During a career that has spanned 25 years in domestic and international cargo, a familiar ebb and flow of volume tracked a predictable seasonal trend through each year. This trend would be susceptible to cyclical economic issues but nonetheless follow eerily similar patterns. During that same period the direction of that flow of goods has shifted within the U.S. (west to east vs. east to west) but peak time periods and slower periods were consistent.
The last two years have seen this model of predictability crushed with significant volatility affecting the equilibrium of capacity and demand. Enough has been written on the macroeconomic issues impacting the fall in demand. The reaction on part of carriers to reduce capacity took months. Freighters parked in the desert, ships coming off of schedules, fleets parking tractors, trailer and container orders canceled, trucking companies going broke and thousands of drivers changing careers resulted in significant capacity leaving our industry. Upon reaching a match with softer demand, our industry experienced an unprecedented rise in orders and shipments that strained networks and fleets across the globe. This strain worked its way through the multiple modes that shippers utilize: international air, ocean and domestic truck and rail. The direction of domestic flow and subsequent imbalance of equipment added additional strain. What were highly engineered solutions and consistent supply chains were now facing significant disruptions.
The traditional and predictable forecasts and plans are further complicated by the reaction all parties in the supply chain are taking to deal with these disruptions. Over ordering, shifting suppliers, canceled orders, over booking, and canceled shipments make efficient capacity utilization a tremendous challenge. At the same time, there is slow reaction on part of the carriers to introduce new capacity. Fear of a double dip and a daily dose of negative news on the key economic indicators do little to avert this cautious lack of action. The regulatory horizon and any revision to the HOS rules along with the anticipated impact of CSA 2010 on the current driver pool don’t point to an influx of domestic capacity.
Although all of these issues converge to create a challenge, supply chain professionals have a long history of developing solutions to meet challenges. Collaboration has been a primary theme long before our current situation arose. Forecasting and planning and the communication of those plans have never been more critical. Shippers need to position their transportation suppliers for successful execution of their supply chain. Carriers, 3PLs, Shippers and Consignees are all in this together and if all parties in the supply chain continue to work together, we can withstand the current capacity issues and lay the groundwork for unprecedented industry growth for years to come.
Edited by Ellie Duncan
