January 2018 | Commentary | Checking In

Status Quo? No.

Tags: E-commerce, Manufacturing, Logistics, Supply Chain

Keith Biondo is the publisher of Inbound Logistics magazine.

The coming year is destined to be one of some major and minor changes in business operations. Given your role in logistics, you will face a perfect storm of new. Here are some events and trends that will drive change and the need to think flexibly and laterally, and adapt operations accordingly.

Domestic trucking capacity shortage. We all know the reasons: Hours of Service, ELD mandates, driver pay, more money per mile for owner-operator drivers, more attractive jobs in other sectors, recruitment challenges, increased deliveries because of economic growth, more deliveries because of density destruction, an aging driver workforce. You've likely lined up your capacity by now, and already know costs will continue to go up. Unless the unexpected occurs, political in the off-year election or otherwise, that will be situation normal for all of 2018 and 2019.

Fuel surcharges. Oil prices are likely to go up. Demand is high, and if economic activity continues at pace we may see crude reach $85 a barrel. If crude oil prices do change, costs are passed through to consumers. Based on history, for every one-dollar-per-barrel change in crude oil prices, expect to see a 2.4-cents-per-gallon change in retail prices at the pump.

A moderating trend is that U.S. oil and natural gas production is booming and looks like it will continue. Could OPEC constrict the capacity to artificially boost prices? Nope, they tried that before to kill U.S. production. Fail.

Tax reforms. If you run or lease a warehouse, here's a play to drop your costs a bit lower. Press reports abound about worker bonuses and rising pay, but tax reform is also credited with encouraging some utilities to cut customer bills—electric bills.

Combined with the savings from cheaper and more sustainable natural gas change-overs, check with the utility plugged into your warehouse(s) and see what will be passed along to you.

Continued manufacturing growth. Beyond what we already know, look for stronger, long-term tax reform created growth because R&D and capital investment will spur sustained manufacturing expansion.

Manufacturing 4.0 initiatives will get a boost of cash. Buying habits will continue to impact supply chain relationships as well as transportation and logistics operations. Consumer supply chain impatience is impacting industrial customers as well. The result is smaller and more frequent shipments, and the destruction of density savings, which affects transport costs and available capacity.

The premature death of retail. The 2017 holiday season was the strongest for brick retail since the last recession, according to press reports. That growth was driven largely by consumer confidence and job growth and can go the other way with the mid-term congressional elections in 2018.

Despite the holiday bump, there are worries. Mall closings will continue as smaller retailers are not breaking their leases, they are just not renewing them, according to real estate experts.

Those that can adapt to the e-commerce tidal wave will. If you've been to Costco recently, you may have seen flocks of Google Express shoppers filling e-commerce orders for customers. Sam's Club recently announced it is shuttering 63 big box retail locations. The same announcement said the company will convert 10 of the closed stores into "e-commerce distribution centers." Death knell or retail evolution?

Wider adoption of demand-driven logistics practices. More low-cost logistics technology, more automation, more logistics and carrier partner expertise, and more IoT intelligent supply chains will drive this trend.

So, 2018 will not be a year of status quo. The question is, where will it take you? How will you face it? That reminds me of another Latin phrase: Quo Vadis—where are you going in this year of change?






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