While the economic recovery has been slower and more modest than hoped, it apparently is real. That's good.
But as we arrive at the peak shipping season, shippers may still have to contend with the recession's aftereffects. During the worst economic downturn in our lifetimes, carriers in all modes made sharp cutbacks in order to survive. As a result, shippers could be looking at a serious shortage of freight capacity just when they need it the most.
Some signs indicate that the nation's freight transportation capacity is already under pressure. In June, trucking officials speaking at a conference in Atlanta warned that the industry could face the most severe driver shortage in its history as a result of increased demand and an aging workforce. That same month, intermodal volume on the nation's railroads reached its highest level since late 2008, while rail carloads posted solid gains.
The picture is much the same on the ocean side. In May and June, import container volumes at the country's top retail container ports showed double-digit gains over year-ago levels, according to the National Retail Federation—a trend the group expects will continue into the fall. At the same time, reports out of Asia suggest that ocean carriers are facing a shortage of containers to move goods to the United States. And when the goods get here, shippers may have a hard time getting them out of port. In a June story, the Journal of Commerce reported that terminal operators at ports around the country expected difficulty in handling the surge in imports.
All this means that shippers have a lot of decisions to make regarding what carriers they use, what they're willing to pay, where to source, whether they should consider redesigning their networks, and more. But one of the toughest quandaries of all may be the inventory/transportation tradeoff: Do you build stocks in what some still consider a wobbly recovery in order to take advantage of transportation economies of scale? Or do you keep inventory lean even though it will mean making smaller, more frequent—and thus more costly—shipments?
The choices are not easy. But while the current experience may be extreme, the dilemmas should not be a surprise to shippers who have paid attention. A post-recession capacity crunch and concomitant rate pressure was almost a certainty.
A recovery of course is a good thing. But it has its challenges. The analogy that springs to mind comes from meteorology: A high-pressure system that brings balmy weather is often preceded by a squall line of dangerous storms. The key is to be ready.
