As we embark on the last two quarters of 2015, we want to examine the state of the logistics industry, and what that means for you—the consumer. In January, we talked about what happened in 2014 and what we foresee for 2015. Now that it’s halfway through it’s time to take another look.
First, let’s take a look at our home front. According to The City Wire, the fastest growing industry for employment is the trade, transportation and utilities sector, which is also Northwest Arkansas’ largest sector. Employment numbers in that sector totaled 51,600 in May, up from 51,500 in April, and up from the 49,400 in May 2014, according to the article. The sector hit record employment of 52,400 in December 2014.
Incidentally, the NWA employments numbers for the manufacturing sector are also slightly up, which implies that more companies are making things that will enter the supply chain and need transporting.
Increased demand causes logistics bottleneck
Now that we’ve looked locally, let’s take a look at the national logistics picture. The truth is, industry-wide costs are rising and this is largely because of transportation issues. We see this trend continuing in the second half of 2015, especially as the holidays approach. As economic recovery pushes stronger consumer spending, freight levels are rising because retailers are replenishing their inventory. This is a good thing, it just has costs associated.
So how are stronger consumer spending and strong supply chains a transportation issue? The transportation industry continues to demonstrate a lack of capacity to manage the uptick in activity. For example, the American Trucking Associations estimated recently that the truck driver shortage ranges from 35,000 to 40,000 drivers. We’re also seeing a continued bottlenecking in other freight-related industries.
We see that logistics costs will rise as companies try to overcome these issues with investments and hiring incentives, both which are necessary.
Warehousing continues to burgeon
We’ve also seen an amazing increase in warehousing needs both here and abroad. This is driven by both the improving economy and the drastic rise in e-commerce. We said early on that this would happen but it’s increased even faster than we expected.
Our own growth at On Time Logistics with the new warehouse space is just one small piece of evidence that points to increasing warehouse space.
Industry experts also look at cold storage in the United States, which has had an annual growth rate of 9.3 percent in the past seven years. This niche industry is poised to continue this growth rate as it mirrors the economic expansion.
We at On Time Logistics agree that the future brings its challenges but we are encouraged by the economic growth and the opportunity to be a part of the logistics discussion.