What's on tap for 2011? The leading professional association for business forecasters—The National Association for Business Economics—expects moderate growth for the year overall, with gross domestic product inching up 2.6 percent. Most DC Velocity readers apparently see things much the same way, expressing guarded optimism about the year ahead.

Our annual Outlook survey of readers found that 52 percent were optimistic that economic conditions will improve. Just 22 percent said they remained pessimistic about the nation's economic future, while 26 percent said they were unsure what 2011 would hold.

The online poll was conducted in early November just after the mid-term elections. A total of 193 readers took part in the survey. The majority of the respondents said they worked for manufacturers (33 percent) or distributors (27 percent). The remainder worked for logistics service providers (20 percent), retailers (11 percent), or other types of businesses (9 percent).

Although survey respondents were generally hopeful about the future, only a handful expect the economy to come roaring back. Just 15 percent said they thought the U.S. economy would see strong growth in 2011. Another 48 percent predicted weak growth, and 34 percent said business would be flat. Three percent declined to speculate.

When it came to their own company's revenue prospects for 2011, respondents were more bullish than they were about the overall economy. Thirty-seven percent foresaw strong sales growth for their companies, and 22 percent said they expected at least weak growth. Another 35 percent predicted sales would be flat, while 6 percent said they were unsure how their companies would fare in the coming year.

Bracing for higher fuel costs
Despite their optimism, the survey respondents clearly plan to hold the line on spending in 2011. When asked about their 2011 spending plans for logistics and related products and services, 48 percent of respondents said they expected their expenditures to remain at 2010 levels. Only 36 percent said they thought their companies would boost their spending. Another 8 percent expect a drop in company spending, while the same percentage said they were unsure about their organizations' spending plans.

Among those respondents who expect to boost their spending, the biggest share—45 percent—estimated their expenditures would increase by 3 to 5 percent. About 28 percent projected an increase of 5 to 9 percent, while 10 percent put the increase at just 1 to 2 percent. Only 17 percent said their logistics spending would jump by 10 percent or more in 2011.

When asked specifically about their plans for buying transportation services, 45 percent of the respondents said they expected their expenditures to increase. Another 40 percent said their spending would remain the same, 6 percent predicted a decrease, and 9 percent said they weren't sure. It's worth noting that regardless of their spending plans, survey respondents largely agreed on where energy costs were headed. Eighty-four percent said they believed fuel prices would rise in 2011.

As for what kinds of transportation services respondents plan to buy in 2011, less-than-truckload (LTL) topped the list. Sixty-six percent of survey takers said they would be contracting for LTL service. That was followed by truckload service (61 percent) and small-package service (55 percent). (See Exhibit 1.)

Survey respondents were also asked about their plans for outsourcing logistics services in the coming year. Of the 35 percent of respondents who currently use third-party logistics service providers (3PLs), 53 percent said they expected their use of third-party services to remain unchanged from 2010 levels. Thirty-five percent said they expected to increase their use of contract logistics services, while 12 percent said they planned to cut back on outsourcing.

When asked what type of material handling equipment they planned to buy during 2011, 43 percent mentioned racks and shelving. Next on the list were batteries and battery handling equipment (39 percent) and safety products (34 percent).

As for planned software purchases, it appears that readers are sticking with the tried and true. Twenty-eight percent of survey respondents said they intended to buy a warehouse management system (WMS), while 27 percent have set their sights on a new transportation management system (TMS). Also on the list were inventory planning software (21 percent) and supply chain optimization applications (20 percent).

Putting the brakes on spending
Although the survey respondents remain guardedly optimistic about the future, it appears they aren't ready to throttle down their cost control efforts just yet. The majority of survey takers indicated they would continue to seek ways to trim distribution expenses in 2011.

As for how they plan to go about it, the largest share of respondents said they would look to re-engineer their trucking spend. Forty-one percent said they planned to consolidate more shipments into full truckloads. The same percentage of respondents said they would seek to renegotiate rates with their carriers. (See Exhibit 2.)

The survey also showed that respondents will be adding some new weapons to their cost-cutting arsenal in 2011. While many will continue to pursue traditional approaches like load consolidation, it appears some have decided the time has come to deploy computer power and intelligence in their battle to contain distribution costs. Nearly one-third of respondents (31 percent) plan to invest in software to analyze their operations for additional savings opportunities.