For freight shipping and the economy in general, 2016 has been a bumpy ride. As of this writing, U.S. stock market averages are riding all-time highs—just weeks after they cratered as a result of the unexpected Brexit vote. Historically, low oil prices are blamed for poor economic conditions one day, and praised for strong ones the next. Political instability and contentious social issues make long-term and even short-term business strategic planning an exercise in educated guesswork.
These examples point to one condition that is bound to dominate the freight economy in the near future—uncertainty.
Turn Signals for the Freight Economy
Which direction is the logistics and freight services economy turning? All in all, trends are positive, but serious challenges figure to make 2016 a year where the industry will have to work very hard to show solid growth. Three important issues affecting logistics and shipping include the following:
Low Fuel Prices
Most analysts see oil prices remaining at low levels for the remainder of the year, even though pricing has edged up and (seemingly) stabilized in recent months. This is good news for freight companies and 3PLs, as low fuel costs offset increases in other operating expenses such as employee benefits and compliance. The question, of course, is what happens to freight and 3PL income statements when oil returns to $100 per barrel levels, as it inevitably will? Smart companies in the industry will continue to do what they have been doing since the market downturn in 2008—continuing to consolidate shipments and put greater concentration on local shipments.
A shortage of drivers has plagued the industry for several years. Estimates of the number of drivers needed to meet U.S. demand range from 30,000 to well over 100,000. The good news here is the labor shortage suggests the freight and logistics industry is working at near full capacity—meaning opportunity knocks for companies with creative business plans and value propositions. Many industry analysts expect the driver shortage to ease in the years ahead as a result of more female drivers coming into the business, and the development of driverless technologies. In the meantime, smart companies are dealing with the shortage by making sure driver wages and benefits are competitive, and emphasizing training and employee retention in their HR strategies.
Outsourcing Roars Ahead
The move to outsourced freight and logistics shows no signs of letting up, pointing to increased demand for efficient, creative and forward-thinking freight companies and 3PLs. Manufacturers and distributors continue to see outsourcing as a way to relieve themselves managing peripheral operational activities in order to focus more intensely on their core strengths. In addition, online retailers have created a gargantuan market for outsourced shipping, as more and more Americans shop by letting their fingers do the clicking. The competitive 3PL industry has driven technological innovations (such as RFID tracking), operational refinements and new service offerings—giving the industry the strong foundation it needs to weather the storm of uncertainty discussed earlier.
TSI is uniquely positioned to capitalize on industry opportunities, as we have strong relationships with a nationwide network of leading freight and logistics companies. This enables us to match our customers’ shipping needs to the most efficient carriers, and offer value-added services that make the customer’s life easier and reduce shipping expenses. Our longstanding focus on LTL shipments of hard-to-handle items anticipated, and is now perfectly positioned to excel in, today’s environment where LTL and niche services are in high demand.
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