Shippers say Wall Street crisis to hinder transportation operations
Jeff Berman, Group News Editor -- Logistics Management, 11/1/2008
WALTHAM, Ma. — With financial markets fluctuating on a daily basis and little meaningful impact being felt from the recently passed $700 billion Federal bailout package, shippers report a high level of anxiety brewing in their transportation and logistics operations.
Based on the findings of a recent Logistics Management reader survey, 84 percent of the 182 logistics, supply chain, and transportation managers who responded said they are likely to feel some effect of this financial tumult in their day-to-day operations.
The ways in which respondents indicated the financial crisis will alter their supply chain operations varied. Some common themes cited were: reduced inventory; longer lead times; further decline in consumer spending; and increased difficulty in financing capital investments due to limited credit availability.
“With the credit crunch, I expect some of my vendors to either close their doors or to start producing substandard parts,” said Mike Scott, operations manager at Braeside Displays, an Antioch, Ill.-based provider of stock and custom displays. “This means that I will be re-sourcing and moving business from one supplier to another. I [also] expect the disruptions to affect delivery scheduling.”
Another area where this bout of economic malaise could effect transportation and logistics operations is on the capacity front, shippers told LM.
“The current financial crisis has the potential to further constrain truckload carrier capacity, as those companies could have difficulty accessing credit markets,” said Tom Carpenter, director of transportation at International Paper. “During the first half of the year, the carrier capacity reductions were predominantly a fuel-driven phenomenon within the context of a softer demand environment. What you have in the second half is a new complexity of tighter credit markets on [shippers and carriers] that are, in some cases, stretched pretty thin credit-wise.”
According to Larry Monaghan, director of transportation, logistics, and 3PL DCs for LG Electronics, “Once the economy does begin to turn around, the capacity situation is likely to be exacerbated since more carriers will have gone out of business due to a lack of cash flow.”
Aside from industry woes shifting from fuel price issues to credit and financial-related issues, FTR Associates Managing Director and Senior Consultant Noël Perry noted in a recent conference call that 2009 will be the worst year for freight declines since 1982. Perry said this is significant in terms of the cumulative effect this decline will have on freight transportation, as we’re now in the third year of declines for truck, rail, and intermodal freight.
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