Logistics Trends Could Alter Trucking

Logistics and distribution trends spearheaded by a changing economy and electronic retailing have begun to drastically alter the face of trucking.

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The explosive growth of warehouses to consolidate goods from different parts of the country and distribute them to nearby purchasers has curbed the demand for middle-range carriers that haul goods between 700 and 1,200 miles, according to panelists brought together for the forum.

Ted Scherck, president of the Colography Group in Atlanta, said despite a robust market for freight services, medium-haul carriers have lost 2.7% of their business. He said that was not true for long-haul trucking, which has grown by 4% a year, and short-haul trucking, which has seen an annual increase of 9.7%.

This trend in the trucking industry is partially due to a shift in the economy toward high-value, low-density goods, such as electronics items, and a flagging market for low-value commodities.

Shipments of low-value, high-density merchandise dropped 4.9% in 1998, according to Donald Broughton, senior analyst with A.G. Edwards & Sons in St. Louis. In contrast, its opposite grew 8.9% in 1999 and could reach 12% this year, he said at Transport Topics’ annual management forum.

Adding to the woes of mid-range truckers is an increase in electronic retailing, which has fueled the short-haul and parcel delivery markets.

“Regional distribution companies are springing up all over the country — indeed, all over the world — and the value of high-quality, short-haul trucking services will be more important than ever,” Scherck said.

	Michael James - Transport Topics
	Colography Group President Theodore R. Scherck

The trend toward parcel delivery has been borne out by the Bureau of Transportation’s latest commodity flow survey, which shows that the value of goods carried by parcel delivery firms went up by 42.8% between 1993 and 1997. The panelists expect that to continue.

Long-haul truckers will also find a place in the new economy because most over-the-road freight movement is more efficient than trains and less expensive than airplanes. The use of two-person teams and a good record of on-time delivery have boosted that trucking sector, Scherck said.

Mid-range carriers are not as efficient as either parcel carriers or long haul truckers and are “at risk of continuing to operate in the shrinking market,” he noted.

In the years ahead, electronic retailing will become a larger component of the overall economy, Scherck said.

“As more online retailers recognize the importance of an effective distribution network, they will allocate a relatively smaller portion of their budgets to advertising and public relations and will reallocate those dollars to investments in warehouses and inventories.”

Scherk cited as an example Amazon.com, which opened five of its seven U.S. distribution centers in 1999.

The new wave of trucking brought on by electronic retailing is not the only new trend in trucking and logistics. Shippers are moving to a bifurcated strategy in getting products to their destinations, weighing the option of maintaining inventory against efficient transportation, he said. Among the considerations are the obsolescence rates, shipping cost and inventory holding time.