Logistics and transportation companies doing business with the government and military will experience significant challenges in 2012. The Department of Defense will seek new ways to reduce costs. This will be the year the department will start to significantly reduce budgets — reductions in force structure and manpower, a decline in operations and maintenance accounts, reductions in major acquisition programs, a reduction in the number of forces deployed, more competition in service contracts, and a continued focus on gaining efficiencies.
These and other decisions will result in fewer people and less materiel to be moved, and fewer business opportunities.
The reductions in defense combined with a weak economy and the expected changes in Department of Transportation rules — hours-of-service regulations for truckers, crew duty rest rule in aviation — and continuing uncertainty with the implementation of the health care legislation and financial reforms will result in increased costs to the logistics and transportation provider, resulting in an extremely challenging business environment.
The successful companies will leverage technology, seek operating efficiencies, explore partnerships, innovate, and seek new business opportunities. As the U.S. focus on trade shifts to the Pacific region, government logistics and transportation providers should closely follow the U.S. initiative on Trans-Pacific Partnership to identify potential opportunities.
Logistics and transportation providers should also follow closely the implementation of the recently announced stationing of 2,500 U.S. military personnel in Australia, and other stationing and force structure initiatives in the Pacific region. Although not yet clear, there will be business opportunities in the government and military market in 2012.