As the New Year begins we take time to reflect on the previous year and begin to make predictions as to how the next year will unfold. The supply chain industry is made up of a lot of different components, each one impacting the other. Here is what the leadership team at NFI expects from the supply chain in the New Year. Knowing what to expect and how it affects the industry as a whole can help plan your supply chain for the New Year.
In 2015, trends show that consumers will continue to push for next day delivery. Many ecommerce sites offer quick delivery and those who are not will be following shortly to stay competitive. This requires distribution networks to work fast, be strategically located near populations, and work efficiently to meet expectations.
We also hope to see West Coast port congestion issues dissolve as current negotiation plans move forward. The West Coast ports will once again be a viable solution for customers to bring product through versus diverting or shipping considerably earlier as they did in 2014.
We will continue to see growth in the south due to manufacturing returning to the western hemisphere. This area also has some of the country’s lowest cost of distribution due to the low cost of living and less expensive real estate.
In 2015 shippers can expect to see continued capacity constraints industry wide. Significant driver shortage issues will persist. Due to these issues overall transportation costs will continue to rise. I anticipate companies with heavy transportation needs will increasingly look at alternative transportation solutions to meet their needs. Whether it’s OTR to Intermodal for long haul shippers or common carrier to private/dedicated fleets for local and regional shippers, the current transportation industry challenges will continue to force change.
There may be difficulties in 2015, carrier capacity and its effects on the domestic supply chain are going to be an ongoing topic of conversation. With driver hiring already challenged and the economy showing signs of relative strength, growth in tonnage shipped is going to prove problematic in the current pricing dynamic. Look for more consolidation / acquisition by the larger carriers and for more carriers to unilaterally increase pay for drivers in an effort to keep them in the seats of the companies they work for.
Other trends show that transparency and ease of use are going to continue to dominate the progress in our industry. Customers and carriers alike want a sense of comfort around who they are working with and their ability to see what is going on in their world dynamically. By providing them with services and tools they can rely on and use to manage their business they have a greater sense of control over the movement of their goods to market – which all relates to that company’s execution and commitment to customer service.
The three big themes for 2015 will be infrastructure, the Chinese middle class, and technology.
The U.S. infrastructure is struggling to keep up with changes in global trade such as new work rules, larger ships, shifts in asset ownership, and carrier alliances. This is the hottest topic and the key industry groups such as NIT League and RILA are lobbying Congress for action.
Alibaba alone sold $9.5B worth of product on one day (Singles day), demonstrating the awesome purchasing power of the emerging Chinese middle class. While still the manufacturer to the world, China is also becoming an international purchaser and domestic consumer in their own right which will have major implications on global trade, manufacturing, and sales.
As supply chain technology advances so will the mega shifts to social and big data. These are making their way to international trade and importers are searching for the best way to leverage these trends.
The intermodal industry in North America is poised for continued growth in 2015. As we end 2014, all four major rails in the U.S. continue to see volume levels that are up between 5 and 10 percent from the year before. Even with mediocre service, all of the Class 1 rails continue to see demand outstripping supply. The shrinking driver pool has pushed many shippers to try rail as they aren’t able to meet the demands of their supply chains. As we get ready to turn the calendar into 2015, there doesn’t appear to be any sign of this mode conversion slowing down. Service has improved in some lanes as the rail’s focus on core lanes. Drivers want to be home every night and right now they have choice.
In 2015 the industrial real estate market will continue to grow and be strong. Supply constraints will continue to push rents higher and industrial real estate will remain favored asset class for capital markets. Infill locations to population bases will continue to thrive as businesses leverage urban hubs for ease of moving their goods through their supply chains. Customization and flexibility will continue to drive demand for built to suit facilities.