Global Logistics—November 2006

Global Trucking Woes

High fuel costs and a shortage of truck drivers aren’t concerns for fleet operators only in the United States, finds a new study from GE Capital Solutions.

Nearly 70 percent of trucking industry leaders in Canada, the United Kingdom, and France also feel high fuel prices and the driver shortage place their business at risk, according to GE’s survey of more than 1,200 transportation professionals.

Forty percent of respondents also view excessive government regulation as a threat.

"Seeking new methods for achieving greater operational and financial efficiencies to address economic and regulatory pressures will clearly remain the top priority for trucking industry leaders over the next 12 months," says Patrick Palerme, president and CEO of GE Capital Solutions Canada.

The majority of fleets involved in the study are exploring new methods for achieving efficiencies and realizing cost savings. This is largely due to fuel costs, which 90 percent of respondents expect will continue to increase over the next year.

Respondents cite a variety of methods employed to reduce fuel expenses, including the following:

  • Tightening supplier management (41 percent).
  • Seeking alternative or green initiatives (36 percent).
  • Leasing trucks to free cash flow (18 percent).
  • Using alternative fuels (7 percent).

Though fleet operators recognize the impact of the driver shortage on their business, only 22 percent feel the shortage will impact their ability to deliver goods on time to existing customers, finds the report.

U.S. companies, however, are more concerned with the driver shortage than companies in other countries, saying 20 percent of additional transportation business is potentially impacted by the shortage.

Respondents in all countries are expending significant effort to combat this challenge. Other than salary increases, U.S. respondents say more paid leave (49 percent), less paperwork (30 percent), and high-quality trucks (24 percent) are the leading factors to retain drivers.

Interestingly, in France, improving cab facilities is the number-one way to attract and retain drivers, according to survey results.

U.S. Trade Sees Red

Not surprisingly, the United States’ increasing trade volume with China was the main shipping story of 2005, according to The Colography Group’s annual analysis of air and ocean trade between the United States and 224 of its trading partners.

Shipping between the United States and China in 2005 grew at a faster pace than between the United States and all world markets, finds the Atlanta-based research firm. In addition, the trade imbalance between the two countries increased dramatically.

U.S. import volume by all modes from China last year rose 19.2 percent to 129.6 billion pounds, while the value of those imports soared by 24.4 percent to $235.2 billion, says the report. In contrast, total U.S. import tonnage—including shipments from China—rose 4.2 percent, and total import value increased 15.1 percent, largely due to high petroleum prices.

On the export side, the United States shipped 74.2 billion pounds to China last year, up less than 2 percent from 2004. The value of those goods rose by 13 percent. Total U.S. exports—including shipments to China—reached 791.2 billion pounds, a 1.2-percent gain. The value of those goods rose slightly less than 10 percent.

Other findings in The Colography Group’s annual report include:

U.S.-China ocean trade increased 19 percent from 2004 levels, with nearly 128 billion pounds of Chinese exports—valued at $180 billion—arriving at U.S. ports last year. U.S. ocean exports to China, however, grew less than 2 percent to 73.9 billion pounds, worth a total of $23.4 billion.

Nearly 20 percent of all U.S.-bound air trade—approximately 1.8 billion pounds—originated in China last year, a 21-percent increase from 2004. The value of those imports totaled $54.8 billion, a whopping 37- percent jump from 2004. While U.S. air exports to China grew in 2005, it was at a much slower pace: tonnage increased 3 percent to 265.3 million pounds.

Air shipments in 2005 accounted for .75 percent of all U.S. export tonnage, essentially flat from 2004 levels. Air accounted for .42 percent of all U.S. import tonnage, down from .43 percent in 2004.

Logistics at the Finnish Line

While improving logistics competencies is often a key goal for global businesses, it is rare for governments to get involved. But Finland’s government is doing just that.

Seeking to better understand how improving its logistics industry will boost its overall economy, Finland’s Ministry of Transport and Communications began conducting surveys in 1990 to examine the state of logistics in the Finnish economy and the factors affecting the competitiveness of Finnish businesses.

The recently released Finland State of Logistics 2006 report indicates logistics costs in Finland are relatively high compared to international standards.

In 2005, for example, logistics costs totaled 26.4 billion euros (US $33 billion), or 17 percent of the country’s gross domestic product (GDP). Logistics costs typically account for 10 percent to 17 percent of GDP in industrialized countries.

When comparing Finland’s key logistics performance indicators with those of other countries, however, Finnish companies generally fare well. Businesses are well aware of the significance of logistics and give themselves "fairly good" or "good" marks for competence in all the principal sectors, shows the report, which polled 2,255 Finnish companies.

The share of costs incurred by Finnish companies for inventory and warehousing/logistics administration has increased since the last survey in 2001, while the share of transport costs has decreased. This trend is reflected in estimates emerging from other European countries in recent years, according to the Ministry.

Other report highlights include:

  • Logistics costs account for 13 percent of companies’ turnover, which represents an increase from 2001.
  • Finnish companies operating internationally have greater logistics competencies than those operating in the domestic markets or in export.
  • The majority of Finnish companies are satisfied with the operating environment and transport infrastructure in their location.

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