This past year, the supply chain industry evolved to accommodate numerous factors. Variables like new administration, advances in technologies, and changing consumer behavior are shifting how companies approach logistics, today and moving forward. NFI’s executive team shares their insight into the top trends of 2017.
We are excited about the New Year’s possibilities as 2017 saw a tightening in the overall freight market. The continued driver shortage and overall market readiness for the ELD mandate continue to affect capacity and make dedicated fleets an optimal solution for customers to secure capacity in the new year. With changes in regulations and capacity in the market, providers continue to upgrade equipment, focus on human capital, and find additional ways to provide value to their customers. Moving forward, continued rate pressure in the one-way market will also steer shippers to consider incorporating dedicated fleets into their supply chains, more so than we’ve seen in recent years.
As predicted in 2016, we continued to see space vacancies reduce to less than 3 percent overall. NFI’s portfolio grew to over 40 million square feet in North America during 2017 and made strategic efforts to grow our footprint in key markets such as the Northeast and Western Regions. The overall question will be at what point will the current development of new industrial properties outpace the demand for the 3PL warehousing industry. In addition, rising wage pressures will be a key reason we will see automation take front and center.
2017 is a year that will be remembered for the market completely changing in transportation. Back-to-back hurricanes pushed the transportation market out of its stagnancy, and brought the market down on shipper’s heads. A better than expected economy has helped to underpin this recovery, and much of the FEMA driven market panic has settled into mid-teens percentage rate increases and generally tight overall capacity market. As we quickly approach the deadline for integrating an ELD for carriers, expect the capacity supply to the market to continue to remain incredibly tight for the foreseeable future.
2017 was a year of ups and downs for the intermodal space. The year started quite slow for intermodal, with a majority long haul shipments continuing to lose market share to over-the-road’s continued depressed pricing. As the year wore on, the economy strengthened, and the overall market tightened up, the intermodal business has started to see better-than-expected returns on long haul moves. With ELDs looking to eat into the transit time of some key comparable moves in the market, look for intermodal to continue its market share growth going into 2018, and for rates to rise along with that growth.
2017 was a fairly calm year when comparing to the past few in the port services world. There were no major labor issues at the ports to contend with, and the only looming potential issue on that front was resolved well in advance of contract expiration on the east coast. Capacity at the ports has been challenged all year as dray providers have had to continue to shift with the way the ocean carrier alliances and ship sizes have changed the way cargo is discharged off ships. As port terminals service the more diverse alliances, and discharge more containers per ship, congestion and confusion continue to be the main factors impeding the desired efficiency from dray carriers. Look for 2018 to be challenging in this regard as ships get bigger and alliances get better at working with each other which will create even larger commingled ships.
2017 has been a year in advances in the global logistics environment. After the collapse of Hanjin last year, we have seen the formation of three ocean carrier alliances to create more stability in the market. Trying to integrate the mega ships with higher cargo volumes caused some disruptions for the alliances in capacity, technology, and reliability, all of which will be worked upon in 2018. The cyber-attack on Maersk in August exposed a gap in industry security and even shut down the largest cargo terminal at the Port of LA. Disruptions have caused carriers to dig deeper to uncover causes and utilize big data and technology to provide stronger customer-centric offerings. Shippers continue to demand transparency from origin operations through final delivery through sophisticated track and trace systems. New transportation management systems and track-and-trace systems are created every day, all with the goal of giving customers the most complete image of their international supply chains. Demand for quick transit times in conjunction with e-commerce trending upwards has caused shippers to rely on air freight, causing a peak season from full capacity. Looking forward, the next year will prove advantageous to global logistics players that understand and can cater to customers’ desire for compliance, transparency, and affordability.
This past year, a strong economy and continued growth in e-commerce led to an all time high in U.S. industrial rent rates at $5.40 per square foot. CBRE has noted that a high rental rate was caused by a 16-year low availability of 7.7 percent in the third quarter of this year. Shippers continue to look for space that improves service to their customers, and in turn are continuing to favor logistics hubs around the country such as the Lehigh Valley, New Jersey, and Southern California. For the remainder of the year, demand will continue to outpace supply; however, many expect the supply and demand to eventually balance over the next 18 to 24 months.