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What Logistics Trends to Expect in 2018?
With 2017 coming to an end and the New Year beginning, as logistics managers, it is time to assess what has worked this year and define strategies for the next year. Understanding what impacts logistics rates and demands requires knowledge of various logistics markets and consideration of a variety of perspectives. For any business, logistics managers need to tie together trend expectations, company goals, and business performance statistics to review logistics strategy, revise logistics processes and revise contracts. Below article is a summary of experts’ anticipated 2018 market behavior across transportation modes.
Air
The air industry is expecting a moderate increase in passenger traffic into 2018 due to an easing of demand drivers, and no reduction in air freight volumes. Demand has been healthy and is expected to support increased profits according to IATA surveys which, interestingly enough, no respondents (airline CEOs and Heads of Cargo) expected freight volumes to decline in 2018. Demand for air freight space is growing beyond capacity, meaning an increase in rates is also foreseeable. Fuel costs are expected to increase due to a weakened USD and an ongoing supply constraint from OPEC and Russia. These supply cuts are expected to extend until the end of 2018.
Ground
Truckload pricing is expected to increase, according to Cass Information Systems, between 2% and 4%. Earnings reports from large companies suggest rates will continue to rise as many have increased pricing power in the market. The degree of industry wide increases will depend on whether the US economy can continue to exceed GDP expectations and the effects of the electronic devices mandate to be in full effect by April 2018. Rate increases are also likely in intermodal pricing, with some companies expecting transportation costs to rise over ten percent. The driver shortage is also expected to continue to be a major issue in 2018 as it has become a major issue for the first time in 11 years in 2017 according to the American Transportation Research Institute. This shortage is partly the cause of increased pricing and trucking costs, as wages and benefits for drivers have been steadily increasing to attract more potential employees.
Ocean
Compounded growth rates of containerized trade volume are expected to increase anywhere between 1.9% and 5.1% globally with projected container port volume in Europe decreasing by 0.4% and doubling in Africa in 2018. The transition to electronic chart displays and information systems are expected to be fully enacted in July of 2018 and expose companies to significant security risks. Hackers are expected to cost energy companies close to $1.9 billion by 2018 via causing system shut downs, navigation errors, and isolating systems from one another. Additionally, with the key westbound route from Asia to Northern Europe trending upwards in ship utilization since late 2016, and spot rates trending downwards, signs point to undercutting of the market by carriers. As contracts are being negotiated and finalized, shippers may have unnecessarily increased their risk by signing to much lower rates than they would have otherwise agreed to if some capacity was temporarily removed. Although there is speculation that shippers may not have reduced capacity because they want to inflate customer loyalty to their alliance.
Allyn Contributor: Taylor Rathka
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe, and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.
References
Braden, Dustin. "US Driver Shortage Becomes Top Trucking Concern." US Driver Shortage Becomes Top Trucking Concern. Journal of Commerce, 23 Oct. 2017. Web.
Braden, Dustin. "US Surface Transportation Pricing on the Rise." US Surface Transportation Pricing on the Rise. Journal of Commerce, 31 Oct. 2017. Web.
Cassidy, William B. "Driver Wages and Benefits Jump, Pushing up Trucking Costs." Joc.com. Journal of Commerce, 19 Oct. 2017. Web.
Cassidy, William B. "ELD Enforcement to Be 'phased In' through April 2018." ELD Enforcement to Be 'phased In' through April 2018. Journal of Commerce, 28 Aug. 2017. Web.
IATA. "Chart of the Week." Iata.org. International Air Transport Association, 27 Oct. 2017. Web.
IATA Economics. Airlines Financial Monitor August 2017 - September 2017. Iata.org. IATA Economics, 12 Oct. 2017. Web.
Knowler, Greg. "Carriers' Lack of Asia-Europe Service Cuts to Weaken Contract Rates." Carriers' Lack of Asia-Europe Service Cuts to Weaken Contract Rates. Journal of Commerce, 30 Oct. 2017. Web.
Knowler, Greg. "Expect Another Year of Solid Demand, Air Freight Heads Say." Joc.com. The Journal of Commerce, 26 Oct. 2017. Web.
Oxley, David. Air Freight Market Analysis July 2017. Iata.org. IATA Economics, 5 Sept. 2017. Web.
Oxley, David. Air Freight Market Analysis August 2017. Iata.org. IATA Economics, 4 Oct. 2017. Web.
UNCTAD. "Review of Maritime Transport 2017." Unctad.org. United Nations Conference on Trade and Development, Oct. 2017. Web.