Transportation Outlook 2012
By Gina Emel, Kansas City SmartPort
The search for efficiency continues. Industry leaders are taking the initiative to set the bar high for more sustainable and cost efficient transportation. Intermodal has become more in favor, 2011 also brought disaster for companies to consider. The earthquake and tsunami in Japan required unexpected adjustments needed to be made in supply chains globally, while floods encompassed railroad tracks nationally. The Panama Canal expansion is another shift for the transportation industry. The significance of this project is already being felt, though the project is not slated for completion until 2014. Below, is an overview of the recent status of the main modes of transportation; trucking, rail, global disruptions, and intermodal.
Trucking
The Recession of 2008 hit hard on employment, and from a transportation perspective the trucking industry endured drastic changes. 150,000 trucking jobs have been eliminated since 2008. The demand for drivers has increased every year since 2008. It is estimated that the industry, as a whole, is looking to fill 200,000 driving positions by 2012 and one million positions by 2025. In the past, the freight and trucking industry has advanced 10 percent after a recession, for 2011 the forecast for growth is only 4-6 percent. Sustainable transportation options, efficient rail transportation, a retiring workforce, stricter driving regulations and gas prices are all factors that have contributed to the increased need for truck drivers.
Operating at full capacity has long been a challenge for trucking companies. To overcome this capacity issue the industry has turned to technology. Truckers can communicate with companies in real-time messages with a phone or portable device. Drivers receive POS data to ensure stocked inventory levels, as well as utilize the space in their truck as efficiently as possible. This definitive service has given customers the ability to track and trace their shipments, be alerted of shipment delays and electronically receive invoices.
Rail
While flooding and numerous severe winter storms encompassed the Nation, rail road operations for 2011 advanced and the volume of train loads prevailed. In just the first quarter we saw a 5.3 percent increase compared to last year.
Further support expected for the train industry will come from rail companies located in the south. KCS operates three primary railroads; Kansas City Southern, Kansas City Southern de Mexico and the Panama Canal Railroad Company. PCRC is the land transportation link between the Atlantic and Pacific oceans. Panama is the sole location capable of transporting containers in a customs zone from the Atlantic to the Pacific Ocean in less than four hours. There is expected be increased intermodal traffic with the Panama Canal expansion slated for 2014. The Panama Railroad Company is preparing to complement the canal, by allowing high volume rail transportation and increased trips per day. TEUs are estimated at two million per year to travel on the railway after the expansion.
The BNSF, the largest class 1 railroad by revenue and volume, committed to $3.5 billion in capital spending for 2011. The BNSF is a leader in green technology and commitment to the environment. The BNSF intermodal network continues to grow each quarter.
The UP, NS and the other class one railroads are also experiencing double digit growth year over year and investing significant amounts for capital improvements. One might call 2011 the year of the railroad – again.
Global Disruptions
There is no doubt the devastating earthquake and tsunami in Japan took a toll on the Global economy. The question is, who will it continue to affect and how long? Power outages and supply chain disruptions were among some short-term disturbances. As for perpetual changes, companies have been forced to re-evaluate their suppliers. This has created a rippling effect for suppliers around the world. Some describe the impact as changing supply chains into supply networks. Auto makers in the U.S. felt the impact severely; manufactured car parts in Japan took weeks to start flowing again. Even though production has resumed, most suppliers in Japan will not return to full capacity any time soon. Analysts forecast a spike in automobile prices in the U.S. post-earthquake.
Intermodal
Rail is expecting more intermodal freight and competitive prices due to the intermodal transportation market and low employment in the trucking industry. Although international activity has decreased since the peak of last year, intermodal shipment volume is up 9 percent compared to 2010. Momentum is slow but existent. Retailers attribute the intermodal come back to the decrease in consumer demand and a decline in imports after global disasters in 2011.
The Kansas City Southern de Mexico rail line is a contributor to the rail and intermodal industry. KCS accommodates both intermodal and international containers at multiple ports. Lazaro Cardenas, an intermodal facility that KCSM uses, presents an opportunity for expansion and the possibility of a rebound for West coast ports.
The BNSF is investing heavily in their intermodal network, including a new intermodal facility in Kansas City. The new facility will have the three time the capacity of its existing, Kansas City, facility.
Intermodal has played a critical role in making our rail systems efficient. In 1980 the U.S. operated about one million intermodal units. Units have since tripled in 2011, with the tremendous increase for use of intermodal. The use of electric powered cranes has led to more efficient transporting at the terminals. There is also some discussion of wind farms near intermodal terminals to power the facilities.
Outlook
The trucking industry has taken a fall, but only for a more ideal outlook. It is better to have quality truck drivers on our highways rather than an abundance of drivers. The Panama Canal expansion will open up many opportunities for distributors in the next few years and possibly lead to more rail traffic into the U.S. in the long-run. Kansas City is positioned perfectly to see a positive future. The city fosters all options of transportation for a supply chain. As more and more companies become knowledgeable of how to run a successful supply chain, the transportation industry will flourish in the Midwest and increase the demand for more employment.
