Wild Weather Ahead

Eight Issues the Transportation Industry Will Face in 2009

By Tony Seideman

In an industry where change is a constant, the global transportation system is dealing with a development that is as utterly unexpected as it is unsurprising — decline can happen as fast as growth.

Ports that were once poster facilities for congestion are no longer dealing with the issues brought on by seemingly endless increases in volume. Instead, they’re dealing with issues like where to warehouse unsold vehicles as the automotive industry continues to explore new depths of decline.

Making the situation even more challenging is the fact that, even as economic troubles continue, major shifts are occurring (or will soon) in areas such as government regulations and green technology.

Dealing with these situations will take unprecedented skill. Companies will need to be agile, bending and twisting to meet the needs of a marketplace that’s reshaping itself on a moment-by-moment basis.

1. Managing contraction

There’s a chance the American way of debt may be over, and that has major implications for trade flows planet-wide.

One thing the global credit crisis has done is call attention to the fact you can’t be a debtor nation forever. There’s a limit to how many assets you can sell off before the bills really start coming, and the United States may well have reached it. This throws into question a lot of projections and plans for everything from port facilities to cargo vessels. Betting on an endless increase in the flow of imports no longer seems the sure thing it once was.

2. Modifying the pipeline

With consumers going on strike and Americans suddenly realizing that saving instead of debiting might be a great idea, just-in-time and quick response strategies are in opposition to a “Hey, wait-a-minute world.”

This presents an unusual challenge for the logistics industry that’s conditioned to moving as many goods, as rapidly as possible, through its pipelines. Managers must now locate places for goods to sit for a while.

At the Port of Los Angeles, space that was allocated for new terminal development is instead being utilized for parking of unsold imported vehicles. Accurately matching limited demand with over-abundant supply is now a more critical skill, and it’s likely that the penalties from misjudgment will be far greater in a shrinking climate than a growing one. Instead of losing potential sales to under-stocked, empty shelves, miscalculations may see perfectly fine goods going instead straight to the overstock market at profit-devouring discounts.

3. Volatility becoming a way of life

Instability and planning seem to be directly contrary concepts, yet this profound partnership appears to be the way the world is swinging, with the unpredictable becoming routine.

While oil prices peaked at $140 a barrel and helped set off the global slump, that same decline has also caused oil costs to slump by almost two-thirds. But the same constraints that sparked a surge are still in place, which means that once the global economy gets on a growth path again, we may see yet another situation where consumption will crash into capacity and prices will take off again.

That’s not the only place where instability seems to have found a comfortable home. Members of the American financial community, who previously blanched at the volatility of Asian markets, are now experiencing it for themselves, a situation that has yet unknown implications for the global economy.

4. Shifts coming at the Department of Homeland Security

Washington is under new management, and it looks like cleaning up the mess that is the DHS is going to be a top priority. Some are even suggesting that the appropriate approach might be to break up the organization into its original parts.

While that’s not likely, changes in approach to security regulations have had a huge impact on the global transportation industry since 2001, and the new alterations to come will inevitably add yet more uncertainty to an environment that is already confused, even if those changes bring long-term benefits.

5. A still-evolving Internet creating unexpected opportunities

You may already be “Cloud Computing” — when high-powered off-site systems use high-bandwidth links to take on time and information-intensive tasks that once could have only been handled by in-house machines.

This shift has the potential to save money in a multitude of ways, from offloading the need for data processing centers to making updating systems easier because work will be more centralized.

6. Climate change getting serious attention

Barak Obama is sending a clear signal that climate change will be on the top of his agenda.

When it comes to the environment, the entire course of regulatory action in the U.S. is about to undergo a sea of change — something Obama also signaled strongly, by creating a team dedicated to undoing as many of the Bush Administration’s regulations as possible as soon as the new administration is sworn in.

7. Green technology coming to fruition

When hybrid tugs make the front page of The Los Angeles Times, a serious milestone has been passed.

Slumping fuel prices may depress demand in some areas, but environmental regulations are constant. As more machinery moves from development to production, green systems are making the leap from theoretical prospects to commonplace tools.

8. Smart security systems continuing to rise in IQ

As digital intelligence becomes cheaper and software more sophisticated, machine smarts continue to rise.

Facilities no longer need to depend upon tired guards monitoring banks of TV screens to keep watch. For example, some cameras are now equipped with sensors that will take note if moving objects exceed a certain size and velocity and send a “Hey, look at this” message to the people who are monitoring.

It’s likely that all these technologies will continue to reinforce each other, dramatically improving capabilities of security systems while reducing the cost of running them.

Preparing for 2009

How does a company ready itself for 2009? Plan for change — and a lot of it.