Transportation spending soared. In 2017, U.S. companies invested nearly $1.5 trillion in logistics services, a record high, according to researchers at the supply chain management professional committee. Of course, chemical manufacturers are part of a wide range of organizations; they rely heavily on commercial freight companies. Why do companies have so much money to fund their distribution in this unique and expanding niche market? These problems require expensive intervention and it is expected that between 2017 and 2027, US chemical suppliers will spend an additional $79billion, according to the analysis of the U.S. chemical Commission and PricewaterhouseCoopers.
With this disturbing forecast, chemical suppliers in the United States should have a deep understanding of logistics issues affecting the industry.
Competition and staffing in truck transport
ACC and PwC found that an estimated 61 per cent of chemical transport was carried out by trucks, making semi trucks the main transport mode in the region. Unfortunately, the economic growth has caused a variety of traffic jams, as companies from all walks of life compete to reserve relatively limited transport spaces, forcing truck companies to run at full load. Logistics institutions can raise prices without punishment because of increased competition, the Wall Street Journal reported. However, demand is not the only factor driving price rise. For some time, logistics companies with mature truck fleets have been trying to achieve the best staffing level. At present, the shortage of truck drivers in China is 50000, which may increase to 174000 by 2026. Companies in the logistics industry are trying to attract new drivers through high pay and strong training programs, which are all cost to customers. Unfortunately, there is no solution yet, which means chemical suppliers will have to pay higher transport costs over time or risk cutting off the supply chain.
As the second largest transportation mode in chemical manufacturing, railway transportation plays a crucial role in transportation space, especially for bulk carriers. Although most enterprises in the industry continue to see the success of this particular transport mode in logistics, it is not without problems, namely congestion. For example, according to the business daily, in february2018, due to weather, shortage of locomotive operators and electrical recording equipment problems, there was congestion in the terminal of Canada national railway and United Pacific Railway in Illinois, and organizations of several departments found serious delays. The shipper expressed considerable dissatisfaction because of the turnover time of 4 hours. ACC and PwC found that infrastructure depletion is often considered a contributing factor because private and government entities responsible for U.S. railways are lagging behind in the maintenance of critical tasks for rail, cables and other critical equipment.
The American Railway Association and other industry organizations have long advocated increasing institutional investment. But without a large amount of funding, things may not change, which is an unfortunate situation for chemical manufacturers.
Crumbling marine infrastructure
The U.S. ports have been strengthening logistics operations in the chemical field for a long time. According to ACC and PwC, about 14 percent of the chemical products are currently transported through these waterways through container ships. However, so far, this logistics strategy is not reliable. Why? Analysts at the American Society of civil engineers found that the crumbling infrastructure is one of them. A considerable part of the 920 ports across the country have not yet been retrofitted to accept modern container ships, which carry up to 22000 20 foot equivalent units. By contrast, in 2005, the average ship’s load capacity was not more than 10000 TEU. Congestion often occurs if there is no physical structure to support the flow of today’s large ships.
In addition to the serious infrastructure defects, American ports are often at the center of maritime administrative disputes that hinder operation. ACC and PwC found that delays in the West Coast ports were particularly evident due to such disputes. For example, in 2015, the contract conflict between the international Longshore and Warehouse Union and the Pacific Maritime Association affected the productivity of ports along the Pacific coast.