Respondents to DC Velocity 's 2011 Outlook Survey are cautiously optimistic about the economy. But they're not ready to throttle down their cost-cutting efforts just yet.
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP?s Supply Chain Quarterly and a staff writer for DC Velocity.
What's on tap for 2011? The leading professional association for business forecasters—The National Association for Business Economics—expects moderate growth for the year overall, with gross domestic product inching up 2.6 percent. Most DC Velocity readers apparently see things much the same way, expressing guarded optimism about the year ahead.
Our annual Outlook survey of readers found that 52 percent were optimistic that economic conditions will improve. Just 22 percent said they remained pessimistic about the nation's economic future, while 26 percent said they were unsure what 2011 would hold.
The online poll was conducted in early November just after the mid-term elections. A total of 193 readers took part in the survey. The majority of the respondents said they worked for manufacturers (33 percent) or distributors (27 percent). The remainder worked for logistics service providers (20 percent), retailers (11 percent), or other types of businesses (9 percent).
Although survey respondents were generally hopeful about the future, only a handful expect the economy to come roaring back. Just 15 percent said they thought the U.S. economy would see strong growth in 2011. Another 48 percent predicted weak growth, and 34 percent said business would be flat. Three percent declined to speculate.
When it came to their own company's revenue prospects for 2011, respondents were more bullish than they were about the overall economy. Thirty-seven percent foresaw strong sales growth for their companies, and 22 percent said they expected at least weak growth. Another 35 percent predicted sales would be flat, while 6 percent said they were unsure how their companies would fare in the coming year.
Bracing for higher fuel costs
Despite their optimism, the survey respondents clearly plan to hold the line on spending in 2011. When asked about their 2011 spending plans for logistics and related products and services, 48 percent of respondents said they expected their expenditures to remain at 2010 levels. Only 36 percent said they thought their companies would boost their spending. Another 8 percent expect a drop in company spending, while the same percentage said they were unsure about their organizations' spending plans.
Among those respondents who expect to boost their spending, the biggest share—45 percent—estimated their expenditures would increase by 3 to 5 percent. About 28 percent projected an increase of 5 to 9 percent, while 10 percent put the increase at just 1 to 2 percent. Only 17 percent said their logistics spending would jump by 10 percent or more in 2011.
When asked specifically about their plans for buying transportation services, 45 percent of the respondents said they expected their expenditures to increase. Another 40 percent said their spending would remain the same, 6 percent predicted a decrease, and 9 percent said they weren't sure. It's worth noting that regardless of their spending plans, survey respondents largely agreed on where energy costs were headed. Eighty-four percent said they believed fuel prices would rise in 2011.
As for what kinds of transportation services respondents plan to buy in 2011, less-than-truckload (LTL) topped the list. Sixty-six percent of survey takers said they would be contracting for LTL service. That was followed by truckload service (61 percent) and small-package service (55 percent). (See Exhibit 1.)
Survey respondents were also asked about their plans for outsourcing logistics services in the coming year. Of the 35 percent of respondents who currently use third-party logistics service providers (3PLs), 53 percent said they expected their use of third-party services to remain unchanged from 2010 levels. Thirty-five percent said they expected to increase their use of contract logistics services, while 12 percent said they planned to cut back on outsourcing.
When asked what type of material handling equipment they planned to buy during 2011, 43 percent mentioned racks and shelving. Next on the list were batteries and battery handling equipment (39 percent) and safety products (34 percent).
As for planned software purchases, it appears that readers are sticking with the tried and true. Twenty-eight percent of survey respondents said they intended to buy a warehouse management system (WMS), while 27 percent have set their sights on a new transportation management system (TMS). Also on the list were inventory planning software (21 percent) and supply chain optimization applications (20 percent).
Putting the brakes on spending
Although the survey respondents remain guardedly optimistic about the future, it appears they aren't ready to throttle down their cost control efforts just yet. The majority of survey takers indicated they would continue to seek ways to trim distribution expenses in 2011.
