Areas of Concern Remain Top of Mind for Shippers, LSP’s and Third-Party Providers
As explained by John Schultz of Logistics Management, US business logistics costs rose to 11.45% in 2018, representing 8% of GDP. While warehousing and inventory carrying costs, as well as carrier support costs and administrative fees, rose enough to worry shippers, between 3% and 5.3%, transportation costs continue to form the majority of logistics spend. Tight capacity in 2018 created significant rate increases, and shippers were almost unable to manage spend. The strong demand for the industry led to an ultimatum for shippers, implement a dedicated fleet, or achieve “Shipper Of Choice” status.
Similar trends exist for logistics service providers and third-party services as well, representing the increased uncertainty in the US and fears over the wake of a US-China trade war. The caution exercised by corporations in 2018 pave the way for strong growth in 2019, and while talk of the recession continues, all indicators point to industrywide growth. Moreover, transportation industry participants have developed new management models to reap additional capacity, such as the use of intermodal shipping, especially rail, to improve sustainability and not outsmart themselves.
What Does the Future Hold for the Freight Market in Domestic and International Transactions?
The future of the tactical freight market is shaky. All power rests in the hands of shippers and LSPs. As more companies look to invest in technology and reduce operating expenses, such as the implementation of autonomous mobile robots, shippers will need to make more tactical decisions that affect traditional areas of strategy. In a sense, strategic supply chain management revolves around making plans, and tactical freight management is how those plans translate into action and benefits for the company.
Now, many companies, particularly shippers, will likely see higher than average inventory and warehouse costs for 2019 following the trade tensions with China, explains Steve Banker of Forbes. Yet, transpacific carriers have benefited from these tensions, seeing substantial increases in their rates. This fact alone means shippers must take preemptive action to secure more capacity and diversify carrier networks to stay competitive.