“By 2020, it will be crazy. Don’t expect to get anywhere near a city,” expert warns
October 7, 2011
REXDALE, Ont. -- North American shippers have enjoyed a 30-year run of declining logistics costs but that is about to change, according to George Stalk, senior advisor with Boston Consulting Group, and lingering unwillingness to deal with a...
REXDALE, Ont. — North American shippers have enjoyed a 30-year run of declining logistics costs but that is about to change, according to George Stalk, senior advisor with Boston Consulting Group, and lingering unwillingness to deal with a crumbling infrastructure is to blame.
While higher oil prices is a clearly visible factor creating upward pressure on logistics costs, less obvious, but critically important nonetheless, is the effect of congestion on extended supply chains, Stalk told the recent 25th-annual Transportation Conference, held at the Woodbine Racetrack in Rexdale, Ont.
“It will bring into question supply chain models that have essentially been handed down from the 60s and 70s. Change is happening underneath the eyes of our clients,” Stalk warned.
He painted a future scenario where gridlock rules everywhere. North American ports, many of which flirted with capacity prior to the recession, will once again be pushing the limits of their capabilities. And they will have a tough time growing beyond their current footprint due to public opposition to further industrial growth on waterfronts. Yet containerlines such as Maersk are placing 15,000 and even 18,000 TEU ships into their rotations, which could actually result in greater congestion.
“One could argue, the bigger the ship, the greater the congestion,” Stalk said. “…There could be a flotilla of ships waiting to be unloaded. It could become the second Wall of China.”
Containers coming off the dock need an efficient infrastructure to quickly move them inland but Stalk pointed out there is little appetite to grow rail lines. And demand for trucking capacity is growing four times faster than it is being created.
Don’t count on more expensive air freight either, according to Stalk. He believes airport capacity in the US will be gridlocked by 2015 unless planned improvements are actually made. Over the past 40 years only 3 major airports have been built in North America – two were replacements and one was a failure (Mirabel). Since 1975 there have been 16 runway projects cancelled. Key airports such as Boston have been working for three decades to add capacity due to public opposition.
“By 2020, it will be crazy…Don’t expect to get anywhere near a city,” Stalk said, adding that to fight back new relationships are required among transportation stakeholders. He advised that the focus should be on faster and better service that is appropriately compensated.
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