Takeaways From the State of Logistics Report
- 2014 was “the best year for the supply chain industry since the Great Recession,” the Council says. But freight costs are poised to rise, with trucking a potential catalyst. The American Trucking Associations estimates the driver shortage to be between 35,000 and 40,000 workers, as baby-boomers exit the business and aren’t replaced by enough younger truckers. Higher wages would attract drivers, at the price of higher freight costs.
- Rail traffic increased 4.5% in 2014 and is now generally back to pre-recession levels, the Council found. But are the nations tracks, bridges, locomotives and freight cars equipped to handle rising demand? Between 2009 and 2013, freight railroads invested $115 billion in infrastructure and equipment, an average of $23 billion per year. In 2015, that number is expected to rise to $29 billion, and the industry is expected to hire 15,000 new employees. Shippers will be watching to see if the investment and staffing increases will be enough to keep up.
- Warehouse vacancy rates have plunged to the low single digits at some ports, and the crunch could worsen, the Council found. Taking up space: the online shopping boom, economic growth and transportation bottlenecks. CoStar Inc. reported that at the end of the first quarter, the national warehouse vacancy rate was 6.7%, but was just 3.2% in Los Angeles. For shippers, this means higher costs to store goods, which could lead the market to adjust by building more warehouses.
- In 2014, carriers moved a record $968 billion in high value merchandise in the cargo holds of freight aircraft, the Council found. But despite high volume, air freight revenue fell 1.2%. Air was the only mode of freight transport that failed to produce increased revenue for carriers.
- Ocean freight recovered well in 2014, but the East Coast ports saw the biggest percentage gains among all U.S. ports, the Council found, due mainly to congestion caused by labor troubles along the West Coast. Some ports, like Portland, Ore., saw their container traffic all but wiped out. It’s not clear whether those gains are permanent, or if traffic will return to old patterns now that the labor conflict has been resolved.