Ten Trends

Ten Trends

The transportation economy looks decidedly different heading into 2007 than it did a year ago, both in the larger trends surrounding business and the closer developments involving the movement of goods.

How the larger economy develops this year is out of the hands of the transportation world, of course, but how shippers and their providers ride out the winds of change is very much in their control.

The questions shippers and carriers will face this year are hardly new. But the rapid economic growth of recent years has allowed all sides in the shipping equation to set aside the tougher choices as companies concentrated on growth.

After all, the theme of our annual Joint Logistics Special, a yearly cooperative publishing venture between Traffic World and several sister publications, a couple of years ago was on how logistics departments were focused not on efficiency but on ways to enhance revenue.

A report this year by the Establish/Herbert W. Davis consulting firm graphically illustrated the topsy-turvy situation for shippers. It found logistics costs soared a remarkable 10.6 percent during the first nine months of the year, a seemingly dismal performance unless you consider that sales for the surveyed companies grew 9.9 percent over the same period the past year.

Now, energy costs seem to be leveling off - or at least the roller-coaster is riding a bit lower to the ground - but shipping demand is waning in a slowing economy.

Shippers who pleaded for capacity in 2005 got it from ocean carriers in 2006, and now some container lines are watching profits plummet following the peak season that didn't peak. There are hints of a similar dynamic in the trucking industry, where reports of slipping volume at critical bellwethers have analysts warning of a "precipitous decline" in volume and rates.

But even with a cloud of uncertainty hovering over the economy heading into 2007, shippers and carriers can foresee certain key trends dominating the transportation agenda next year. 

First, security will be an even greater issue in the freight industry. Newly-empowered Democrats are promising a push on air cargo screening, and the moves by the Department of Homeland Security on rail and maritime anti-terror initiatives are a hint of the debates to come.

Energy will remain a major concern, even if crude oil prices are moderate and keep diesel prices to tolerable levels. As former rail and shipper executive Charles Taylor put it, "Most supply chains run on cheap, ready availability of fossil fuels. But the wolf is at the door."

Within transportation, we expect to see an accelerating push by trucking companies into the broker business as the truckers seek to add business without adding assets. LTL companies will fine-tune their premium services as they seek to maintain profit and revenue momentum.

In the logistics arena, expect the larger enterprise software companies to weave more transportation and logistics technology into their services. Planners will look to use the links to get better forecasting in place, of course.

Whether that planning gives shippers or carriers greater control of the market, however, will be a question to answer in 2007.