Freight Insights

Efficiency And The Slow Climb Up From 2009

In this video, a stuntsman named Alex Thomson climbs up the 30 meter mast of a speeding boat. When he gets to the top, he realizes that there is no where else to go…and dives. (Hugo Boss may be paying for the advertising but their suits are not what I would choose to go for a dip).

The market crash of 2008 hit the world a whole lot harder than the water at the end of the stuntsman’s climb. While global trade reached a value of $18 trillion dollars in 2013, the pains from the dive are still there. Let’s look at the individual sectors to see what kind of challenges are still lingering.

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GDP Per Capita
This UN chart shows the dive in GDP growth per capita after the crash. Costs from the decline were passed on to the shipping world.

Global Recovery and Maritime Shipping

Drewry Maritime Research anticipates a meager growth of only 2% of box volume in 2014. Compare that to the 15% annual increases before 2008. Maritime shipping is also getting crushed by rising bunker costs and overcapacity. Over 40% of shippers agree that overcapacity is the biggest threat to the industry. And many analysts believe that this isn’t likely to improve before 2017. While many continue to look towards China and the developing markets for comfort, an ongoing slowdown in Chinese production may put a damper on expectations.

Global Recovery and Air Shipping

During 2013, global freight tonne kilometers (FTKs) grew by 1.4%, compared to 2012. Much like shipping, capacity grew 2.6% faster than actual demand, forcing air carriers to change their pricing accordingly.

Trucking and Rail

There has been a resurgence in improving last-mile delivery (same day shipping being a notable example). Warren Buffet’s huge investment in Canadian National Railway is definitely a hint of things to come. That said, driver availability, pricing and regulation continue to worry truckers and accidents are plaguing freight train lines. These aren’t only US problems either – trucking rates in India and other countries are also taking a plunge because of over-capacity.

But wait!

While this may paint a depressing picture, we’re in a very different place than our stuntsman, Alex. The freight industry has shown an incredible degree of resilience and ingenuity in dealing with these challenges, aligning dozens of methods to increase bottom-line efficiency. Global alliances, like the P3, are one example of increased efficiency through cooperation. Better IT capabilities, like TMS software or automated quoting, are another great way of pushing your existing assets to do more. Finally, practical measures to increase how those assets operates, like slow-steaming, are crucial too. And at the end of the day, slowly but surely, they are working. The freight world is slowly climbing back up that mast.

In order to make sure that when we reach the top of the mast, we keep climbing, it’s crucial to maintain efficient operations. Lora Cecere recently wrote a great piece about the importance of B2B networking, a cornerstone in aligning efforts for everyone from retailers to freight vendors. According to Lora, 44% of respondents agreed that the lack of a transportation or supply chain network was preventing efficient business operations. Do yourself a favor and check out her report here. The bottom line? It’s all about efficiency. Faster online connectivity will have you accomplishing more and spending far less.

Also, don’t forget to watch the same stuntsman try to walk the keel of the same boat.