March 2016 | News | Trends

Trends—March 2016

Tags: Trucking, Transportation Infrastructure, E-commerce, Transportation, Logistics, Supply Chain

Trucking Companies Hit the Brakes on Driver Wages

The capacity crunch that has plagued the trucking industry since 2013 appears to be easing as poor economic growth in the fourth quarter of 2015 has trucking companies lowering their freight estimates.

Only one-third of carriers expect to have any increase in freight volume in 2016, according to the Business Expectations Survey by Transport Capital Partners (TCP). About half of those surveyed expect freight levels to remain unchanged, and only one-sixth of respondents expect a decrease in the volume of cargo they'll move in the year ahead.

Despite the American Trucking Associations' prediction that the industry will be short by more than 73,000 drivers by the end of 2016, the freight slowdown is expected to reduce driver wage increases. After wage increases averaging nearly 12 percent in 2015, 70 percent of carriers surveyed by TCP now expect 2016 increases to fall in the one- to five-percent range. In fact, 22 percent of carriers expect to give no raises at all to their drivers.

"Carriers are in a tactical seasonal strategy—the first quarter being weak in loads, more drivers being available from construction in northern climates, and deep cutbacks in truck purchases over the last few months," says TCP Partner Richard Mikes. "The longer-term struggle between business caution and the need to improve driver staffing via driver wage levels will be interesting to watch in 2016."

The freight slowdown shouldn't be seen as a sign of worse times to come, however. "While volume and rate expectations have tumbled, there is still no fear of a looming recession in these results," says Steven Dutro, a TCP partner.

Logistics 2016: Going Global, Going Mobile

By Greg Hewitt, CEO, DHL Express U.S

As we get deeper into 2016, you can stay ahead of the competition, grow your business, and deliver for your customers by leveraging the following opportunities:

  • The future is wide open. If global trade is not currently part of your business, 2016 may be the year to think and act beyond U.S. borders. If you are already doing business internationally, it may be the year to expand to new territory. Why? Because approximately 95 percent of the world's consumers live outside the United States, where the International Monetary Fund estimates 87 percent of global economic growth will occur in the next five years.

The rise of e-commerce, combined with advances in shipping and logistics, allows even small organizations to reach customers abroad. Nearly 300,000 American businesses engage in global trade, according to the Department of Commerce's International Trade Administration, and trade activity accounts for more than 28 percent of U.S. GDP, reports the U.S. Chamber of Commerce. Expect these numbers to increase in the year ahead.

  • International trade agreements mean business. New international trade agreements could fuel even more global business. On Oct. 5, 2015, the United States joined 11 nations in negotiating a landmark trade agreement to improve market access and facilitate key trade benefits. If ratified, the Trans-Pacific Partnership (TPP) would cover more than 40 percent of global GDP, reduce border costs, expedite and simplify border clearance, and assist developed countries in modernizing customs procedures.

What does the TPP mean for your business in 2016? If approved by Congress, the agreement would make it faster, easier, and more affordable to move goods between participating countries. U.S. companies could gain an expanded customer base, a more dynamic supply chain, and new opportunities to source affordable materials from partner nations.

The trade opportunities are considerable. Consider that participating countries—the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam—will contain more than 60 percent of the world's middle-class population by 2030, according to estimates.

The TPP is not the only major international trade agreement in the works. Looking eastward to the European Union, the Transatlantic Trade and Investment Partnership (TTIP) could create the world's largest free trade zone.

Many analysts predict that the United States and European Union will move closer to completing TTIP negotiations in 2016. This agreement could affect more than 60 percent of global trade, harmonize many regulatory rules between the two regions, and create greater market access to an estimated 800 million consumers.

  • Sustainability stays front and center. In 2014, 75 percent of S&P 500 companies published corporate sustainability reports. And, 93 percent of CEOs responding to a 2013 UN Global Compact—Accenture study said sustainability is important to the success of their business (see chart). The focus on green business practices persists and will likely grow in 2016 and beyond, as companies continue to analyze the sustainability of their operations and their partners up and down the supply chain.

Why is supply chain sustainability important? While your carbon footprint may seem well defined, all the products you ship and receive make the impact more difficult to measure. To get your shipping and logistics on a greener path, choose eco-friendly partners, pay attention to packaging, and make sure you can access data to accurately assess your carbon footprint.

  • Nearshoring continues. Increasingly, U.S. manufacturers see the value in nearshoring—locating certain manufacturing and warehousing facilities closer to customers and central operations.Nearshoring is on the rise, and will likely continue to grow in 2016.

U.S. companies that nearshore do not always replace overseas manufacturing capabilities altogether, but sometimes expand with new operations in Mexico or Canada. Forces driving this change include more affordable shipping with nearshoring, and increased business costs in certain overseas countries.

  • M-commerce is on the move. Mobile commerce was big in 2015, and many expect further gains in 2016. Mobile commerce transactions exceeded $115 billion in 2015, and will reach $142 billion in 2016, predicts a recent Forrester Research report.

The report also outlines the challenges to m-commerce growth, noting that smartphones are the source for one-third of retail web traffic, but only 11 percent of sales. To succeed in this environment, companies need to ensure that their mobile commerce platforms and logistics operations remain up to the task.

Can an Oil Tax Fuel Infrastructure Improvements?

President Obama wants to add a $10 tax to every barrel of oil to raise money to begin implementing a cleaner transportation system within the United States. The proposed tax would raise more than $32 billion in additional funds, which the White House claims will not only help maintain current transportation infrastructure, but also fund new rail corridors, highway projects, and pilots for cleaner transportation initiatives, such as self-driving vehicles.

The proposed tax, which oil companies would pay, would be phased in over five years. "We recognize that oil companies would likely pass on some of the cost," says Jeff Zients, a White House economic advisor. The tax would add approximately 25 cents per gallon at the pump, on top of the 14-cents-per-gallon tax that already exists.

The oil tax was part of the final 2017 budget proposal that the president submitted to Congress. The proposal also includes a doubling of funds for clean energy research, as well as incentives to encourage state and local governments and the transportation industry to reduce dependence on fossil fuels and find ways to use cleaner energy.

Analysts widely agree that the $305-billion bipartisan transportation bill passed in December 2015 is merely a stopgap, and that additional funding must be found if U.S. transportation infrastructure is to be not only maintained, but improved. "For too long there has been strong bipartisan agreement that we need more funding for infrastructure, but that hasn't been accompanied by the political will on how to pay for it," says Zients.

Congress is expected to reject the tax. "The president should be proposing policies to grow our economy instead of sacrificing it to appease progressive climate activists," said Speaker of the House Paul Ryan (R-WI) in a public statement. "The good news is, this plan is little more than an election-year distraction."






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