For many years, Transportation executives have had to consider a range of variables in crafting their supply chain strategies. These variables have included the economy, carrier capacity, customer demand, interest rates, inflation, climate change, technology, energy costs, Ecommerce strategy, and availability of raw materials.

While geopolitical issues such as trade policies with NAFTA countries, the European Union and China have been having impacts on supply chains in the United States and Canada for the past several decades, transportation executives have been able to largely focus on domestic matters.

This has changed dramatically over the past year. A number of geopolitical forces are shaping strategies in board rooms throughout North America and internationally. They include:

1. The War in Ukraine

Friday’s surprising U.S. January jobs number raised multiple questions about the status of the American and Canadian economies and the prospects for a recession in 2023. The figure of 517,000 non-farm jobs created in January was significantly higher than the market estimate of 187,000, and the job creation figures for the previous five months. Despite the ongoing series of Fed rate increases, unemployment fell to 3.4%, the lowest figure in 50 years. “Today’s jobs report is almost too good to be true,” wrote Julia Pollak, chief economist at ZipRecruiter. “Like $20 bills on the sidewalk and free lunches, falling inflation paired with falling unemployment is the stuff of economics fiction.”

Growth across a multitude of sectors helped propel the massive beat against the estimate. Leisure and hospitality added 128,000 jobs to lead all sectors. Other significant gainers were professional and business services (82,000), government (74,000) and health care (58,000). Retail was up 30,000 and construction added 25,000.

Reorganization of the New Economy

In a Sunday interview with Margaret Brennan, host of Face the Nation, Gary Cohen, Vice Chair of IBM, and former chief economic advisor to President Donald Trump, stated that these statistics point to a “reorganization of the new economy.” He expressed the view that the “service economy is regaining strength.” He noted that “the occupancy rate in offices in major cities is over fifty percent.” Service sector employees (parking attendants, restaurant workers) are needed to support workers in offices. Even though many employees are not returning to the office, 5 days a week, there is still a need for service industry employees to support them as they, and their colleagues, move from their dens to their offices, several days a week. It appears that as many people try to normalize their lives, as the pandemic crisis subsides, more hotel and airline personnel are also being hired.

Carrier costing models have evolved over the past couple of decades. Freight rates are based on the complete set of transportation-related processes at origin, in transit, and at destination, to serve each client. To effectively manage freight expenses, shippers must have a full understanding of all three elements.

Shippers with weak shipping order procedures and staging processes drive up the cost of freight transportation. Shipments that move at peak times, in congested areas, to remote areas, or on circuitous routes, drive up the cost of freight transportation. Consignees that disrupt or slow down the delivery process, that consistently extend a delivery beyond standard Hours of Service, that charge fines for late deliveries, have a significant negative impact on the financials of the shipper. What takes place during the pick-up and loading process is only part of the expense of moving freight in a cost-effective way. One of the biggest mistakes a shipper can make is to think that after they have selected high quality carriers, negotiated competitive freight rates, and trained their carriers on how to load their freight, their job is done. It isn’t.

The world of freight has changed. Hours of Service regulations coupled with the ELD implementation have increased the focus on driving and delivery windows. Strong economic conditions have created capacity shortages. Driver shortages have made capacity even tighter as carriers have had to park equipment across North America. Shippers and consignees with ineffective pick-up and delivery processes can increase the number of transit days beyond previous norms and raise costs. Shippers with chronically inefficient processes have been facing not only higher rates, but also a shortage of capacity. This can jeopardize customer retention, revenues and profits. What can shippers do to prevent this from happening?

Gain an Understanding of the Three Components of Freight Transportation for your Business

On January 10, 2019, LevaData, a supply chain AI company, released the results of its 2018 Automotive Survey based on responses from one hundred US-based auto executives. All of the individuals surveyed are senior executives of car manufacturers, car parts manufacturers or are in leadership positions in related industries.

The study was designed to gather feedback on the impact of NAFTA2 or as it has been renamed, the USMCA (US Mexico Canada Agreement), on the North American automotive industry. This industry is of major importance to the economies of three countries that are signatories to this agreement, and specifically to several U.S states (i.e. Michigan, Ohio, Kentucky, Tennessee) and the province of Ontario in Canada.

It should be pointed out that the USMCA has not been approved by the U.S. Congress. Based on the battle over President Trump’s border wall, this may suggest that some sections of the Agreement may be revised before it takes effect. Assuming that the essential structure of the agreement remains in place, here are some insights on how it will shape the industry in the coming years.

Impact of USMCA on North American Vehicle Production

Ten years ago, my colleagues at Newcom Business Media and Dan Goodwill & Associates set out to create a high quality educational and networking event for Transportation Professionals and Decision-Makers. From humble beginnings, the conference has evolved into Canada’s premier event in the Surface Transportation Industry. The Surface Transportation Summit now attracts hundreds of Logistics executives, Transportation Industry owners and leaders, vendors to this industry, government officials, consultants, educators, and students.

To celebrate the tenth anniversary of the Summit, the organizers, in partnership with the Freight Management Association of Canada, the Canadian Trucking Alliance and the CSCMP Toronto Roundtable have created an agenda that encompasses the most important issues of the day and assembled an elite group of moderators and panelists to address these topics. As always, the conference will begin with a discussion of the top forces that have shaped the economies and the freight industry in Canada and the United States in 2018 and will power it in 2019. Paul Ferley, Assistant Chief Economist, Royal Bank of Canada, will provide an overview of the direction of the Canadian economy. He will be followed by Walter Spracklin, Managing Director, RBC Capital Markets and David Ross, Research Managing Director, Stifel Financial Corp who will discuss the trucking and rail industries in Canada and the United States. This will be followed by a moderator led discussion with Paul Roach, President & CEO, Belmont Meat Products and Scott Smith, President, JD Smith & Sons who will share their insights on the economic projections for 2019.

