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One of the more interesting sessions at this week's WERC Conference in Atlanta was on the subject of trucking rate trends and forecasts. Experts Anthony Hatch of ABH Consulting, Jason Seidl of Dalhrman Rose, and economist Noël Perry of Transportation Fundamentals provided some interesting insights into what shippers might expect over the next several years.

For trucking companies, all of the major cost factors, i.e. equipment, labor, overhead, and fuel are moving up; and over the next two years, the total of these will increase by 6%. For shippers, the bad news is that we will continue to see rate increases of 6-10% over the next two years -- excluding fuel.

As/if the upturn continues, we will once again approach the practical capacity limits of the industry. As one might expect, the problem is not lack of equipment, it is lack of drivers. Perry estimates the current shortage at 80,000, and as regulatory considerations such as CSA 2010 and new rules of service kick in, we will see an annual drag of 70,000 drivers due to disqualification and reduced productivity. Plus -- it is not such a great job anyway, paying $45,000 - 50,000 annually, with long haul drivers home about once a month. To paraphrase an old C&W favorite, "Mama, Don't Let Your Boys Grow Up To Be Truck Drivers".

The major beneficiaries will be the railroads, primarily intermodal service, with attrition from truck to rail of approximately 1.5% annually.

This is a new culture for the Supply Chain Manager. Between 1950 and 2000, he/she could expect costs to decrease most years. Since 2000, we have been in a culture of rate increases and will continue to be so for the foreseeable future.

Image by Mark Hunter

Did you know? The first supply chain program in the United States opened nearly a century ago! Check out the supply chain timeline below for other logistics highlights from the past century.

Source: SCM-Operations.com

Last week the U.S. House of Representatives signed off on another extension of the current transportation funding bill – the tenth since September, 2009! This extension will take us through the end of September when the current ninth continuation expires. Both the House and Senate have passed their own versions of a funding bill, but have been unable to agree on a cooperative version. Some industry watchers saw the House extension as a positive move – a vehicle to set up a conference with the Senate. Maybe so, but it is hard not to be a little cynical.

The Highway Trust Fund continues to get bailouts from the General Treasury Fund, and the federal tax levy on gasoline and diesel fuel hasn't been changed since 1993. It would be naïve to expect anything else to happen in this election year; but hopefully, 2013 will bring some new, realistic solutions to a problem that gets worse with every passing day. Our highway system, with certain exceptions, is a mess and won't get any better until members of Congress bite the bullet, set their own personal and partisan agendas aside and do what is best for the country.

Image by Andrew Bossi

Recently, a fatal explosion at an Evonik Industries factory caused tremors across the global supply chains for cars, light trucks and heavy-duty (Class 8) trucks, among other products. The Nylon-12 production plant in Marl, Germany, was severely damaged in the explosion and hopes to reopen by winter.

The lack of supply is causing alarm because the chemical resin, PA-12 (a.k.a. Polyamide 12 or Nylon-12), is used to make brake lines and fuel systems. As such a critical component, it cannot be easily replaced. Few companies worldwide produce PA-12, and no equivalent alternatives are known. Substitutes for Nylon-12 will require rigorous testing before implementation.

Europe expected to be first affected

"European users will be the canary in the coal mine for this problem," said analyst Chris Cesaro, in a Credit Suisse report cited by Bloomberg.

As the automotive production region in closest proximity to the German plant, Europe is expected to be the hardest hit by the supply shortage. Because of greater distance from the supplier, automobile factories in areas such as North America and Japan should still have supply of PA-12 en route.

Despite its location in the fallout zone, Germany is expected to be less affected by the shortage, as it can source from Ems Chemie Holding, a supplier in Switzerland.

Detroit distressed over resin shortage

"The shortage is real and immediate," warned William Kozyra, TI Automotive Chairman and CEO, in a memo to customers. Auto industry heavyweights met this week in Detroit to ruminate and discuss the growing concern.

Location and Lean: Opportunity and challenge in East Asia

Like Germany's use of the Swiss supplier, Japan is expected to supplant its Polyamide 12 supply via Ube Industries, Asia's largest supplier of the resin.

Conversely, Hyundai and Kia Motors, based in South Korea, are vulnerable to the just-in-time crisis due to their Lean manufacturing tactics.

Image by bisgovuk