If forecasting is the art of predicting what will be, and later explaining why it didn’t happen, then this may be as clear a glimpse of the future as we’re going to get.
Freight transportation performance last year turned out to be one of the best in almost a decade, resulting from many factors, including strong business investments, increased consumer confidence, more construction and improved factory output. Freight forwarders saw strong results last year in the ocean, air and trucking sectors, as tightening supply conditions led to strong inventory demand due to restocking of shelves, partially depleted by surging e-commerce growth. The progressive tailwind creates the belief underlying these freight transportation provider predictions for 2018.
In the United States, truck carriers moved a significant share of the restocking activity, and the trend is bound to continue. Since nearly 70 percent of the freight shipped throughout the U.S. travels by truck at some point in its journey, the American Trucking Association’s justifiably optimistic forecast calls for goods hauled by truck to increase 3 percent, per year, over the next five years.
Despite this optimism and rising rates, these factors may be masking continuing challenges still confronting the trucking industry. The stressful political climate, created by less-than-certain international trade, is causing diesel prices to rise. The new U.S. electronic logging requirement will likely curtail the number of operational hours, making fewer drivers available to haul shipments. Unfortunately, forwarders and their customers are going to face a rough road when securing capacity pricing and availability throughout the year.
Global airfreight will continue to see gains in 2018 in both cargo volumes and profits as buoyant e-commerce-related demand continues at a rate that drove 2017 volumes to grow at twice the pace of the expansion of world trade. The International Air Transport Association (IATA) reports that the need for air cargo is at its highest level in more than a decade, with new capacity arriving to satisfy reliable passenger and cargo demand as more people are traveling and shipping than ever before. Airlines are continuing to see profitability levels rise, allowing them to pay higher employee salaries and erase losses from past years.
Aviation, however, is a fragile business. Despite its recent good fortune, it still faces a significant risk that could adversely impact its operational performance. Security continues to be a primary concern, even though the industry has made flying substantially safer through more-aggressive screening of passengers and cargo. The airlines face the same fuel risk shared by the trucking industry, but airport cargo-related congestion now has more of an adverse impact in the U.S. and Europe than ever before.
Ground handling delays are a mounting concern for forwarders, which are now being forced to search for less congested destinations, away from the significant cargo hubs in favor of smaller airports with less volume and increased efficiency. This congestion challenge is likely to linger throughout 2018.
Potholes, unstable bridges and old highways remain throughout the U.S. – this decay also exists at many of the nation’s older air hubs. While the Trump administration has promised an infrastructure package as its next legislative priority, intense political discord in Washington makes passing this legislation in 2018 unlikely.
Once these improvements are approved, however, forwarders and shippers should expect construction-related delays, as newly unleashed funds will begin to spur significant road and bridge projects throughout the country that are likely to cause transit interruptions, both on our highways and at major airports. In other words, precise shipment planning will be required to mitigate the adverse impact of road delays and detours.
Technology is playing an increasing role in driving e-commerce, making shippers much more demanding of their forwarders to supply transparent and easy-to-use interfaces when booking and transacting shipment arrangements. In many instances, data provided to customers will play more of a role than ever, as customers strive to get goods delivered faster and more efficiently to their online customers. Data security will also be a focus, with more shippers asking forwarders about how they will protect shipment data during and after the transaction.
Forwarders & e-commerce
The role of forwarders in participating in the e-commerce megatrend is both promising and uncertain, since delivering small packages to residences may prove challenging to some. However, forwarders will always have a place to excel in providing more massive shipments to both distribution centers and businesses alike. In the meantime, forwarders deserve a balanced regulatory playing field in order to compete against other providers.
These predictions are likely to prove accurate through 2018, but your results may differ. If so, tune in to this same page, at this same time next year, and we’ll do our best to explain why they did not.