American Society of Transportation and Logistics

American Society of Transportation and Logistics

Look for greater popularity of refrigerated shipping this year.

A combination of port and vessel efficiencies and new reefer-container technology will be needed to make the cold chain more effective and efficient. This is important because cost pressures and reliability mishaps have created a greater need to preserve perishable goods such as food and pharmaceuticals, and sensitive items such as high-end electronics and low-density plastics.

Companies no longer can afford to absorb “acceptable losses” to the degree they did in 2011, and global manufacturers are less willing to hold safety stock to cover the losses. As air freight costs rise, that mode becomes less of a plausible alternative for reefer containers. In addition, the reliability of perishables in containers is in question because more pharmaceuticals are sourced outside the U.S. and are ruined easily in extreme temperature and humidity. Equipment failures are all too common even when refrigerated containers are used.

Second, the move to direct fulfillment is increasing as more companies respond to the volatile economy by reducing inventory, and therefore the need for storage and handling. Still, moves in this area in 2011 were slower than expected in smaller markets, where the lack of economies of scale make direct-to-market shipping too expensive. Consolidation strategies for these markets still require the use of distribution centers and timed deliveries. In 2011, direct-to-market shipping was most effective in large markets where scale is available.

Third, trucking will become increasingly popular over rail for many mainstream commodities, because rail fuel surcharges are likely to become more frequent, and direct fulfillment is increasingly more popular.

Rail fuel surcharges in 2010 and 2011 made trucking more efficient per ton for many mainstream items. This trend doesn’t apply to heavy industrials.