What's ahead? One observer's view

By Staff -- Logistics Management, 3/1/2000

Aaron Gellman has watched the transportation industry for a long time and is sure he knows where the industry is headed. His views will not comfort everyone.

As director of The Transportation Center at Northwestern University in Chicago, a professor of management and industrial engineering, and a transportation economist, Gellman has a background that lends credence to his views.

Gellman expounded on some of his ideas during a recent meeting of The Conference Board in Chicago. That meeting, which was co-sponsored by Mercer Management Consulting, focused on logistics trends. Here's what he had to say about some of the biggest industry questions looming today:

- Is disintermediation in the cards? Gellman believes so. He sees slower growth for third-party logistics but expects logistics auctions and futures markets to become more important. He predicts that railroads will bypass intermodal marketing companies (IMCs) and market themselves directly to shippers.

- Will logistics be driven by computer models? That's already happening, and Gellman questions its validity. "Shippers have done themselves a lot of harm by making the business more turn-the-crank than it really is," he says. "To think that you can turn every decision over to a model is a terrible mistake."

- Will the logistics function be found more often in the purchasing department? Again, Gellman believes that is already occurring. "That's very unfortunate," he says. Logistics professionals, he argues, must persuade senior management that their business requires "artistic decision making" that lies outside the realm of purchasing managers.

- Will shippers continue to work with fewer providers? Gellman doesn't think so. Too much consolidation, he says, would be a grave error. "In the long run, it is self defeating." On the supplier side, he expects that maritime vessel-sharing agreements will die out. "They are a monopolistic practice that neither Washington nor Brussels will tolerate. They should not be tolerated." He also opposes open access for railroads, which allows any railroad access to competitors' systems and therefore to their customers. "It has been a disaster in Europe," he says.

- Will railroad mergers drive more freight to the highways? Probably, Gellman says. "And that's unfortunate. The railroads have a lot to offer. I think many companies are getting traffic off the railroads. Any [third-party logistics provider] that helps them do that is not serving itself or its customers."

- Outside the United States, will privatization continue? Gellman expects so, although in fits and starts. And it is about time, he thinks. "The time for privatization has not only come," he says, "it's passed."

- Will acquisitions of private firms by public enterprises be widespread? Gellman believes the trend that sees government-owned organizations such as postal services buying private businesses will continue--if allowed to do so. He believes much will hinge on the success of United Parcel Service's legal challenges to Deutsche Post's acquisitions.

- Is the "death of distance" sustainable? "It is sustainable within limits," Gellman contends. Any company that builds warehouses to speed up fulfillment could be making a serious, even fatal, mistake, he believes. Owning warehouses means taking on the inventory. "The burden on finances is astronomical," he says.

Gellman says that the study of transportation is undergoing a renaissance in higher education. "We're seeing a renewed interest in studies of transportation," he says. "It had been replaced by logistics. Much of logistics is the sound of one hand clapping without transportation." A greater focus by shippers on transportation, he says, is "good for the profession and good for the country."