Distribution and Dedicated Transportation Outlooks: 2019

Guest Blog: William Mahoney, Senior Vice President, Sales at NFI

Distribution Outlook

Inventory levels in 2019 will continue to grow creating the demand for more third-party warehousing space in the coming year. Preemptive purchases for imported products from China looking to avoid new tariff fees will bleed out in the first half of 2019. Inventory strategies tend to move with the ever-changing demands of our economy. Eventually a softening consumer demand will driver leaner inventory levels, but I wouldn’t expect to see this happening until later in 2019, if at all this year.

Based on current new construction in the industrial real estate market lagging behind demand, lease rates will continue to rise, therefore getting passed along in the third-party storage arena based on supply and demand. Inventory will continue to move closer to the market as shippers will need to make sure they are positioning their products for same-day shipping.

Rising real estate costs and high labor costs will more than likely start to push both shippers and 3PLs to look at secondary markets, where both space and labor is less expensive. The key will be if transportation capacity will be available in these markets and its costs won’t exceed any savings produced by the lower space and labor cost.

Dedicated Transportation Outlook

With the recent slowdown in the one-way freight market, it will be quite interesting to see 2019 actual demand for dedicated fleet services. 2018 was a year where shippers were required to lock in capacity to get capacity, therefore shippers turned to dedicated fleets as a way to do so.

For 2019, we believe that a soft Q1 will still allow for a strong remainder of the year, where a shortage of both capacity and drivers will continue to drive a high demand for dedicated fleet services. Dedicated fleet services will continue to evolve as order sizes shrink in size with direct to consumer home delivery. By the end of 2019, we will be able to tell if this trend will continue or consumers will resort back to a more conventional type of retail buying. Statistics show a growing e-commerce channel but also a recent improvement in the retail buying channel.

2019 will provide for further consolidation within the DCC market and NFI will continue to explore opportunities for further expansion and market share growth. A growing and thriving NFI non-asset division will allow for even greater success in 2019 due to continued improving in sourcing backhaul and producing surge capacity for our dedicated contract carrier customers.

Joining the company in 2001, Bill Mahoney is the Senior Vice President of Sales at NFI. He leads the Asset-Based Sales Team and helps to design comprehensive supply chain solutions for existing and prospective customers.