inventories have been bled down,” says
Joe Dagnese, vice president at Menlo
Worldwide Logistics, a Con-way company
based in San Mateo, Calif. Before the
recession, “companies positioned inven-
tory to ensure that they would always
have safety stock to draw on, regardless of
circumstance,” Dagnese says. “We are just
now reaching an equilibrium where that
inventory has been consumed.”
Latest data confirms that traffic is on
the rise. Seasonally adjusted truck ton-
nage surged 5. 7 percent in January com-
pared with January 2009, according to an
index published by The American Truck-
ing Associations. This was the best year-
over-year reading in five years and the
second consecutive monthly increase.
For all of 2009, the tonnage index was
down 8. 7 percent, which was the largest
annual decrease since a 12.3-percent
plunge in 1982.
ATA Chief Economist Bob Costello says
that the latest tonnage reading, coupled
with anecdotal reports from carriers, indicates that both the industry and the economy are clearly in a recovery mode.
“While I don’t expect tonnage to continue
growing as robustly as it did in January,
the industry is finally moving in the right
direction. Although there are still risks that
could throw the rebound off track, the
likelihood of that happening continues to
diminish,” he says.
Rates will be slower to rise because of
excess capacity in the market. “Rates for
trucking are still generally lower or flat
and will not jump back up until a capacity
balance is restored,” says Roslyn Wilson, a
consultant and author of The Annual State
of Logistics Report published by the Council of Supply Chain Management Professionals. Wilson sees some “green shoots,”
however. “Container rates have started to
go up and railroads have been able to
raise rates a little,” she says.
Wilson doesn’t see real strength returning to the logistics market until late in 2010
or early 2011 and, for some sectors, she
says it will be 2012 or 2013 before the market gets back to pre-recession levels. “I
don’t think this is going to be a fast turnaround at all, nor do I think it will be a
straight upward progression,” she says.
“There is just not enough confidence in
the market on either the consumer or the
business side. Until that confidence
returns, we won’t see much spending.”
Gonzalez agrees that confidence
remains a problem even as things begin to
stabilize. “There is still a conservative and
short-term mindset in terms of managing
costs and productivity,” he says. “If a com-
pany is going to make an investment, it
will be in something that will lead to cost
savings and productivity improvements
within three months.”
This mindset may keep some carriers
and companies from being ready to take
full advantage of the recovery, says Jason
Richard, associate vice president, logistics
and distribution at Infosys, a global com-
pany that designs and delivers IT-enabled
business solutions. Even if companies are
feeling battered right now, they should
start making investments to positively
position them for the future, he says. “We
see a widening gap between those com-
panies who are still dealing with the reces-
sion vs. those who are preparing for the
recovery,” he says. “Companies that are
positioned to take on new customers
quickly and provide a high level of service
will gain more business and have a faster
growth rate than those focused just on
keeping the lights on. As the recovery
picks up, that gap will continue to widen.”
He offers an example of a logistics
company that Infosys is working with to
implement a new learning management
system. “This system can be used to
organize, track and facilitate driver certi-
fications and other data so that if the
company needs to bring back a thousand
employees quickly, it will know that all
their licenses are current and everything
is in order. That’s a case of a company
that was hurting during the downturn,
but still willing to invest in new capital
projects that will help them when the
economy recovers.”
New Normal
Some of the operating and strategy changes
made by logistics companies and their customers to survive the recession seem likely
to become permanent, contributing to a
“new normal” that will influence how this
recovery evolves.
“We know that folks who lived through
the Great Depression changed their eco-
nomic and buying behavior and I think we
will see that here as well,” says Bentz. “I
don’t think people are going to be so quick
to hire workers back and once those work-
ers are back on a payroll I don’t they will be
so quick to go out and buy a new TV or a
new car,” he says.
