From Austin Consulting
Last month, I wrote about supply chain trends that are affecting manufactures. This month, I will focus on the transportation trends that all manufactures must also take into account.
Trends in Transportation:
Third Party Logistics – Many manufacturers today are outsourcing their logistics and transportation operation to third party providers (3PL). In fact, 3PL providers accounted for an estimated $176.2-billion in revenues in North America in 2013. When you look at 2013 from a world-wide prospective, they accounted for an estimated $685.1-billion. This is a growing trend that allows manufacturers to focus on their core competency (making great products) and shifts the burden of managing their logistics to experts who are better equipped to handle the day-to-day operating issues.
Rail Car Shortage – During the recession of 2008, rail car owners started scrapping thousands of rail cars. Since cars were not being used to anywhere near capacity, it made more sense for them to get rid of these cars than continue to hold on to them. Since then, crude oil shipments have jumped in the US from about 11,000 carloads in 2009 to about 400,000 carloads in 2013. This growing backlog has manufacturers pushing back delivery dates all the way to 2016. When you combine a shortage of rail cars, an increase in crude oil shipments, the lower cost of rail shipping, and an increase in intermodal shipments, you can see how rail networks are being stretched beyond capacity.
Driver Shortage – There has been a drastic drop in the number of available truck drivers. While the numbers have been steadily increasing over the past four years, the number of available drivers is still 6.4% below its 2007 peak. The number of drivers increased 11.4% from 2002 to 2007, before falling 13.4% from 2007 through 2010. An increase of 8.1% has been seen from 2010 to 2013. One key factor is that driver pay is lagging behind the average US wage. A challenging schedule, increasing regulations and pay shortages are just a few reasons why there are fewer truck drivers on the road. When you take into account that not many people are choosing truck driving as a professional, you can see how this issue can greatly affect the number of available trucks on the road, reducing supply and increasing demand.
Hours of Service Rules – In an effort to make our nation’s highways safer, the US government changed the hours of service rules affecting truck drivers in July 2013. These new rules changed the number of continuous hours a driver could be on the road and also increased the number and length of drivers’ breaks. This causes various issues with regard to productivity. When you combine a decline in the number of hours a driver can drive, with the current driver shortage, the compounding effect of these events is causing a severe impact on trucking capacity and costs. In studies conducted at the end of 2014, the hours of service rule changes were at the top with regard to operational impacts seen throughout supply chains. So, after almost a year a half, this is still a top issue for carriers and shippers.
Taking all of these trends into account, you can see that the supply chain, transportation and logistics industries are heading for major changes. All proactive companies are doing what they can to stay on top of these trends and adjust accordingly. Austin is staying ahead of these trends as well, and can discuss with you how these trends may impact your business.