There is little doubt that the pace of change in the transportation and logistics space is accelerating. Regulations, a lack of adequate infrastructure investment, and a shortage of willing, compliant workers threaten to create a freight transportation capacity shortage in 2018 that could be severe enough to constrain the overall rate of macroeconomic growth across the US.
Technology investment, in transportation and logistics, is clearly accelerating, as carriers, intermediaries, receivers, and shippers endeavor to close the technology gap, vis-à-vis other industries. But, as we see it, the investment in technology is unlikely to provide enough efficiencies soon enough to offset the capacity sapping trends highlighted above.
The capacity shortage will be concentrated in the truckload sector due to the driver intensive nature of truckload operations. Millennials have little or no interest, at any level of pay, in driving a truck, sleeping in a truck, and endless delays at loading and unloading docks. This tight supply-demand scenario will benefit nearly all other sectors in the broader transportation and logistics space as truckload overflow freight will find its way into the intermodal and LTL sectors. In addition, 3P’s will benefit from an onslaught of shippers who need high level assistance in sourcing sufficient freight hauling capacity.
The growth of e-commerce will also complicate matters, against a backdrop of tightening capacity, as customers seemingly expect ever faster transit times and ever less variability around transit times. With a lack of sufficient capacity, congested highway infrastructure, the railroad industry’s primary focus on cost reduction, labor shortages, and intensified government oversight, shippers should be prepared to pay higher prices to move their freight this year. Only a full-blown economic downturn could spare us from the anticipated upswing in pricing, and, we suspect, no one wants that.