Four Trends In 2014 Transport
John Wagner Jr. looks at statistics from the logistics industry from April 2014
In this post we’ll dissect the April numbers, which show plenty to satisfy both pessimists and optimists, and I have four trend predictions for the rest of 2014 for those of us in the transportation business.
We’re still feeling the effect of that nasty winter across the country as we now know the U.S. GDP contracted 1 percent in the first quarter of the year.
The Census Bureau said retailers sold just 0.1 percent more in April, although auto sales were up 0.6 percent. Home and garden sales were up 0.4 percent and clothing sales increased 1.2 percent. The losers were electronics/appliances, down 2.3 percent, and furniture, dropping by 0.6 percent. In a year-over-year comparison, retail sales were up 4 percent.
The Federal Reserve reported that factory output declined 0.3 percent in April, while housing broke out to a 13.2 percent increase.
Retailers may be feeling the pinch from lower sales at their brick-and-mortar stores but they are fighting back. The consumer’s increasing appetite for ordering online continues and, in a surprise, Wal-mart’s 27 percent growth in online sales topped established giant Amazon’s 18.3 percent in the first quarter. It appears that Wal-mart is poised for online growth as they innovate. As an example, Wal-mart is testing home delivery of groceries in the Denver market.
Nordstrom is also after the online market and showed a 33 percent increase in the first quarter. The retailer has set a goal of $6 billion in online sales by 2020.
As retailers continue to lose customers walking in the door, they are all trying to develop a direct channel to the consumer. Expect to see continued investment in their e-commerce platforms and fulfillment capabilities.
In trucking, the moderate weather in the second quarter has helped carriers catch up after the first-quarter disruptions. An extended/delayed produce season in tandem with spring/summer beer and beverage shipments should result in a competition for capacity.
The American Trucking Associations’ truck tonnage index increased 4.8 percent in April when compared to the same month in 2013. Tonnage was up 1.5 percent from March to April. LTL companies are doing well on strong growth in the second quarter.
What will the rest of 2014 bring in transportation? I’m seeing four trends:
- A continued shortage of drivers. Carriers with enough drivers will become more selective as to how they devote these valuable resources. Expect rate increases of 4 to 6 percent!
- Continued industry consolidation as both motor carriers and freight brokerage firms buy additional capacity and expand their service offerings, trying to establish scale and differentiation. The big will get bigger and have more pricing power.
- The nation’s roads and bridges will continue to deteriorate as our politicians lack the will to increase gasoline/fuel taxes. The net effects of bad/outdated roads are congestion, loss of driver productivity and higher maintenance costs for consumers and carriers alike.
- Intermodal will continue to struggle with growth. As motor carriers divert more loads to the rails and freight increases due to the growing economy, transit times will continue to be impacted. Intermodal volume is up 10 percent in April year over year and continues to grow.
Regardless of the mode you are shipping in, you should expect good communication from your carrier. In the real world it is important to understand transit time reliability so you may plan your supply chain accordingly. Reliability often trumps speed.