In late 2008, the retail industry witnessed one of the worst contractions in consumer spending it has ever seen. The holiday shipping season came and went with barely a whisper. This left many transportation companies in dire straits heading into 2009.
However, for logistics companies that have weathered tough times before, there are two reasons to be optimistic for better times ahead. First, the economic crisis is already forcing undisciplined transportation operators out of the market. No one likes to see companies fail, but in recent years, my colleagues and I have seen companies quoting customers ridiculous rates that we know are unviable. A return to pricing discipline is required so that shippers develop a true undestanding of the cost of logistics, particularly in light of new environmental costs. How can we begin to explain these rising costs to customers if we have trucking companies pricing business at a loss? It is no surprise that hundreds of trucking companies have gone out of business since the beginning of 2008 and I expect more will follow.
Second, I believe we finally have an awareness building in the public about the need to improve transportation infrastructure, particularly in the major U.S. import-export corridors. I said this in last year’s essay and I will say it again: We need the land and roads and railways near ports for port business. We need a transportation planning mechanism where the industry, local communities and government agencies can prioritize transportation funding based on what’s best for the entire economy, not individual developers and politicians.
Having logistics facilities near ports for trade business is more efficient. It is better for the environment, reducing driving distances, traffic and emissions. It is also better for truck drivers who can make more turns and earn more revenue, setting the foundation for equipment upgrades and investment in pier drayage businesses.
We need government and regulatory support to create a more competitive U.S. economy founded on a streamlined and sustainable U.S. logistics infrastructure model.