What's going to change the industry next? Government regulation? Near-shoring? E-commerce?


Looking over the next five to 10 years, transportation analysts at investment advisory firm Stifel Nicolaus predicted what major issues could potentially reshape the industry as part of its third annual "Shaking the Sand Out of our Sneakers" post-Labor-Day conference call for investors earlier this week.

Managing directors and transportation analysis John Larkin and David Ross listed the following potential game-changers:

- 2012 presidential election
- Energy prices
- Labor availability and qualification
- Government regulation (safety, security, the environment, fuel efficiency, economics)
- Emergence of a middle class in Asia, Eastern Europe and Mexico
- Restructuring of the U.S. Postal Service
- Stability of organized labor and decline of unions
- Shifting trade lanes, near-shorting and re-shoring
- 3-player global express market
- B2C/B2B e-commerce
- Terrorism
- Supply chain redesign
- Outsourcing of transportation and logistics functions
- Systems allowing widespread continuous optimization

They discussed several in more detail:

Regulations: "We are seeing a laundry list of alphabet soup regulations," Larkin said. "The net effect of all of these is to either reduce the number of drivers approved to operate Class 8 trucks or to reduce the productivity of those safe drivers. Over the next five years or so, as all these regulations are implement,ed, you have the potential to lose 10%, some say as much as 15% of the capacity of the industry."

Shifting trade lanes: Some manufacturers are moving product production back from Asia and into Mexico, where the logistics supply chain is a lot shorter, inventory in transit is much lower, and you're operating on the same time zone.

"We see some of that happening," Larkin says. "To the extent that smart robots can be put to work here in the U.S., you may see some of the manufacturing coming back to the states. All that has a big impact on modal share and the types of transportation required."

If manufacturing plants are located in Mexico or the U.S., there's a lot more truck freight as far as moving around raw materials, components for final assembly, and finished goods - not just the final moves from the ports as happens with overseas manufacturing.

E-commerce: Business-to-consumer and business-to-business e-commerce "are really beginning to gain scale, and that last-mile delivery is going to be a key component in the extend to which UPS and FedEx are gong to trade market share," Larkin said.

Outsourcing transportation logistics: "We see that as a very strong trend," Larkin says, because third-party and fourth-party logistics companies can typically buy transportation much cheaper, and they can bring more sophisticated systems to the party than an individual shpper, especially for small to medium-size shippers. "We see that growing at two to three times the overall economic growth."

Continuous optimization: "We no longer just redesign the supply chain in July and run it that way for three years," Larkin said. "Some of these third- and fourth-parties are able to continuously optimize." They can look at factors such as the modal mix and fine-tine on the fly to reflect changes in the markets, "and provide a truly optimized supply chain at the lowest possible cost."