Logistics Crisis Looming
By George Anderson
According to Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, 10,000 truck companies fold every time the cost of diesel fuel increases by a dime.
With the cost of diesel fuel up more than 40 cents in the past year and further increases expected there is clearly cause for concern, writes Robert Malone in an opinion piece on Forbes.com.
In fact, there is sufficient evidence, according to the author to suggest, “The danger of a widespread U.S. logistics breakdown is here and staring us in the face.”
Mr. Malone contends current capacity for truck to haul goods is already stretched. The fuel used by trucks now accounts for 21 percent of the nation’s total fuel consumption and the demand continues to increase as congestion on roads and other factors reduce the mileage traveled on each gallon.
Rails offer a partial solution to the fuel usage element but, according to Mr. Malone, “the U.S. corridors and hubs are in need of major overhauls and higher technology extension at a price that reaches into the hundreds of billions of dollars.”
Something clearly needs to be done but what?
Mr. Malone offers a number of recommendations for what is and is not needed.
What isn’t needed, writes the author, is another “presidential commission.”
As to what can be done, he suggests work begin immediately on short-term projects improving roads, rails and ports financed by existing government funds or emergency funds if current budgets do not cover the cost of financing necessary projects.
Longer-term solutions include a greater government commitment to aiding intermodal transportation where a combination of shipping methods are used to move products from their point of entry into the supply chain to their final destination at retail.
He also suggests greater investment in pursuing alternative vehicles and fuels. Hybrids and hydrogen as a fuel are seen as plausible options.
Moderator’s Comment: Is “the danger of a widespread U.S. logistics breakdown is here and staring us in the face” as suggested in the Forbes.com article?
What points raised in the article do you believe are most important to address? –
George Anderson – Moderator
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6 Comments on "Logistics Crisis Looming"
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Ever since motor freight pricing was deregulated, the industry’s profit margins have been challenged. It’s hard to compete in a commodity service industry. When costs rise, the marginally profitable players have little pricing power and they go under. The remaining players will have greater pricing power when the marginal players go under. The nation would benefit from appropriate infrastructure improvements to its roads and rail lines, but it’s clear that there will be no push in this area from the government. If the auto industry is a guide, alternative fuels for trucks will be Japanese innovations.
No doubt a presidential commission will happen anyway.
I think that the idea of immediately improving heavy, and more importantly, light rail with funds that are currently supporting roads should be the first move. This could mean that private railroad “right-of-ways” become government owned and supported with tax dollars. Or perhaps, Interstate 70 and/or 80 should have a heavy rail line running down the median.
The better solution is to have an energy policy that rewards investment in alternative vehicles and fuels. Hybrids and hydrogen as a fuel are seen as plausible options.