It is that time of year when pundits attempt to predict what will happen in the year ahead; and every year or so, I try it myself. Sometimes I have been right, and other predictions have fallen flat. For example, I really thought this would be the year for the Dallas Cowboys, but that no longer looks promising. Other predictions are starting to surface in blogs and postings, i.e. rates are going up, they are going down, capacity will Be an issue, then again, maybe not; but I believe there are several developments that will result in some fundamental changes in the way we currently, or will manage our supply chains. Some are new. Some are a continuation of those already begun.
- Tariffs and Trade Wars (?). We should be concerned about tariffs and possible trade wars, particularly with China. President Trump seems to be determined to impose tariffs on foreign goods which he believes will protect U.S. manufacturers. Most economist believe that no one ever “wins’ a trade war in the end. In 2017, the U.S. imported $505B worth of good from China. We exported to them only $130B. This does not seem like a war we can win, but one that could affect our supply chains – everything from facility locations, product origins, to rates.
- “Amazon Effect.” We have all heard of this one. I liked a Seattle Times definition, “Huge E Commerce company uses the internet to sell stuff cheap, wiping out the competition.” On a more serious note, driven by the aggressive customer techniques of Amazon, the term has come to stand for rapid and dependable service, often same day deliveries, free shipping, and instant visibility. To accomplish this, Amazon has established hundreds of distribution points in the country from which their shipments are made. So-called millennials are making 54% of their purchases on line, and Amazon provides over 50% of that. For a retail competitor, supply chain management will become even more challenging in 2019. (Amazon will also keep us on our toes with threats, or patents of squadrons of delivery drones, distribution centers in the sky, and skyscraper warehouses.)
- Industrial Property. To compete with Amazon, a mad dash to industrial property is creating a shortage of available sites, and when they are available, prices are significantly higher. According to CBRE, availability decreased over 7% in the second quarter of 2018. The age of many buildings is becoming a problem as well, since they are ill suited for modern distribution operations.
- Robotics can operate in small spaces more efficiently than humans, and we will see companies turning to smaller buildings to control real estate costs. This savings can be devoted to robotics. In larger buildings their use will be increased significantly to supplement manpower.
- Infrastructure, or the lack thereof, will continue to be an issue with little action expected from the Federal government. States are realizing that if they need infrastructure improvements, they must provide it themselves. Look for increased state fuel taxes and/or tolls to fund these.
- One of the interesting findings to come out of the “2019 Third Party Logistics Study” was that more shippers are realizing that they do not have the technology to reach their objectives, and are turning to their third-party partners to provide this. Already, 93% of shippers feel that technology capabilities are a necessary part of 3pl offerings. Technology is expensive, and as these offerings increase, expect rates to increase to cover the expense.
The last three actually began in 2018, or before, but will be with us for the foreseeable future unless we see a significant downturn in the economy.
- Driver Shortage. This condition has been with us so long, it seems like business as usual. However, as shipments get smaller, more trucks will be needed, as well as men and women to drive them. The shortage has existed primarily in the truckload sector, but it could spread to LTL in 2019.
- Capacity Issues will increase, not because of equipment shortages, but due to the lack of drivers. I do not see autonomous vehicles as a solution for several years.
- Transportation Prices will rise, and 2019 will demonstrate just how the economic principle of supply and demand works.
Notwithstanding some of our current management challenges, keep in mind that things could be worse. Stay calm, focused, keep an eye out for lost delivery drones and have a happy and blessed 2019.