The will be followed by an inside look at New Freight Transportation Technologies for Manufacturers, Distributors, and Retailers. In brief interviews, Brian Hodgson, VP, Transportation Strategy, Descartes Systems will provide some thoughts on Shipment Visibility, Dave Brajkovich, Chief Technology Officer, Polaris Transportation Group, and Iliana Oris Valiente, Managing Director, Accenture | Founder at ColliderX Blockchain R&D Hub, will discuss the Blockchain movement, Martin Abadi, Counsel, Borden Ladner Gervais LLP will provide his insights on Connected Trucks and Charles Fallon, Principal, Supply Chain Intelligence will talk about Warehouse Automation.

The Shipper-Carrier Roundtable has always been a popular track. This year Dan Einwechter, Chairman and CEO, Challenger Group of Companies, Tracy Raimondo, Vice President, Logistics, Normandin Transit, John Ferguson, President, Purolator, Andrew Fuller, Assistant Vice President, Domestic Intermodal, CN Rail, Geoffrey Joseph, President & CEO, Joseph Haulage Canada, Martin Pede, Manager Zinc Sales, Hudson Bay Mining and Fiona Renzi-Fantin, VP, Supply Chain, Maple Leaf Foods will debate some of the hot issues facing shippers and carriers in 2018.

Investopedia defines Blockchain as a distributed database that holds records of digital data or events in a way that makes them tamper-resistant. While many users may access, inspect, or add to the data, they can’t change or delete them. With Blockchain, transactions agreed by consensus are added to a block, a unique cryptographic code is calculated of the block, and that code is added to the following block creating a unique chain of blocks containing all the transactions.

The so-called distributed ledger is a technological system that is an asset database that can be shared across a network on multiple sites, geographies, or institutions. The original information stays put, leaving a permanent and public information trail, or chain, of transactions. The decentralized and distributed digital ledger contains transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. In short, Blockchain is a record-keeping mechanism that makes it easier and safer for businesses to work together over the internet.

The most popular application of Blockchain technology is Bitcoin, the currency system. The good news is that the Blockchain protocol can be used for non-currency purposes as well.

Though it was initially intended for financial transactions, businesses of all kinds are getting creative with the so-called Blockchain ledger, as it can be used to record, track, and verify trades of virtually anything that holds value. From ride-sharing to cloud storage to voting, companies in all industries are beginning to see blockchain’s potential. Earlier this year, consulting firm Deloitte predicted that by 2025, 10% of global GDP (approximately $12 trillion) would be built on top of Blockchain applications.

Economic conditions are solid as we approach the first quarter of 2018. Unemployment is low and companies are hiring. Demand for freight transportation services should be strong during the first half of the New Year.  Shippers need to contend with a range of variables that are shaping the supply and demand for freight transportation services.

Hurricanes Harvey and Irma

Two natural disasters have had a dramatic effect on Texas, Florida, and the surrounding states. Hurricanes Harvey and Irma, two of the most powerful hurricanes in years, have created significant destruction to power grids, infrastructure, homes, and their contents. Repairing, replacing, and rebuilding will consume significant transportation resources, lumber, roofing materials, electrical equipment, appliances, paint, and other materials. These activities will continue during 2018.

The ELD mandate

This has been a challenging month. Hurricane Harvey caused huge damage in southeast Texas and Hurricane Irma is expected to cause major damage to Florida and the east coast of the United States (as it did to several islands in the Caribbean). We should not forget the recent forest fires in British Columbia and California. Tornadoes, earthquakes, and ice storms seem to be occurring with much greater regularity and ferocity. These natural disasters have been very disruptive to the smooth flow of people, goods and services for many companies. They have also made life difficult for supply chain professionals.

Of course, disruptions to supply chains can come from factors other than weather or natural disasters. Quality control problems, piracy, export restrictions, and computer system hacking are just some of the factors that can come into play. To make matters worse, most of these disruptions are unpredictable in timing and scope. Each shipper has to make an assessment of the potential risks to their supply chains and make recovery plans.

According to Patthira Siriwan, senior project manager for supply chain development in North America for Damco, the combined logistics brand for A.P. Moller-Maersk, supply chain risks can be categorized into five groups: operational, social, natural, economy and political/legal. Damco defines supply chain risk management as “attempts to identify risks and quantify their commercial financial exposures as well as mitigate potential disruptions at each node and lane in the supply chain.” Supply chain risk models can vary from the rudimentary to the sophisticated. In the case of the latter, complex “what if” analyses can be performed. This allows the shipper and/or receiver to identify potential trouble spots and map out alternative supply chain strategies.

In an article in the Journal of Commerce, Siriwan indicated that shippers tend to focus on “factors with the biggest impact on their supply chain, such as on-time performance, supplier lead time variability and carriers by origin or trade lane.” Shippers need to perform some sort of probability analysis on the impacts of each potential disruption, with a particular focus on alternative vendors, carriers, origin points and ports and destination ports. Looking ahead to the balance of 2017, there are some major predictable (tropical storm Jose) and unpredictable risks that could drive up supply chain and transportation costs. The latter could include the impact on fuel costs as a result of unrest in Venezuela or war in the Middle East or war with North Korea.