Friday, November 29, 2019

Where Did the Freight Go & When Will It Come Back? Part 2

"Wealth is the product of man's capacity to think."- Ayn Rand

In Part 1, we looked at the current state of the industry and then asked what will this all look like in five, ten or fifty years. What’s the big picture telling us?

I would suggest that these are some of the most important issues to consider : Technological Advancements, The Environmental Movement, Demographics, Sociopolitical Factors.


The Digital Revolution will lead to more Automation, Optimization and Innovation.

Automation has already transformed distribution inside the four walls. We’ll continue to see advances in this regard which makes large scale order fulfillment extremely affordable. This type of massive distribution capability close to the customer will be THE BIG thing going forward. As more of our population clusters in metro areas it makes this model even more attractive to both companies and consumers. Small package and final mile or last five mile delivery will grow. This will be a business where volume and density are required to achieve required service levels and lowest costs. Fed Ex, UPS, maybe Amazon and one or two others yet to emerge will be the winners. I hold little hope for the USPS.

The optimization of transportation networks has much further to go. You can only optimize what you know and what you can control. As we employ more advanced technology in the tracking of cargo, assets and people; networks will achieve greater efficiency. Empty miles, wasted space and lost time will be steadily reduced over the next half-century.

While I don’t think we’ll see a lot of driver-less trucks on the highway anytime soon, I do see technology continuing to have a huge impact on transportation. Self-driving trucks with an “attending driver” in the seat for over-the-road trips is coming soon. These “attending drivers” could be third-parties who operate in a relay network and are contracted to “drive” for any number of eligible carriers. More experienced drivers, who are employed by the carrier, will handle pick-ups and deliveries as well as travel through certain highly congested areas or under extreme weather conditions.

And the highways will become less congested. Not in the next ten years, perhaps not in the next 20 years. But by 2070, absolutely. More lanes will be constructed, no question. But, the big impact will be fewer vehicles on the highways. The development of mass transit alternatives, expanding ride-share networks, the increase in telecommuting, the evolution of 3D print production and biotech advancements which will allow us to produce more food near highly populated areas will combine to reduce the overall level of transport activity.

The Environment::

Environmental activism is not going away. Regardless of what you think about climate change, this is a movement that has taken hold around the world and is growing in the United States. This has huge implications for transportation companies. As mentioned above, the movement toward food production nearer to consumers is certainly driven by environmental activism and will create new logistics opportunities while putting some companies out of business. It’s a game changer.

Of greater concern is the overall economic impact of the Green Movement. While I do not see the world completely caving into climate change activists, I do think there is already a shift toward more “sustainable” lifestyles and renewable energy alternatives. But it cost money to “save the planet” and to the degree this leads to higher taxes, higher energy costs, fewer cars, smaller homes with smaller closets and an overall reduction in consumption; the demand for transportation and logistics services will decline.

No one really knows what a Green New Deal will end up looking like, but that there will be one of some sort is inevitable. And that its impact on transportation and logistics companies will be unfavorable is almost certain.


News flash: The World is NOT going to become over-crowded. Global population predictions continue to be revised downward. The world's population may well peak within the next 30-50 years and then start to decline. Some regions will be in worse shape than others as populations decline and age out. Consumption is driven by youth and household formation. Investment and production by middle-age wealth-creators. Old people cash out, live off savings and die. If the United States is smart, it will push for more immigration, not less. We are still the number one destination for people seeking a better life. And we need them because we are not reproducing at rates to sustain, much less grow our population.

Population growth is certainly a wild-card factor. But anyone who thinks that the world’s demographic profile will not change dramatically between now and 2070 is just not paying attention. And where people live, how they live and how they work will create the need for totally new and different supply chains.

Sociopolitical Factors:

This gets very complicated because almost everything has a social or political component. But for the sake of simplicity, just consider where the United States is likely headed over the next 50 years with regard to Health, Education and Welfare. Raise your hand if you think “we the people” can avoid increased subsidization of health, education and welfare. Perhaps “investment” is a better word than subsidization. Call it what you will, but a higher percentage of GDP will be spent on goods and services related to these three areas. It’s unavoidable. Unless we find a low cost magic pill that cures most illness and disease, the costs for healthcare will continue to rise, especially with an aging population. We are already at the tipping point when it comes to education and training. There is no choice other than to provide better and more affordable education and job training in order to have a workforce that can just keep the lights on and the water flowing. And, the welfare safety net will only get larger. Whether it’s outright transfer payments or some other form of subsidy or tax credits, we will be faced with an increasing percentage of the population that is unable or unwilling to generate the economic value that would compensate well enough for them to maintain an acceptable standard of living.

This will likely result in higher taxes in the more advanced economies that have some semblance of a social conscience and the flight of capital to those countries that are less concerned about such things or whose poor have lower expectations. Combine this with flat or declining populations in many of the more advanced economies and you have low growth or no growth GDP’s in those places where supply chains are the most developed. Only the best and most efficient service providers can survive under such conditions.

Am I painting a grim picture of the future or simply a reflection of the past into the future? I think more so the latter. This is how civilization has lurched forward for centuries. Two steps forward, one step back. Nations rise, nations fall. Industries are created, flourish, plateau and fade away. Whatever your enterprise or endeavor you must adjust, adapt and overcome….or face extinction.

So you PLAN and work with what you know. That would be the now and the near-term. But you PREPARE for the future...even if you’re not planning to be around.

I'll wrap this up in Part 3 with answers to the questions: Where did the freight go? When will it come back?

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