Sustaining

Sustaining

Copyright 2007, Traffic World, Inc.

Is talk of a recession sustainable? There, we''ve gotten out of the way two highly charged words hovering over any logistics manager heading into 2008.

As 2007 closes, the belief that the national economy is either in recession or heading that way is pretty much received wisdom, particularly across the transportation world.

And why shouldn''t that be? After all, shipping volumes are down across a wide range of operations, from the ports of Southern California to the less-than-truckload operators in the Midwest. In the wider economy, the housing market is in shambles and it looks like anyone who wants to buy a house couldn''t get the credit for a purchase anyway.

Some forecasters in the shipping world, including some executives at several transportation operators, are projecting a recovery only in 2009, all but folding up the tents and closing the books on the failed year of 2008.

The trouble is, the actual economy, including the buying and selling of services and the shipping of goods, hasn''t quite been living up to the dire forecasts. About the same time transport executives were throwing up their hands at a "flat peak" in the third quarter, the national economy was growing at an estimated 4.9 percent annual rate. That followed real GDP growth of 3.8 percent in the second quarter.

Trucking companies have faced overcapacity and tough rate competition in a year in which trucking activity has slipped 1.7 percent, according to the American Trucking Associations. But does that add up to a "freight recession," an unfortunate term that became easy shorthand in 2007 for a business no longer growing at an unbridled pace?

Revenue at the largest of the LTL carriers, YRC Worldwide, was down in the third quarter, but the company still earned a $40.7 million net profit. Regional power Con-way''s revenue rose in the third quarter but falling yields pushed the profit down more than a third to $37.3 million.

Such smaller returns make it tougher to invest in new capacity, but is it a freight recession if profits are down? Can truckers be near collapse if pricing for truckload and LTL service grew in November, according to Bank of America Securities?

For the nation''s shippers, it doesn''t look like the sky is falling. Early reports suggest many reined in logistics costs in 2007 even as they, along with carriers, battled rising energy prices.

The seeming conflicts in numbers reported by railroads, ports, truckers and air carriers - volume up here, down there - make more sense if considered all together as a sign of changing strategies. Shippers have responded to the capacity and cost challenges of recent years by shifting distribution patterns, redirecting imported goods to new gateways and mapping out new inventory strategies.

That''s why we have a hard time joining the crowd rushing toward protection from the impending economic downturn, and why we''ve resolved to use the "R" word with a bit more discrimination in 2008. After all, isn''t the transportation economy more sustainable than that?