HAPPY NEW YEAR!

As we come to the end of another eventful year, our thoughts begin to turn to 2016, and whatever developments it might bring. With several trucking issues and infrastructure legislation behind us, at least for the time being, hopefully we will have smoother supply chain sailing ahead. Predicting the future in any year is difficult, but particularly so in an election year. The candidates tend to set a tone through their rhetoric and in many cases, polarize the country. This will be even more pronounced this year, as we choose among the most eclectic group of candidates we have seen in several years. Depending on who is elected, 2017 and forward could bring some dramatic changes.

But the election is almost a year away, and life goes on. Economists believe that the six – year economic expansion will continue, although at a modest pace. A Wells Fargo senior economist predicts a growth rate of 2.5% which will be about the same as 2015. The existing oil glut should keep gasoline and diesel fuel prices at, or close to their current low levels. Employment should continue to grow, and auto sales and housing starts are expected to continue at the 2015 record volume.

But what about the supply chain? The transportation consulting firm FTR agrees, but feels, at least for the time being, there are signs of activity slowdown in the supply chain. Decreasing intermodal moves, lower new tractor orders, high inventories, manufacturing weaknesses, and fewer driver supply problems all point to a decrease in supply chain activity. Given that the economy continues to grow however, we probably will see rate increases by the end of the year.

Given its influence in previous years, it would be shortsighted to ignore Amazon as a major factor in 2016. With each passing month, Amazon looks more and more like a logistics service provider. Earlier this month, it purchased several thousand trailers for movement of its goods among its network of distribution centers.

The drones are last year’s news. While I think they are fun and can be useful in some industries, I don’t see the making significant inroads into the package delivery business.

Perhaps one of the most interesting developments concerns a 1900 acre airport in Wilmington, Ohio – not exactly ground zero for supply chain activity. Formerly a hub for Airborne Express, for the past few years, it has been for the most part unused. Lately however, Amazon has been using a small fleet of cargo planes to fly product from and to various distribution centers, using the Wilmington Air Park as a hub. They now are negotiating for the lease of 20 Boeing 767’s to expand this pilot program. It appears we may have a mini – FedEx in the making.

The push to same day delivery is going to put enormous pressure on retail competitors and we can expect to see delivery options that would have been unheard of 10 or even 5 years ago.

I believe the logistics service provider (LSP) industry will remain in a strong growth mode as an increasing number of supply chain managers struggle with rapidly changing technology and techniques. Just as they have in the past – albeit for different issues – the LSP industry will bring resources and expertise to the solutions.

There is one thing we can count on – the 2016 supply chain journey will not be risk free; but with the technology, expertise, and other resources we have in the industry, a creative and innovative supply chain manager will prevail.

 

Written By: Clifford F. Lynch