At the end of the day, nothing a distribution center, or a warehouse, or a manufacturing plant does means much of anything if the products don't get to the customer. Transportation is the most visible link in the logistics chain, and typically, it's also the costliest link. Until relatively recent times, it was also heavily regulated.
That began to change just over a quarter of a century ago, with the first in a series of laws deregulating transportation. The idea behind deregulation was to promote competition and let the marketplace do its work in transportation, just as it does in most other industries.
Even so, after all these years, the industry has not completely relinquished the habits formed in the days of government regulation. The railroads, in particular, still indulge in some monopolistic practices. To this day, captive rail customers—those with no alternative to rail because of the size of their shipments—complain of arbitrarily high pricing. Air shippers haven't always fared much better. For a long time, airlines maintained a stranglehold on their hubs—although they're now starting to give way to newer and more agile competitors.
Then there's the trucking industry, which of all the transport modes has made the most of deregulation. Today, 25 years after those first steps toward deregulation, motor freight has become the most flexible and competitive transportation mode—perhaps the only one that allows the customer to change suppliers easily or even rent vehicles and do the job himself. The combination of healthy competition and the do-ityourself option has led to major changes in the trucking industry. It's no coincidence that trucking accounts for 81 cents of each dollar spent on freight transportation in the United States.
Even so, the trucking industry faces some daunting challenges: long-haul carriers have enormous difficulty attracting and retaining drivers; highway congestion and border crossing delays threaten to erode productivity; and high fuel and insurance costs have cut into profitability.
The industry has made serious efforts to improve productivity and capacity utilization while delivering the reliable service most shippers demand today. It's been helped by technological advances that are playing a major role in transforming the industry. Cell phones, global positioning systems (GPS) and radio-frequency identification tags (RFID) give carriers better control of the movement of tractors and trailers than they've ever had before. Technology even allows carriers to offer real-time visibility for every shipment.
But even the most advanced technology can't overcome what some see as the most serious threat to the nation's supply chains: congestion in the transportation network. The transportation infrastructure that was adequate when most of the nation's goods were manufactured in Iowa, or Michigan, or Allentown is being overwhelmed by the surging tide of low-cost imports from Shenzhen and Singapore.
Challenges like the driver shortage and the need to boost productivity represent great opportunities for creative carrier management. One challenge for carriers is to devise creative techniques to reduce the frustration of driving a truck and make the job more attractive for new employees. Another challenge will be to achieve better planning and execution, enabled by better technology, which will help reduce the dwell time resulting from inefficient warehousing operations.
America's most successful airline controls its turnaround time by benchmarking the pit crews at the Indianapolis Motor Speedway. When this kind of thinking is applied to motor freight and railroad operations, there will be significant improvement in the efficiency of our overall transportation system. In the meantime, the clock is ticking.