The last couple of years have been a real roller coaster—and few industries have been affected as much as transportation and logistics. From running a warehouse in a pandemic, to supply chain delays, to dealing with the continued shortage of labor and drivers, our industry has had to innovate more rapidly than ever before. At Momentum Transportation, a Landstar Agent, our expert team continues to give you an inside track on the latest trends that impact your mission-critical operations.
Trend 1: An intensifying capacity shortage is exacerbated by the rapidly-rising cost of fuel
The trend towards online shopping and delivery are at historic levels, driven ever higher due to the COVID-19 pandemic. That translates into a huge amount of truckload and LTL capacity being consumed by online retailers. Simply put, there is more fright to move than there are trucks and drivers to move it. The driver shortage is becoming more acute as a large portion of experienced drivers near retirement age. Becky Scott, director of key accounts, adds, “In my opinion many younger potential drivers are staying away from the field due to the long hours away from home, pay that can be unpredictable, and the prospect of driving automation limiting long term opportunities. ”
In an environment where capacity was already extremely tight, now fuel costs are skyrocketing. Worldwide crude oil supply and worldwide demand for crude oil determine fuel prices. First the supply side. We’ve all been following the war in Ukraine closely. When the United States put sanctions on Russia — one of the world’s largest energy suppliers — as a punishment for attacking Ukraine, it hindered Russia’s ability to sell crude oil. That is pushing prices up. What’s more, the United States hasn’t maintained a high level of oil refining capacity — and other global refineries are struggling to produce enough to keep up.
On the demand side, loosened COVID restrictions are resulting in increased demand for fuel. As the world slowly adjusts to the new normal, people and businesses are going back to their pre-COVID routines. More driving, more air travel equals more demand for fuel.
There are strategies to lessen the impact. The first is to be as flexible with your pick-up and delivery schedule as possible. Look for facilities that have flexible, open hours. A facility that is open 24/7 gives you more options to take advantage of any capacity that you find. The second major strategy is an emphasis on planning. By planning for capacity as far in advance as possible, you can put a flexible ship schedule in place that allows you to use capacity when it becomes available. Planning also takes advantage of lead time to facilitate dedicated route capacity without having to rely on the spot market.
Trend 2: The equipment shortage is real and not going away anytime soon
The rules of supply and demand apply for equipment too. COVID-19 interrupted supply chains of all kinds — and the supply chain for producing new commercial equipment including truck engines, trailers, refrigeration units and more was no exception. Serious delays in getting raw materials that are sourced overseas, such as truck components, metals, sub-assemblies and more mean that all phases of manufacturing have slowed down.
From shortages of workers at the docks to process and unload containers to simply not having the labor to support manufacturing plants and facilities, truck and trailer manufacturers are suffering from the same problem finding staff that other companies are experiencing. Workers are demanding higher wages and some employers are not willing to meet those demands, fearing a negative impact on profitability. That means those employees who are on the job must work longer hours to fill the gap.
One astounding figure is that there are currently 10+ million job openings in the United States with only 4 million workers registered as unemployed. Similar to truck capacity, there are many more jobs than people to fill them, production timelines are stretching out far beyond what might have been expected a couple of years ago.
Momentum can help increase visibility and help our customers plan for what’s ahead in a more effective way. Our highly skilled project management team helps ensure a closed loop of drivers moving from one project to the next, so our customers are not at risk of having to go back to the market. And, we plan far ahead to project and meet needs before they occur.
Trend 3: Nearshoring / Cross Border
Since 2019, increasing trade tensions between the United States and China has prompted many American companies to rethink their international supply chains and manufacturing locations. When the United States-Mexico-Canada Agreement (USMCA) was signed into law in early 2020, the switch to cross-border operations with Mexico accelerated. COVID-19 made cross-border operations with Mexico even more attractive—in some cases, even imperative. Over the last two years, we’ve seen many companies move their supply chains from other parts of the globe to Mexico and other areas of Latin America. There are quite a few benefits to moving your supply chain operations to Mexico. Importing from China and other overseas countries requires shipping via ocean or air—the former takes weeks and the latter is cost-prohibitive. In contrast, goods can be quickly imported from Mexico using ground transport in a matter of days—or even hours — a highly effective way to speed your supply chain.
Labor is another positive. Mexico has significant manufacturing and logistics expertise and infrastructure already in place in Mexico. The combination of escalating labor costs along with the higher cost of power and infrastructure in China also makes Mexico a more cost-effective choice. Since Spanish is the second-most common language in the United States—and a large proportion of Mexican citizens also speak English. So whether you are hiring bilingual employees to work with your Mexican partners—or are looking for Mexican partners with English-speaking staff, there are far fewer barriers to communication. Mexico is located in our same time zones, making it far simpler and convenient to keep the lines of communication open. No more trying to connect with someone on the other side of the world who has limited availability during your normal work day. Fewer language barriers and closer proximity as far as location and time means that it is much simpler to conduct onsite inspections, manage operations, and build long-term trusted relationships with vendors. (Read more about the benefits of nearshoring to Mexico in this related blog post.)
A Committed Partner with the Expertise and Strategic Know-How
Despite the many challenges of the current market, Momentum has the staff, expertise and can-do attitude that makes all the difference in a difficult environment like the one we are in now. Our customers reap the benefits of an incredible network of dedicated drivers who operate in the mission critical space and our office is fully staffed 24×7. We’re ready and willing to help your business thrive too. Contact Us Today.