How's it going? Depends on who you ask

Three years after the official end of the Great Recession, there's no clear consensus among DC VELOCITY's readers on where the economy is headed in 2012. Respondents to our annual Outlook reader survey were almost equally divided in their opinions: positive, negative, or simply not sure. That same uncertainty is reflected in their views of their own companies' revenue prospects and in their overall logistics budgets. In fact, there was only one thing almost all of the 189 respondents to this year's survey agreed on: Oil prices will head up in 2012.

Just 39 percent of the respondents to the online poll, which was conducted in November, said they were optimistic about the direction the U.S. economy would take in 2012. That's the lowest percentage since our 2009 survey, when just 23 percent expressed optimism about the economy. It's also a significant drop from the percentage of respondents who were upbeat about the economic outlook for 2011 (52 percent) and 2010 (56 percent).

Meanwhile, about one-third of this year's survey respondents (34 percent) said they were pessimistic about business conditions in 2012, up from 22 percent last year. And here's that nagging sense of uncertainty: 27 percent said they were unsure what would happen, about the same as last year's 26 percent.

When it came to their own companies' prospects for 2012, opinion was once again almost evenly divided among survey takers. Thirty-four percent said they anticipated strong sales growth, while 35 percent foresaw flat revenues. Another 25 percent thought company sales would be weak. Six percent said they simply didn't know.

Survey respondents held out even less hope for overall U.S. economic growth. Almost half (49 percent) said they believed that growth would be weak, and 38 percent said they thought it would be flat. A paltry 10 percent predicted strong growth, and 4 percent said they had no idea.

As for the respondents themselves, the largest share worked for distributors, at 33 percent, followed by manufacturers, with 31 percent. The remainder worked for logistics service providers (18 percent), retailers (10 percent), or other types of businesses (8 percent).

*Note: Survey respondents were allowed to select more than one response.

Budget creep
Respondents seemed a little more definite when it came to their transportation spending plans. More than half (55 percent) said they expected to spend more for transportation services in 2012 than they had in 2011. Another 33 percent predicted their spending on transportation would remain the same, 6 percent anticipated a decrease, and 6 percent said they weren't sure. Of those who plan to spend more, 52 percent forecast an increase of 3 to 5 percent over what they spent in 2011. One-fourth anticipate spending just 1 to 2 percent more, and 15 percent expect an increase in the neighborhood of 5 to 9 percent. Only 8 percent foresaw an increase of 10 percent or more.

The projected increase in transportation spending is most likely related to respondents' views on where oil prices are headed. The vast majority—89 percent—said they were concerned that oil prices would rise in 2012, which would presumably result in higher freight rates.

Even so, only 40 percent of survey takers said their overall spending on logistics and related products and services (including material handling equipment, information technology, and freight transportation) would increase in 2012. Another 44 percent said their overall logistics expenditures would remain the same as in 2011, and 11 percent forecast a decline. The remaining 5 percent were unsure.

Among those respondents who expect to boost their overall logistics spending, the biggest share—43 percent—said their budget would rise by 3 to 5 percent compared with 2011. About one-fifth (21 percent) expected an increase of just 1 to 2 percent. But others forecast a bigger jump: 16 percent said they expect to spend 5 to 9 percent more than last year, and a full 20 percent said their budgets would increase by more than 10 percent.

As was the case in the 2010 and 2011 surveys, less-than-truckload (LTL) services topped the readers' list of planned transportation purchases. Seventy-six percent of survey takers said they planned to buy LTL services in 2012. About 65 percent said they would buy small-package shipping services, while 60 percent said they planned to use truckload carriers. (See Exhibit 1 for the full breakdown by mode.)

Investments on tap
Transportation, of course, isn't the only service readers purchase. Some 40 percent of the survey participants also buy contract logistics services. Of those respondents who use third-party logistics service providers (3PLs), 26 percent said they planned to increase their use of contract services in 2012. Sixty-one percent said their use of 3PLs would stay the same, while 13 percent expected to cut back on outsourcing. Readers have some flexibility when it comes to changing their outsourcing plans: Of those who use 3PLs, 88 percent said the average length of their contracts is three years or less.

Readers are planning to continue investing in warehousing and material handling products and services in the coming year. The top choices: racks and shelving (51 percent), lift trucks (45 percent), batteries and battery handling products (37 percent), safety products (36 percent), and dock products (34 percent).

They also intend to invest in technology. At the top of their shopping list were warehouse management systems (WMS), with 27 percent, and transportation management systems (TMS), with 24 percent. But it appears readers won't just be buying supply chain execution software this year. Twenty-one percent of survey takers said they planned to purchase business intelligence applications, software designed to help users analyze and improve their end-to-end supply chains. Inventory optimization software (19 percent), planning and forecasting software (18 percent), and demand planning apps (14 percent) were also popular choices.

Reining in costs
Although there was no real consensus among survey respondents about the economic outlook, readers aren't just sitting back and waiting to see what happens. Given the events of the past year—earthquakes, floods, civil unrest in the Middle East, and unpredictable oil prices—it's no surprise they're taking steps to rein in costs in 2012.

Readers appear to be sticking with tried-and-true methods to keep their logistics spending under control. Forty-one percent said they would consolidate more shipments into truckloads, and the same number said they expected to renegotiate with carriers. Nearly as many—36 percent—said they planned to cut back on express shipments. Another popular approach to controlling costs is a supply chain network redesign, cited by 26 percent of survey takers. Other favored tactics included shipping orders less frequently to customers, using fewer carriers, and switching more shipments from truck to rail. (See Exhibit 2.)

And finally, there's one glimmer of good news in all this cost-cutting: Just 7 percent said they planned to cut costs by laying off workers.