Each January for the past few years, I've made a number of predictions for the coming 12 months. Some have panned out; others have not. But the task seems to be getting harder. As I sat down to write this year's edition, it occurred to me that I haven't seen this much upheaval in our industry since the early 1980s.
That point was driven home to me on Dec. 1, when I saw the "60 Minutes" segment in which Jeff Bezos introduced his drone package delivery system. While we won't see Amazon drones winging their way through our neighborhoods in 2014, it's quite possible we'll see them some time in the future. With so much going on, it is increasingly tough to visualize what will happen tomorrow, let alone throughout the year. Nevertheless, I am going to wade into the storm and make eight predictions for 2014:
- Amazon.com will continue to set the pace for supply chain innovation. Just as Wal-Mart did several years ago, Amazon will keep raising the bar where supply chain advances are concerned. Whether it's building out a vast private distribution network, utilizing Sunday deliveries by the U.S. Postal Service, or launching drones into the supply chain skies, I believe Amazon will force other retailers to rethink their networks and capabilities.
- The truck driver hours-of-service (HOS) controversy will heat up again. Even though the courts have upheld the new rule and the regulations took effect July 1, 2013, we haven't heard the end of this. I believe Congress will step in. The American Trucking Associations can be a formidable lobbying force, and it is making a full court press to get the regulations rolled back.
- Regardless of what happens with the HOS regulations, there will still be a shortage of drivers. The overall lifestyle, congested roads, and various government interventions are simply making the job too unpleasant. To attract and keep qualified drivers, carriers will be forced to raise salaries.
- "Reshoring" and "nearshoring" will continue, although at a relatively slow pace. Offshoring may be losing its luster, but don't expect to see a dramatic shift in sourcing patterns. While labor rate differentials are narrowing between China and Mexico, for example, it will be a few years before they equalize. Also, the large investments some manufacturers have made in Asia will keep them there for the foreseeable future.
- The current transportation funding act will expire in October 2014. Although we desperately need a comprehensive bill with an adequate funding mechanism, it's doubtful we'll see a breakthrough in this area anytime soon. I believe Congress will kick the can down the road again, possibly just extending the current legislation.
- More states will raise taxes to fund their own infrastructure. In the face of Congress's continued failure to act, states will take matters into their own hands. Maryland, Virginia, Wyoming, and others have already done so.
- Carriers will continue to invest in alternative fuel vehicles. The growing abundance of cleaner, lower-cost fuels will accelerate the shift away from diesel. UPS has already made heavy investments in electric, hybrid, and natural gas-powered vehicles, and others are sure to follow.
- The air travel experience will continue to deteriorate. American Airlines and U.S. Airways executives have touted their recently approved merger as a good move. It may be for them, but experience has shown that consolidation in the airline industry often results in reduced service for many cities coupled with higher fares and fees, not to mention the shrinkage in personal space.
Notwithstanding some of our current issues, things could be worse. Remain calm, stay focused, and keep an eye out for drones.
Loxo/Planzer