October 29th, 1929, is known to the world as Black Friday.
This was the day the stock market crashed resulting in the beginning of the
Great Depression. Then there was the Great Recession of 2009, where the world
economy saw its greatest collapse since World War II. Recovery from both of
these devastating events took time and patience. So where do we sit a decade
(and almost 90 years) later? Healthy. The gross domestic product is expected to
remain between 2% and 3% - which is considered the ideal range. Anything at a
higher pace is considered booming and could eventually lead to a damaging bust.
Many industries are directly affected by the rise and fall of
the global economy. This is certainly the case for the transportation industry.
When the global market is on the up, the retail and manufacturing industries
ramp up in turn. Their success means the transportation industry grows increasingly
essential. Whether a shipment is traveling by Air, Truck, Rail, Water or
Intermodal, the demand for these services is very strong right now and it’s
causing companies to become more strategic. They’re thinking more carefully
about which carriers they’ll partner with and how they’ll manage these
partnerships.
The holiday season provides a great example of how the global
economy affects the transportation industry. In a strong economy, the average
consumer is able to afford some unnecessary luxuries. As a result, more and
more people will aggressively spend money online. These purchases mean they’ll rely
heavily on carriers for timely deliveries. Ongoing efforts are in place to make
the annual holiday season less of a fiasco. Carriers are spending more to boost
capabilities and they’re starting the preparation process much earlier in the
year. Hundreds of millions of dollars will be invested across the
transportation industry to help meet the increase in demand for 2019 and beyond.
It’s no secret that brick and mortar stores are continuing to
struggle. Meanwhile, e-commerce continues to grow resulting in a shift in how
end users receive their product. It’s much easier for people to make a few
clicks with their mouse, wait a couple of days, and have their purchase show up
on their doorstep than have to battle with traffic and other consumers. This
shift in how products are bought and sold is forcing the transportation
industry to adapt as well.
A major issue still facing the transportation industry, and
specifically LTL/FTL (Less Than Truckload/Full Truckload), is the lack of
available drivers. The demand for truck drivers is continuing to grow. The
retail and manufacturing industries are consistently driving demand. Their
needs should only increase in the future, and failure to meet them could soon
have a negative effect on pricing. With more products on the move throughout
the world, and fewer people to do so, the cost to move freight might start to
make drive down global economic sustainability and contribute to shrinking
profits. There is a finite amount of space in the LTL circuit and making sure
you have your section carved out is critical. Working to strengthen the
relationships with top-performing carriers helps to ensure your freight is
always moving throughout the supply chain network.
In case there are not enough hurdles in supply chain
planning, there is always the potential for a curve-ball in the global market.
The new nasty word on the streets is…tariffs. Just when a company thinks they
have it all figured out…tariffs. I won’t go into detail here but if you want to
read more on tariffs and how they can affect an entire supply chain, please
check out this blog from colleague at Source One, Samuel
Cagle.
When times are good, it’s easy to spend money without thinking
about the consequences. When times are
tough, the first thing people want to do is cut costs. Enduring the tough times becomes much easier
when smart business and sound financial planning win the day. Strong relationships between vendors and
suppliers and savvy supply chain management could make all the difference in
fending off a Great Depression, a Great Recession or whatever the next Great
‘cession’ is…perhaps a Great Tariff?
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