As for how they plan to go about it, the largest share of respondents said they would look to re-engineer their trucking spend. Forty-one percent said they planned to consolidate more shipments into full truckloads. The same percentage of respondents said they would seek to renegotiate rates with their carriers. (See Exhibit 2.)
The survey also showed that respondents will be adding some new weapons to their cost-cutting arsenal in 2011. While many will continue to pursue traditional approaches like load consolidation, it appears some have decided the time has come to deploy computer power and intelligence in their battle to contain distribution costs. Nearly one-third of respondents (31 percent) plan to invest in software to analyze their operations for additional savings opportunities.
A move by federal regulators to reinforce requirements for broker transparency in freight transactions is stirring debate among transportation groups, after the Federal Motor Carrier Safety Administration (FMCSA) published a “notice of proposed rulemaking” this week.
According to FMCSA, its draft rule would strive to make broker transparency more common, requiring greater sharing of the material information necessary for transportation industry parties to make informed business decisions and to support the efficient resolution of disputes.
The proposed rule titled “Transparency in Property Broker Transactions” would address what FMCSA calls the lack of access to information among shippers and motor carriers that can impact the fairness and efficiency of the transportation system, and would reframe broker transparency as a regulatory duty imposed on brokers, with the goal of deterring non-compliance. Specifically, the move would require brokers to keep electronic records, and require brokers to provide transaction records to motor carriers and shippers upon request and within 48 hours of that request.
Under federal regulatory processes, public comments on the move are due by January 21, 2025. However, transportation groups are not waiting on the sidelines to voice their opinions.
According to the Transportation Intermediaries Association (TIA), an industry group representing the third-party logistics (3PL) industry, the potential rule is “misguided overreach” that fails to address the more pressing issue of freight fraud. In TIA’s view, broker transparency regulation is “obsolete and un-American,” and has no place in today’s “highly transparent” marketplace. “This proposal represents a misguided focus on outdated and unnecessary regulations rather than tackling issues that genuinely threaten the safety and efficiency of our nation’s supply chains,” TIA said.
But trucker trade group the Owner-Operator Independent Drivers Association (OOIDA) welcomed the proposed rule, which it said would ensure that brokers finally play by the rules. “We appreciate that FMCSA incorporated input from our petition, including a requirement to make records available electronically and emphasizing that brokers have a duty to comply with regulations. As FMCSA noted, broker transparency is necessary for a fair, efficient transportation system, and is especially important to help carriers defend themselves against alleged claims on a shipment,” OOIDA President Todd Spencer said in a statement.
Additional pushback came from the Small Business in Transportation Coalition (SBTC), a network of transportation professionals in small business, which said the potential rule didn’t go far enough. “This is too little too late and is disappointing. It preserves the status quo, which caters to Big Broker & TIA. There is no question now that FMCSA has been captured by Big Broker. Truckers and carriers must now come out in droves and file comments in full force against this starting tomorrow,” SBTC executive director James Lamb said in a LinkedIn post.
Bloomington, Indiana-based FTR said its Trucking Conditions Index declined in September to -2.47 from -1.39 in August as weakness in the principal freight dynamics – freight rates, utilization, and volume – offset lower fuel costs and slightly less unfavorable financing costs.
Those negative numbers are nothing new—the TCI has been positive only twice – in May and June of this year – since April 2022, but the group’s current forecast still envisions consistently positive readings through at least a two-year forecast horizon.
“Aside from a near-term boost mostly related to falling diesel prices, we have not changed our Trucking Conditions Index forecast significantly in the wake of the election,” Avery Vise, FTR’s vice president of trucking, said in a release. “The outlook continues to be more favorable for carriers than what they have experienced for well over two years. Our analysis indicates gradual but steadily rising capacity utilization leading to stronger freight rates in 2025.”
But FTR said its forecast remains unchanged. “Just like everyone else, we’ll be watching closely to see exactly what trade and other economic policies are implemented and over what time frame. Some freight disruptions are likely due to tariffs and other factors, but it is not yet clear that those actions will do more than shift the timing of activity,” Vise said.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index indicating the industry’s overall health, a positive score represents good, optimistic conditions while a negative score shows the inverse.
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.