Despite what the cynics may say, it's not true that shippers and carriers can't agree on anything. They agree, for example, that the nation's aging transportation infrastructure and mounting traffic congestion threaten future economic growth. They also agree that shippers and carriers of all modes must work together to persuade Congress, regulators, and state legislators that the issues are urgent. But they don't always agree on the solutions which means translating their shared goals into action may be no easier than it has been in the past.
Just as it did last year, the issue of capacity and related concerns over infrastructure, congestion, and security initiatives dominated the discussion at a recent day-long forum on national transportation policy sponsored by the National Industrial Transportation League (NITL) and the Association of Transportation Law Professionals. The forum brought together leaders of large transportation trade organizations, union officers, federal transportation officials, and others.
NITL president John Ficker said that collaboration among all parties will be required to overcome the issues facing shippers and carriers. "Shippers and carriers are some of the most ingenious people I've met," he said. "They figure out how to resolve issues. But how many rabbits are left inside the hat? We can't do this in a modal silo environment. It is necessary to take a holistic view of freight."
Ficker said that capacity was one of NITL's two major concerns (the other being security), noting that projections call for the amount of freight to double by 2030 to 2035. "Even if that's half right," he said, "it's a problem."
Bill Graves, president of the American Trucking Associations (ATA), added that the transportation industry is likely to start feeling the pinch long before that. His group projects freight tonnage will increase 30 percent in the next 10 to 12 years across all major modes with rail intermodal growing fastest. Graves said that one of the most immediate concerns will be finding labor, noting that the ATA expects the trucking industry will need 100,000 new drivers by 2014 41 percent to replace retirees and 59 percent to absorb the growth in freight.
"There's definitely a feel that the entire freight community is recognizing how important it is that we get our act together to collectively go to the Congress to do things to advance our ability to move freight,"Graves said. "We are part of a global supply chain.We have to understand where we are headed with freight demand up and up and up."
Graves said the ATA's top legislative issue in coming years will be reauthorization of the federal highway spending bill, which expires in 2009. "Congress needs to recommit itself to a national program with freight a huge part of that," he said.
Laying down track
Edward Hamberger, president of the Association of American Railroads, may have summed up the quandary facing carriers, shippers, and policy-makers best when he compared the looming transportation crisis to the legendary Gordian knot.
"Capacity is constrained across all modes," he said. "It is going to get more challenging in the next 20 years. The thrust of every one of the studies is clear. There will be more and more demand for freight movement. That's a good thing, but infrastructure is becoming strained across all modes."
He said the railroad industry plans to add 80,000 new employees over the next six years and that the railroads are spending billions of dollars in new capital investment about $9.4 billion this year alone. However, Hamberger warns that railroad investment will continue only if that spending provides adequate returns. "At its heart," he said, "capacity is about money and capital investment."
Like the railroads, maritime industry players have been scrambling to invest in infrastructure, said Chris Koch, president of the World Shipping Council, a trade group representing the ocean liner shipping industry. "Infrastructure is an issue common to all users," he said. "Tens of billions of dollars are being invested to handle growth in international trade. A shortage of capital is not a problem. Getting environmental permitting is a problem. Hooking up to the infrastructure is a problem. Investing fast enough is an issue."
On the issue of security, Koch said he did not believe the recent legislative push to require that all ocean containers bound for the United States be inspected would get far. "It faces a lot of difficult hurdles," he said. "It is a tad on the extreme side and places barriers on our own trade."
But Koch does expect to see Customs and Border Protection succeed in its bid to expand its "24 hour rule," by requiring importers and carriers to provide additional data on incoming ocean containers 24 hours in advance of vessel loading. He expects to see a proposal for a new federal rule this summer that requires 10 data elements beyond what is on a bill of lading. "That's a big change for the import community," he said. He called it a logical extension of existing regulation, but one that could be difficult to implement.
Federal regulation of international shipping, he said, is constrained by the slow adoption of security rules by other nations. "We're moving to the next step before the rest of the world has moved to the first step," he said. "Many years down the road, it would be nice to see one international standard of the data elements for both importing and exporting. But we're a long way from that."
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."
Global trade will see a moderate rebound in 2025, likely growing by 3.6% in volume terms, helped by companies restocking and households renewing purchases of durable goods while reducing spending on services, according to a forecast from trade credit insurer Allianz Trade.
The end of the year for 2024 will also likely be supported by companies rushing to ship goods in anticipation of the higher tariffs likely to be imposed by the coming Trump administration, and other potential disruptions in the coming quarters, the report said.
However, that tailwind for global trade will likely shift to a headwind once the effects of a renewed but contained trade war are felt from the second half of 2025 and in full in 2026. As a result, Allianz Trade has throttled back its predictions, saying that global trade in volume will grow by 2.8% in 2025 (reduced by 0.2 percentage points vs. its previous forecast) and 2.3% in 2026 (reduced by 0.5 percentage points).
The same logic applies to Allianz Trade’s forecast for export prices in U.S. dollars, which the firm has now revised downward to predict growth reaching 2.3% in 2025 (reduced by 1.7 percentage points) and 4.1% in 2026 (reduced by 0.8 percentage points).
In the meantime, the rush to frontload imports into the U.S. is giving freight carriers an early Christmas present. According to Allianz Trade, data released last week showed Chinese exports rising by a robust 6.7% y/y in November. And imports of some consumer goods that have been threatened with a likely 25% tariff under the new Trump administration have outperformed even more, growing by nearly 20% y/y on average between July and September.