By: Frank McGuigan, President & Chief Operating Officer, Transplace
There’s never a dull moment in the supply chain. That statement seems especially true thus far in 2017. We’re just over a month into the new year and there is already a myriad of questions about the market, the business landscape and how companies will be affected going forward. With issues such as changes to global trade deals, regulations and fluctuating capacity, we are quite certain that there will be an impact on the supply chain in 2017, and beyond, making it is vital for shippers, carriers and logistics service providers to keep a pulse on what’s going on in the industry.
The New Administration and Trade
There was a lot of talk leading up to the presidential election concerning changes that would be made to the United States’ trade agreements with other countries. And within the first week of the new administration, we have already started seeing those changes come to fruition. The U.S. pulled out of the Trans-Pacific Partnership (TPP) and has escalated talks around renegotiating NAFTA or implementing a border tax.
Pulling out of TPP was not a surprise, but it doesn’t mean that the U.S. won’t be trading with partners in Asia, it just means that we won’t be signing a large and comprehensive trade pact with that region and we’ll rely on individual relationships with trading partners in that part of the globe. That might happen with NAFTA as well, but it’s far too early to tell. Right now, it appears that we’re examining all of our trade agreements to see if there are better deals out there for the U.S.
While some of the rhetoric is disconcerting, I don’t anticipate a significant near-term impact. Mexico and Canada are our two largest exporting partners, and those relationships create a significant number of jobs in the U.S., so maintaining trade relationships is in the best interest for everyone involved.
So as we’re all eagerly watching to see how the process takes shape, supply chain leaders are beginning to think about the potential impact of tariffs on their goods and evaluating their networks. They’re considering questions such as: Could my current supplier network be exposed? Do I need to reengineer my supplier network? What are the corresponding logistics issues that would accompany the reengineering of my supplier base?
While it will likely take some time before there is any immediate impact on U.S. logistics networks, it’s prudent for shippers to be proactive and walk through “what if” scenarios if tariffs come into play, or more manufacturing comes back to the US.
The Impact of Regulations
Regulatory change has been at the forefront of the transportation industry in recent years. Whether it’s CSA, HOS, ELDs, and now obstructive sleep apnea, these issues seem to leave more questions than answers. While we can all align in the pursuit to make the transportation industry safer, we must also recognize the overall impact of these regulations on the industry. Can carriers afford the change? Will drivers and carriers leave the market? What is the impact to capacity?
While the new administration appears to be pro-business, it remains to be seen what stance they will take related to transportation. As in previous years, it’s important for shippers to keep an eye on the regulations and proactively plan for the potential impact they could have on productivity and capacity. It is important to look at strategies to diversify your carrier base or modal mix to be able to adjust to changes in capacity.
Shippers have benefited from lower fuel costs and abundant capacity over the last 18 months, but many indicators suggest that there is a tightening of capacity in the coming year. If the economy and industrial production, specifically, continues along the trend line that we saw in Q4 2016, we can expect capacity to tighten and place upwards pressure on rates.
Technology Innovation is Enabling Visibility and Optimization
Innovation in logistics never stops. While autonomous trucks and “Uber of Trucking” companies have dominated the headlines, the exact impact has yet to be seen. We will actually have a chance to monitor the service and cost impact of some of these innovations in our network this year, so stay tuned. Last, though driverless trucks are likely closer than we think (plus/minus 5 years), it is too early to understand how they will be used and the resultant impact on the transportation networks of our shippers.
While there is an appetite for information on those emerging trends, shippers are placing even greater focus on expanding the capabilities and functionality of their transportation management system (TMS). Specifically, gaining real-time visibility of shipments and access to real-time data and reporting. Shippers want to see live performance on what is going on in their network – both inbound and outbound. This is especially true in service intensive industries, where visibility is critical for effective planning, communication and inventory management.
Regional control towers provide shippers the level of visibility – across North America or globally – that enables them to really “see” their network and make data-driven decisions regarding inventory, mode, lane, carrier selection and cost. Understanding all of those modes and hand-offs enables network optimization, effective procurement and with a greater level of data and engineering, the best possible service-cost logistics network.
Now is the Time to Plan Ahead
Although we are planning for measured capacity tightening, we don’t expect the market to take significant twists and turns this year. And with the uncertainty around the exact impact that changes to trade agreements and regulation will have on the supply chain, if you haven’t already, now is the time to evaluate your supplier base and transportation network and collaborate with your strategic partners in order to ready your supply chain for a period that will be leaner than it has been over the last 18 months.
How has your organization proactively planned for possible transportation challenges in 2017?