 percent that will. Of those respondents hiring third-party logistics service providers (3PLs), 31 percent planned to increase their use of contract services. Fifty-nine percent said their use of 3PLs would stay the same, while 10 percent expected to curtail their outsourcing activity.

As for spending on material handling products and services, racks and shelving led the list of planned purchases, cited by 42 percent. Second on the list were safety products, named by 40 percent. Third were lift trucks, at 36 percent.

When it comes to planned software purchases, warehouse management systems (WMS) topped the list, just as they did last year. Twenty-five percent expect to buy a WMS and another 18 percent a transportation management system (TMS). Inventory optimization systems placed third, with 16 percent.

Automation appears to be gaining ground as a way for companies to hold down distribution spending. Although the tried-and-true method of consolidating LTL shipments into truckloads topped the list of planned cost-control measures at 34 percent, carrier rate renegotiation and automation of more work processes were close behind, tied at 31 percent. The third-most-cited approach was cutting back on express shipments, cited by 24 percent. (See Exhibit

2 for the full breakdown.)

The plurality of respondents in the latest poll came from manufacturing, at 34 percent of the overall total. Distributors, 31 percent, were the second largest sector represented. The remainder worked for logistics service providers ( 18 percent), retailers ( 9 percent), or other types of businesses ( 9 percent). ;