Wednesday, April 27, 2016

Future 'Shocks':

Future 'Shocks':

  U.S. trucking industry faces bumps in the road ahead.

For U.S. truckload and LTL (less than truckload) carriers, the road ahead is likely to be a little bumpy. And problems in the trucking industry will inevitably be passed through to the shippers whose goods those freight lines carry.

Capacity is beginning to exit the trucking market, a trend likely to accelerate by the second half of 2016, as higher operating costs and lower revenue push smaller trucking operators off the highways, and the number of drivers is falling. For the second month in a row, the U.S. trucking industry lost jobs, in the face of an overall jobs increase, shedding 3,000 employees in February and March.

New regulations coming in the next several months and the increasing influence of a major retailer are poised to cause significant turbulence in the U.S. trucking market. With electronic logging devices or ELDs being mandated, drivers and their employers will be forced to comply more strictly with safety-driven regulations, reducing the daily number of miles a driver can legally travel. Lower utilization will result in fewer truck miles over the road, effectively shrinking industry capacity further. Fewer daily miles also will result in smaller paychecks for some drivers, at least in the short term, forcing some out of the industry and further reducing the available driver pool.

On the demand side, Amazon's growing presence and its evolving supply chain practices could impact the trucking industry greatly over in the next few years. Aside from the company insourcing some final-mile deliveries or investing in its own private trailer fleet, the company is impacting the way goods move nationwide. With its ever-expanding distribution center network, shipments that were once truckload are now split into several LTL shipments, and the need for truckload carriers providing team driver or premium services is increasing.

Nearly every one of the 25 largest LTL carriers, as well as many of the nation's largest truckload carriers and intermodal marketing companies, does business directly with the company or for one of its suppliers. With such a market penetration, any abrupt shift in Amazon's transportation strategy, and its more than $8 billion in domestic transportation spend, could cause ripples throughout the logistics industry.

With a potentially rough road ahead, smart shippers are working with knowledgeable supply chain experts, who can cushion the bumps and function as "shock absorbers."

Kirk Shearer
800-989-0054 x103

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