Logistics Challenges Continue for Shippers
Capacity shortages, fluctuating fuel costs, and continuing strong demand are expected to challenge chippers throughout 2005. Purchasing Magazine Online summarized the options for shippers in a January 2005 article, suggesting that the trend toward increased rates in all transportation modes will continue to increase. The trucking industry was listed as perhaps the tightest capacity, increasing only 3% between 2000 to 2003 Fuel prices are expected to be an unknown factor, difficult for both shippers and carriers to manage due to dramatic fluctuations. Experts predict the reliance n indexed fuel surcharges to protect corners margins will continue.
In the rail industry, intermodal shipping volumes are expected to increase, keeping capacity tight. Both BNSF and UP have suggested that price increase are forth coming. Purchasing.com expects rail rates to continue to increase. "For the foreseeable future, something in the 2% to 3% range is very achievable," said Thomas Hund, CFO of Burlington Northern Santa Fe at a recent industry conference: And Union Pacific CFO Rob Knight said UP will employ "aggressive pricing", adding that UP intends to "ramp-up fuel surcharge mechanisms on every piece of business we touch." (About 80% of its revenue base pays a fuel surcharge.) "We will walk away from business" if the margins aren't right.
Tight capacity in the rail and intermodal markets was also linked to backlogs i the nations ports. Where containers are waiting to get off of ships and onto truck or railways.
Purchasing.com also noted predictions for increases in ocean freight vessel capacity, citing increased demand by China for transportation of raw materials as a driving factor.