2011 may go down as a year of procrastination. It certainly looks to be a most uncertain time for the freight industry and its customers.
The economic worries are plain to see: continuing financial cutbacks in Europe as governments look to balance the books, with the U.S. likely to follow suit. The shortage of money, declining levels of business and international trade are very real concerns for us all during 2011.
If trade volumes fall, or at best fail to grow as strongly as they did during 2010, we will see pressure on carriers to address the supply of capacity. This will have repercussions on services, quality and price. Ultimately, it will affect the efficiency of supply chain. How long can industry endure the costs of increased lead times from slow-steaming, for example, when companies are pressured to look for shorter lead times, quicker responses to market demands, and lower costs to stay competitive? Air freight is only an answer for a few, and it remains expensive to the point where many are already planning to reduce use of air freight.
At what point do these opposing strategies between the suppliers of freight services and their customers reach a breaking point, and shippers look to take matters into their own hands and fundamentally alter their supply chains to address service issues?
2010 saw many of these tensions between shippers and liner shipping operators culminate in far-reaching regulatory proposals in the United States. With the main protagonist, Rep. James L. Oberstar, D-Minn., now out of the picture, will this be carried through into 2011? Many believe not.
Environmental issues may remain on the table, but with little action being taken this year to initiate new measures or programs to address them, the economic climate will take precedence over the natural climate. One exception may be from unilateral action by the European Commission, which warned it would begin moving toward greenhouse gas regulation for shipping if the international community fails to make progress in this area. This will only add to the worries of shipping lines, where companies already face big challenges from mandates for low sulphur fuel use in northwestern Europe and along North American coasts.
The customer ultimately bears the brunt of such actions where they may arise, and of procrastination on other policies and strategies. It will be a most uncertain year ahead.