Expert Insight

By Ed Sands
Global Logistics Practice Leader

ICG Commerce

Date: December 2, 2010

Supply Chain Comment: 2011–Dynamic Market Shifts Drive Need for Deep Capabilities and Intelligence

The Coming Year Will Be Marked By Rapid Price Increases, Market Volatility And Other Trends

2011 will be marked by rapid price increases and high levels of market volatility, making today’s global transportation networks even more complex to manage.  

Transportation, Space and Equipment and Other Trends


While transportation cost savings helped many companies hold margins steady over the past 2 years, the trend is now reversing sharply.   Transportation analysts report global capacity growth at 6 – 7% versus the 10% growth forecast for demand.  Slow-steaming and a continued shortage of containers have driven up costs as much as 150% for ocean freight from the lows of 2008. Carriers have already announced additional increases and are shifting the cost of chassis fleets to shippers in the form of new surcharges.

 

Space and equipment will also be at a premium as the U.S. tries to grow its way out of this recession through a combination of low interest rates, a weak dollar and an aggressive push to double exports in 5 years. In domestic markets, significant regulatory changes such as CSA 2011 could reduce the driver pool by as much as 10% in the first year. With a weak dollar, fuel costs may continue to increase and stronger economic growth could accelerate the impact. Shippers who shift to intermodal to mitigate the fuel increases will then face chronic container shortages.


Final Thoughts


These dramatic reversals in the supply and demand equation and increased market volatility require companies to manage risk much more aggressively. They must also establish a level of market intelligence and procurement capabilities far more advanced than the more typical “business as usual.”   Some may engage third parties to quickly gain access to such capabilities; others may choose to invest in building it internally. In either case, those able to rapidly adjust their plans and continually optimize them against a dynamic market landscape will be best positioned to meet the challenges of the year ahead.

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About the Author

Ed Sands brings over 26 years of transportation and logistics experience to the practice since joining as the global leader in May 2010.

Most recently, he spent six years as Director of Global Transportation roles with leading retailers Williams-Sonoma and Urban Outfitters. Prior to that, he spent 3 years with Descartes Systems Group in their Ocean/

Transportation Management business developing technology solutions for both shippers and carriers. He began his career in sales and sales leadership roles with APL and Maersk.

Leveraging his deep domain expertise in container based transportation services and supply chain technologies, Ed has been a featured speaker several times at Retail industry conferences representing the needs of shippers and the challenges facing them.

www.icgcommerce.com

Sands Says:


These dramatic reversals in the supply and demand equation and increased market volatility require companies to manage risk much more aggressively.


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