by Cheryl Garcia, regional vice president, Global Transportation Relationship Management, U.S. Bank Freight Payment
December is traditionally a time to reflect back while looking forward. Politics and the economy dominated the headlines in 2012, both in the U.S. and abroad. As we weigh in on 2012, what are the top transportation industry issues for 2013?
President Obama’s reelection means that continued momentum is likely on the trade and transportation policies the administration established in the President’s first term. Expect a renewed push toward his goal of doubling exports by 2015. It’s probably not wise to expect a dramatic increase in funding for the nation’s highways and other public transport infrastructures. Congress and the Obama Administration continue to wrestle over spending cuts, so it’s hard to see where increased funding would come from.
The direction of the economy is harder to predict. From a historical perspective, the economy is relatively healthy, with the crucial exception of employment. Jobs are growing, but not fast enough to offset the losses incurred during the recession. Orders for capital and consumer goods have been consistently trending down since the 2010 inventory bounce back. That’s a sign that shippers are still wary about overextending themselves. Factor in Europe’s debt troubles and China’s slowdown, and the best route for your business becomes less clear.
On the trucking front, expect regulation changes for Compliance Safety and Accountability and hours of service to move forward, despite the pressure that places on carriers and their customers. Fuel is a constant concern, but the price of diesel seems to have stabilized this year, albeit at a higher level than shippers and carriers would probably prefer. Supply chains have to account for a higher norm, now at $4 a gallon.
So what to make of all this as we move into 2013? That depends on shippers’ answers to two key questions. Do you believe that demand will start to rebound in a significant way? How will the pricing power of carriers change in the coming year?
Truckload growth has been at or under 5 percent since the end of 2010. When trucking grows faster than GDP (about 2 percent), carriers prosper to an even greater degree. When it falls below GDP, carriers suffer inversely. It’s important to remember that whether or not your particular industry is booming, a GDP recovery will affect trucking capacity for all shippers. The regulatory burdens on truckload and less-than-truckload carriers also will impact capacity, and thus their pricing power.
On the ocean shipping side, containerized cargo in and out of the United States was pretty flat in 2012. That’s an across-the-board metric, with clear variations among industries. But carriers seem to have a renewed interest in keeping rates at more sustainable levels, despite fairly mediocre demand this year. Steady rate increases introduced in 2012, signaling that carriers went through the rate wars of 2011 (where most lost money) and decided that that’s not the way to be successful. So shippers should brace themselves for slightly less attractive rates next year.
How you view these questions of demand and pricing power will go a long way toward deciding what your outlook for 2013 should be. One thing is certain, though: having a handle on your transportation spend, and being acutely aware of the economic and operational dynamics affecting your supply chains will be essential. We’re here to help any way we can.
Cheryl Garcia leads the U.S. Bank Freight Payment Global Relationship Management team, providing international payment solution expertise to both public and private sector customers. Cheryl combines more than 25 years of global transportation and supply chain optimization experience with MBA and BBA Finance degrees, and is a CPA and a Project Management Professional (PMP). Thoughts to share? Email firstname.lastname@example.org.