Introduction to the Transportation, Supply Chain & Logistics Industry
Transportation is one of the world’s largest industries. Its sectors range from taxis to trucks to airplanes, trains, courier services, ships, barges, pipelines, warehouses and logistics services.
Intotal, during 2010, the U.S. transportation industry (in both for-hire and not-for-hire sectors, including support and repair) had revenues of about $1.75 trillion. At a bit more than 10% of America’s economic activity, transportation is remarkably efficient, considering the fact that it is a vital service to every other sector of the economy. In fact, thanks to increasing use of advanced informationsystems and such strategies as the use of intermodal containers (sending freight via containers that are easily transferred from ship to rail car to truck as needed, without repacking), the transportation industry’s productivity is excellent.
In the U.S., employment in the transportation and warehousing sector totaled 4.183 million people in 2010. To put the size and scope of the industry inperspective, this vast pool of workers helped to facilitate, among other things, 635 million domestic airline passengers, $180.7 billion worth of truck transport and $1.277 trillion in U.S. exports.
The 2011-12 period looks promising for transportation on a worldwide basis, in terms of demand. However, soaring oil rates as of March 2011 may put a damper on profits as fuel costs are risingdramatically thanks largely to turmoil in the Middle East. If fuel costs remain especially high, then demand for transport may slow. Globally, the transportation sector had been under extreme pressure since mid-2007. At first, it was pummeled by rising fuel costs. Then, the global recession slashed traffic of all types, including airline passengers and ship cargo. The decline in business was felt by alltypes of firms within this sector, from freight brokers to railroads.
The global financial crisis created several distinct problems for the transportation industry. For example, in early March 2009, the number of massive container ships sitting idle globally was estimated at an all-time high of 453 vessels.
However, the global transportation sector rebounded sharply in 2010. High load factors wereenjoyed by passenger airlines, marine shipping firms and courier companies. Global trade in goods has a direct effect on transportation, and by the beginning of 2011, trade had rebounded to pre-recession levels. However, this bounce back in business has been felt most in fast-growing, emerging nations like Brazil and China, and to a lesser extent in the U.S. and European Union.
Financial resultsat global shipping giants FedEx and UPS are good indicators of the health of transportation revenues in general. For its second fiscal quarter, which ended November 30, 2010, FedEx reported revenue growth of 12% from the same period of the previous year. While FedEx’s priority package shipments increased 11% by volume, led by exports from Asia, the same category of shipments were up only 3% in theU.S.
Over recent years, globalization placed intense new demands on the transportation and supply chain sector. For example, United Parcel Service (UPS) offers delivery to more than 200 nations worldwide (including every nation in the world where the firm is not barred from doing business due to U.S. government embargoes), and international revenues have been key to its growth. UPS’ totalrevenues soared 9.4% during 2010 to $49.5 billion. Revenues from international package shipments were up 14.8%, while U.S. shipment revenues were up only 5.6%. Meanwhile, the firm’s increasingly important supply chain and freight division saw revenues soar 16.5% to $8.6 billion.
Transportation continues to evolve, no matter whether the type of transport involved is on the road, on the sea or in the...