The trucking industry is in transition. It’s changing in response to a number of factors. And those changes will affect your business.
In a previous blog post, we did a deep dive into one of those factors: the labor shortage. This blog post will address the other factors shaping the trucking industry.
Three other factors driving change are (1) the pandemic, (2) e-Commerce, and (3) economic growth. Each one presents different challenges that will reshape trucking.
To grasp the impacts, we’ll examine regulatory trends, infrastructure, and supply chain bottlenecks.
Emerging Trend: Tightening and Increasing Regulation
We discussed this a bit before, but that post confined the discussion to labor and Hours of Service (HOS). Besides that, environmental trends spawn increasing and tightening regulation.
California, for example, mandated sales of zero-emission commercial trucks and vans by 2045. In the run-up to the 2045 goals, 50% of all trucks sold in California must be zero–emission by 2035.
In trucking, environmental trends include:
- New, lower-carbon fuels that emit less carbon into the atmosphere
- More efficient gas-powered engines that burn fuel more efficiently
- The replacement of legacy truck engines with electric-powered truck engines
Moreover, California is working with seven other states to adopt similar regulations. Notably, some trucking industry groups have resisted California’s antipollution drive. Yet, many vehicle manufacturers are embracing it.
A few companies are designing and manufacturing new engines. They include Cummins, Freightliner, International, and Daimler Trucks, to name a few.
Besides this growing regulatory trend, Congress is taking a more comprehensive approach.
Lack of Strategic Unity: The Impacts of Infrastructure Decline and Investment
As you know, infrastructure has taken center stage in Washington. A few weeks ago, Congress offered a bipartisan bill to fund infrastructure investments. That bill appeared in jeopardy, then it appeared to take on new life only to get caught up in politics.
Without getting into the bill’s details, most agree infrastructure investment is sorely needed. It affects private and public sectors. Without sufficient funding, the private sector will incur degraded performance and greater costs that comes with crumbling roads and bridges.
Decaying infrastructure adds to congestion resulting in longer wait times. Then you have supply chain bottlenecks that further exacerbate infrastructure. (More on that below).
Poor infrastructure also erodes competitive advantage. Thus, trucking companies suffer as do shippers and end customers.
Likewise, inferior infrastructure also puts the public sector at a strategic disadvantage. China’s rise in the world economy aided by its vaunted Road and Belt initiative are putting the U.S. at risk.
The U.S. must compete here to remain a strategic power.
Supply Chain Bottlenecks: Skyrocketing Demand and Supply Shortages
Another trend shaping the trucking industry stems, in large part, from the pandemic. As the economy reopens, the economy is surging more than expected. The rebound is faster and greater and has caught many off-guard and unprepared.
First, demand has skyrocketed with the release of pent-up demand. Also, e-Commerce, popularized during the pandemic, shows no signs of easing. It only adds to increased trade volumes.
Second, due to record demand, global supply chains are experiencing supply shortages. Shortages have manifested themselves from computer chips to potato chips. And analysts project more shortages to come, which will drive prices higher.
Also, Just-in-Time has lost some of its luster. Now, we’re seeing businesses build-up their stockage levels for critical supplies. This is likely a long-term change moving forward.
This will further fuel inflation that is already spiking. According to the Wall Street Journal , inflation has seen the biggest increase in 13 years. In a year-over-year comparison for May consumer prices rose 5 percent. Some say the rise in inflation is temporary; other disagree.
In either case, that only fosters uncertainty in planning and optimizing ground transportation. Meanwhile, frontloading and peak season further challenge transportation planning.
The current outlook suggests constrained capacity will continue as will increased costs.
What These Challenges Mean to You…
We are witnessing an industry in transition. Promoting that transition are increasing regulation, infrastructure challenges, and widespread supply chain bottlenecks.
As the trucking industry adapts, supply chains will experience pockets of disruption.
This places a premium on responsiveness and resilience. Change is coming fast – faster than ever before. That means shippers who fail to adapt will fall behind competitors who embrace these challenges.
Businesses that grasp the impact of these challenges will gain a competitive edge. Although these trends are unfolding rapidly, their solutions will require long-term commitment.
You have two clear options. You can tackle the impacts of these challenges on your own. Or you can partner with a 3PL poised to tackle these issues with you.
At American Global Logistics, we’re equipped to manage uncertainty. We do that daily. We’re successful because we have long-term partnerships with our clients. Our clients benefit from solutions crafted with the long-term in mind.
We strive to achieve customized, seamless solutions. We take a strategic rather than a transactional approach. We focus on today’s challenges to position your business for the future.
Contact us today to find out how we can assist you in building a responsive and resilient supply chain.