It has been a tough year for the trucking industry with empty stores, trailers, and gas tanks casting their lot against carriers and motor freight buyers alike. Shrinking budgets, expanding carbon emissions and fuel efficiency standards, and steady competition from rail/intermodal providers have similarly pushed truckers and shippers into a sustainability strata that augurs a cleaner and greener road to the future.
But are "green truck" huckstering legislators taking too much air out of an industry already plodding on threadbare treads?
States have been bandying about vehicle-per-mile tax legislation and toll road privatization to complement existing fuel tax revenues that fund much-needed infrastructure development.
The senators argue the bill would help reduce motor vehicle miles traveled, carbon dioxide levels, and congestion, while also increasing the percentage of system-critical surface transportation assets in a state of good repair.
Rail advocates laud the legislation as a much-needed impetus for crafting a national transportation policy. But those on the other side of the road perceive a myopic agenda that does not account for the important role motor freight plays in the U.S. supply chain.
"A simple act of Congress cannot overturn an entire U.S. distribution and supply chain network that depends on the trucking industry to move 70 percent of the nation's freight," says Tim Lynch, senior vice president, American Trucking Associations (ATA).
ATA proposes that if Congress wants to look at minimizing commercial vehicle miles, it should consider the only effective means to do that: increasing truck equipment productivity.
"While reducing trucks may seem admirable, it's important to keep in mind that almost every mode utilizes a truck in some manner," adds Charles Clowdis, managing director of North America global commerce and transport for market analyst firm IHS Global Insight.
Truck-only lanes could come into play, as well as other measures that recognize the vital role truck transportation plays in the U.S. economy, Clowdis adds.
What You Can't See Can Hurt You
Do you know who your supplier's suppliers are? If not, you likely have some shared pain and company. A majority of shippers do not have access to real-time supply chain information, and even more lack automated data collection and consolidation systems, according to a recent survey by E2open, Redwood City, Calif., a provider of on-demand solutions, and Maynard, Mass.-based Gatepoint Research, a business-to-business research organization.
Gatepoint Research surveyed more than 1,100 executives from a broad range of industries—including high-end technology, telecommunications, equipment manufacturers, aerospace and defense, and industrial manufacturing—about their level of outsourced manufacturing and procurement activity and spend. Within the context of international outsourced manufacturing, the study reveals that as supply chains evolve into supply networks, brand owners require better systems to improve visibility and control, data quality, and buying efficiency through consolidated procurement.
While many companies plan to establish an integrated process control (IPC) to support "buy-sell" processes (buy directly from component suppliers and sell to the contract manufacturers/internal divisions), the ability to aggregate spending with one or more contract manufacturers and component suppliers is limited.
"The result is that operational inefficiencies remain rampant at a time when cost savings are critical," says Desikan Madhavnavur, vice president of product management for E2open. "Given the multi-tiered, multi-layered nature of today's demand-supply networks, legacy systems are often ill-equipped to seize the opportunity of reducing procurement cost and reduced component shortages at contract manufacturers.
"As a result, they miss important opportunities to improve buying efficiency and/or achieve potential tax savings from efficiently running buy-sell processes," he says.
While a company's procurement objective is to reduce costs by leveraging spend across contract manufacturers, the lack of supply chain visibility for those who have not implemented IPC frequently results in loss of control over cost management. Those who have implemented IPC often find it challenging to scale the buy-sell process manually to achieve significant business value.
WMS Market Holds Steady
In today's economy, small losses are big victories. Warehouse management solution vendors might agree. Despite a prolonged global recession, the worldwide market for warehouse management systems (WMS) shrank less than one percent in 2008, according to a new ARC Advisory Group study.
The Dedham, Mass.-based research firm forecasts a more substantial downturn in 2009, before the WMS market begins to grow again in 2010. Because of the two-year downturn, the market is only projected to grow by a compound annual growth rate of 2.2 percent through 2013. The market was $1,247 million in 2008 and is expected to reach $1,388 million in 2013.
While corporate walls are crumbling, demand for logistics technology inside the four walls remains stable, if slightly down.
"Many WMS suppliers told a similar story of woe about 2008," says Steve Banker, service director for supply chain management at ARC Advisory Group, and author of Warehouse Management Systems Worldwide Outlook: Market Analysis and Forecast Through 2013.
"The year started off strong. Selling cycles began to lengthen in the third quarter," he says. "But many suppliers, particularly mid-size and small vendors, were not able to close any new software deals in the fourth quarter."
Based on the global economic turmoil, it is not surprising that the WMS market shrank in 2008; what is remarkable is just how well the top five suppliers performed last year, reports Banker. All five of the top vendors grew, four posted double-digit revenue growth (year over year), and one reported a 35-percent spike.
"I was surprised the WMS market shrank by only one percent in 2008," he notes. "However, when I looked at the data and realized that the top five suppliers account for slightly more than half of the total market based on revenues, that result became understandable. Without the strong year the top WMS vendors had, the market would have contracted far more severely."
WMS vendors have historically gained market share year over year, but that progression is bound to stagger. "Eventually, the market will reach a point where in order for a large supplier to gain market share, it will have to take it away from another major vendor," Banker says.
This survival tactic suggests further consolidation within the industry as top players expand through acquisition. Market contraction also raises important questions for buyers courting new solutions, placing greater weight on vetting the viability of small vendors, and discerning whether they have the resources and means to support and develop their products beyond initial rollout.