FACING THE NEW YEAR

As we approach a new year, many supply chain writers begin to float their predictions for the future, projecting what might happen to carriers, shippers, and other links in the supply chain. Accurate prediction always becomes problematic in presidential years; but this year it is a real challenge. After such a contentious campaign and surprising (to most) result, the future is cloudy. I think we will continue to see exciting developments in such areas as drone use, last mile deliveries, robotics, and driverless vehicles; but I also believe we will see changes in the more basic, underlying issues.

On a positive note, President-Elect Trump has consistently promised improvements in the nation’s infrastructure and released a plan that would provide for a $1 trillion investment, supported by $140 billion in tax credits. While this would fall far short of covering the total cost, it is a start. Notwithstanding that, I believe we will all be more comfortable when we understand more of the funding details. Management of the infrastructure initiative will fall to the nominee for Secretary of Transportation nominee, Elaine Chao, and both Democrats and Republicans should be supportive – the Democrats because of the jobs that would be created, and the Republicans because of the tax reform.

Trump’s selection for cabinet members and advisors should make for some interesting confirmation hearings. Many of them have been nominated for areas about which they have strong opinions. For example, the nominee for Secretary of Labor is a fast food CEO who is strongly opposed to a $15 minimum wage. (He probably won’t be too popular around McDonalds.) Others don’t seem to be particularly well qualified for their positions. Where all this will end up remains to be seen.

There could be a good resolution to a rail industry regulatory issue next year. The Surface Transportation Board seems to be attempting to re-regulate some segments of the rail industry which, in my opinion, would be harmful to shippers and carriers alike. Currently controlled by Democrats, the STB has two vacancies, and I suspect when these spots are filled, we will see some different results. Neither Mr. Trump nor Ms. Chao are big fans of regulation.

These anti-regulation attitudes could also lessen the regulatory pressures we are seeing in the motor carrier industry, as well.

As of today, it appears that on-line purchasing will reach a new high this year, with of course FedEx and UPS playing key roles. But as on-line sales increase, so do returns; and this year the returns estimate is anywhere between $14 billion to $29 billion worth of products. While reverse logistics already is a major supply chain function, expect it to become more so. Last year, FedEx purchased reverse logistics pioneer, GENCO; and UPS has just invested in reverse logistics specialist, Optoro.

While supply chain management has never been a political function, for the next few years, the smart supply chain manager will keep a close eye on Washington. What might happen there is going to be difficult to predict and could very well impact our industry. In the meantime, our very best wishes for a happy, healthy, and prosperous 2017.

 

Written By: Clifford F. Lynch