2011 will be marked by rapid price increases and high market volatility, making today’s global transportation networks even more complex to manage.
Although transportation cost savings helped many companies hold margins steady over the past two years, the trend is now reversing sharply. Transportation analysts report global ocean container ship capacity growth at 6 to 7 percent versus the 10 percent growth forecast for demand.
Slow-steaming and a continued shortage of containers have driven up costs as much as 150 percent for ocean freight from the lows of 2008. Carriers have already announced additional increases and are shifting the cost of chassis service to shippers.
Space and equipment will also be at a premium as the U.S. tries to grow its way out of this recession through a combination of low interest rates, a weak dollar and an aggressive push to double exports in five years.
In domestic markets, significant regulatory changes such as CSA 2010 could reduce the driver pool by as much as 10 percent in the first year. With a weak dollar, fuel costs will increase and stronger economic growth will accelerate the impact. Shippers who shift to intermodal to mitigate the fuel increases will still face chronic container shortages.
These dramatic reversals in the supply and demand equation and increased market volatility require companies to manage risk much more aggressively. They must also establish far more advanced market intelligence and procurement capabilities. Some may engage third parties to quickly gain access to such capabilities; others may choose to invest in building it internally. Those able to rapidly adjust their plans and continually optimize them against a dynamic market landscape will be best positioned to meet the challenges of the year ahead.