Friday, December 28, 2012

A Look Towards 2013

Happy New Year to all!

As 2012 draws to a close it is inevitable we look towards the new year and wonder what it will bring. Many analysts, periodicals and others have given their thoughts on what 2013 may bring for the supply chain industry. Below are a few thoughts I have, please feel free to comment and add your thoughts as well.

  • The Economy: The global economy will likely continue along similar to 2012 - sluggish growth if any at all. 
    • An end to Europe's woes still looks to be a long way off. A European recession will likely last for at least the first half of 2013. 
    • Right now it appears the US is set to "fall off its fiscal cliff" come the first of the year. What this will bring is anyone's guess. Many economists expect the the country to fall to recession. One thing is for sure, taxes will increase which will result in cuts in spending. Cuts in spending will echo down the supply chain - The retailer, the trucking company, the distributor, the manufacturer, the supplier etc. Not only is the US set to fall off this cliff it is expected to reach its debt ceiling December 31. Update: US Congress passed a bill on January 1 to raise taxes on those families making more than $450,000, raising capital gains taxes and extended unemployment benefits for those that are unemployed. It also delayed by two months the so-called sequester, a series of automatic cuts in federal spending that would reduce budgets of most agencies and programs by 8% to 10%.  The debt ceiling was not mentioned so for the first quarter of 2013, the US government will be mired in heated debate over the debt ceiling and sequester. Expect the US economy to remain sluggish as businesses and consumers are likely to control spending until this situation is finally settled.
  • Labor Unrest: In uncertain economies, union members seek job security. It is quite likely there will be a continuation of strikes or "slowdowns" in such regions as Europe, South America and the US.
    • Here in the US, we may usher in 2013 with a port strike along the US east and gulf coasts. The labor contract originally expired September 30, 2012 however it was agreed to extend discussions through December 29th.  So far, talks have not been positive but the unions have agreed to continue discussions. Update: It appears contract negotiations have been extended for an additional 30 days, through the end of January.
    • The UPS contract with the Teamsters is set to expire July 31, 2013. This contract includes both UPS Freight and small parcel. Negotiations are already underway so more than likely an agreement will be made prior to the deadline. However, the longer it takes to agree to a contract, the likelihood additional parcel will shift to FedEx as a precaution for companies.
    • ABF and Teamsters are set to formally begin negotiations January 7th. However, contract proposals have already been exchanged prior to the negotiation date in hopes a contract can be reached before the March 31, 2013 deadline.
  • Technology: 
    • It seems more and more companies are heading towards the cloud. Logistics providers such as C.H. Robinson and UPS now offer cloud-based services. Expect more logistics providers to offer such services as these are not only quick to get up and running but also may be less expensive for customers to use as they tend to be transaction-based.
    • As supply chains become longer and more complexed, companies will seek IT solutions (Such as cloud-based solutions) to manage risks associated with the long, complexed supply chain. Visibility and the ability to respond quickly through the entire supply chain will be a requirement in order for companies to adapt to risks such as natural disasters, piracy, war, economic, counterfeit or other possible risk. 
    • Growth of ecommerce will see more brick and mortar companies invest in their multi-channels in order to connect and combine all supply chains into one.
  • Modal Shifts:
    • Air to ocean will likely hold true for 2013. FedEx and UTi CEOs have commented on this trend and both plan to add additional resources to pursue ocean freight opportunities. Kuehne + Nagel, the largest ocean freight forwarder will likely benefit as other competitors try to take market share from the large company. Look for new ocean freight products as competition heats up.
    • Intermodal will remain strong as it continues to take market share from the trucking industry. The trucking industry will struggle with ongoing regulations and the need to attract additional drivers.
  • Tradelane Shifts:
    • As China's main trade partners, US and Europe, continue to work out their economic issues, China looks for other export markets. Intra-Asia trade will continue to pick up particularly with Southeast Asian countries. South America and Middle East trade will also likely continue to increase as well.
  • Regionalization:
    • Rising Chinese labor costs, transportation costs and other operational costs is spurring manufacturing to move closer to end markets - particularly to the US. Perhaps there is a bit of political pressure as well as major companies such as GE and also Apple have announced a return of some manufacturing to the US. Mexico is also benefiting from this trend as automakers, high tech and aerospace manufacturers take advantage of NAFTA rules and expand manufacturing to this US neighbor.

So, to sum up what 2013 will likely bring - nothing new but a continuation of 2012. However, technology changes is fascinating to keep watch on and could quite possibly change the logistics landscape/rethink. Events likely to hit the first of the new year will be monitored and updates will appear here. So, what do you think? What other trends are likely to occur?