Insights on the Future of the Supply Chain (Logistics 2011)

The Transportation forum at RILA was as informative as a crowded panel format could ever allow it to be, with real insight; three major points stood out….

1. Capacity is a real and major fear for the retail shipper community, as it is in the transportation world in general in early 2011.  even large (and “mega”) carriers with clout, who had managed to avoid being bitten by the capacity crunch in the second quarter of last year (2010) fear this year as it unfolds….
2. Truck driver shortages are a primary reason for that capacity fear.  First you have demographics going into the recovery (driver shortages turnover was up to 150% in the last cycle); added to that longer term, secular story is the pressure of government regulations, CSA 2010 and, particularly, changed hours of service (HOS).  One retailer noted that its 26 DCs nationwide (up from less than half that many in the last 10-12 years) were set up to be a days drive or less from their stores; reducing HOS by only one hour (or say less than 10%) could move a high percentage of its connections to two days (or up 100%), likely necessitating a major strategic re-think, withy large capital considerations….
3. Intermodal is “sexy” – so said one who should know, Mark Yeager of Hub Group.  But intermodal is clearly hot (see the numbers in the recovery) and domestic intermodal is white hot (see the numbers even through the Great Recession, where volumes were the only rail commodity to show any increase at all).  And domestic intermodal conversion can solve three existing and/or emerging problems for shippers:  supplying capacity in an era of truckload shortage; lowering overall supply chain costs (among other reasons is its significant fuel and labor cost advantages); and lowering carbon footprints in an era when that topic has moved from cocktail chatter to a real decision point.  Improved rail service, better information technology and huge(recent and planned) capital expenditures on the network have all helped.  But it is no “done deal” – volume growth was restricted last year by a shortage of domestic 53’ boxes.  This year it appears the industry overall, from IMCs like Hub to TTX to the individual rails, will add something north of 10% in 53’ box capacity.  But will that be enough?  Could the rails fail to deliver just when their product is “hot”, a situation familiar to any experienced retailer?