What issues bear watching in 2012? Once again, I've put together a list of 10 developments that supply chain executives should keep a close eye on over the next 12 months. They are as follows:
1. The economy. First and foremost has to be the economy. Although the recession was declared officially over in June 2009, it appears to me that at best we are in a very slow recovery. With unemployment fluctuating between 8 and 10 percent, supply chain costs increasing, and resources decreasing, managers will be challenged throughout 2012, and no doubt beyond.
2. The price of diesel. According to Department of Energy forecasts, diesel fuel will average $3.73 per gallon in 2012. Although this is down slightly from 2011 levels, it is still 25 percent higher than it was in 2010. We will see upward and downward fluctuations, but the end result will be higher transportation costs.
3. Rising truck rates. High fuel costs and further regulation of engine emissions and carbon footprints, as well as possible driver shortages, will result in higher truck rates. Some increases have already been taken or announced. Look for more in 2012.
4. Capacity. Despite rising rates, the threat of capacity shortages remains. Many truckers sold off equipment during the downturn, and continuing battles over driver hours-of-service regulations and safety initiatives like CSA 2010 could exacerbate the problem.
5. Infrastructure. The infrastructure continues to deteriorate, and Congress is in seemingly hopeless turmoil and conflict over jobs, spending, and other issues that are all tangled up with infrastructure. I can't imagine this getting a lot better within the next year.
6. Ocean shipping. With the Panama Canal expansion proceeding on time and on budget, look for continued expansion and retrofitting at Gulf and East Coast ports in order to accommodate the new post-Panamax ships. Many industry observers believe we will also see port expansion in the Caribbean, where large ships will be unloaded and their loads dispatched on smaller vessels to various U.S. ports.
7. Security. Efforts to tighten security in the supply chain will continue, but the idea of guaranteeing that every package and every container is safe boggles the mind. It will be impossible to plug every leak, but the government and carriers will likely scramble to do so every time one develops.
8. The green movement. We can expect to see continuing efforts by shippers, carriers, and service providers to store, handle, and transport goods in environmentally responsible ways. These will not always be the least expensive methods in terms of capital outlay, but they will pay off in the long run.
9. Increased truck weight limits. Many shippers and carriers back an initiative that would increase truck weight limits on certain roads to 97,000 pounds from 80,000 pounds for vehicles equipped with six axles, rather than the usual five. Truck size would not be affected, but the extra axle would enable the vehicle to handle the additional weight without any negative effects on highway infrastructure, safety, fuel costs, or the environment. (In fact, there is strong evidence that just the opposite would be true.) The Senate recently approved higher limits for Vermont and Maine, where tests have been under way, but the hope is that each state will be given the option to increase weight limits on its own portion of the interstate highway system.
10. The election. We can expect action on infrastructure, the new Keystone XL pipeline project, and other important supply chain initiatives to be delayed until after the November election. In spite of the need to move swiftly on some of these issues, Congress will almost certainly place the election agenda ahead of that of the supply chain.