2018 Logistics Industry Trend Forecast:Part One of Three: All Roads Point to Greater Price Pressure

By Len Batcha
President
Technical Transportation, Inc

No one has a crystal ball. But so much has impacted the logistics industry in 2017 that I have no doubt what the most important trend—and challenge—for logistics providers will be in the coming year. And it’s all due to the constant changes we’ve had to deal with over the past 12 months.

And that trend is—Increasing price pressure.

To cut to the chase, 2018 will be a year where we’ll be hit from all sides with changes and mandates that are likely to lead to one of two consequences:

1. Lower profits for logistics providers.
2. Higher pass-on costs to the consumer.

The #1 challenge we will all face in 2018 is how to keep costs down in order to remain competitive, despite these market demands. Here are my thoughts on the three trends that will make this pressure all too real.

1. The Aftershock of the Electronic Logging MandateAs of December 18, the Federal Motor Carrier Safety Administration (FMCSA) eliminates the use of paper logs by drivers and carriers. Electronic logging devices are far from new, but the FMCSA is continuing to tighten compliance standards. By December 16, 2019, all drivers and carriers of line haul and long-distance deliveries must use self-certified electronic logging devices that are registered with the FMCSA.To make it happen, most of the costs needed to meet new compliance standards throughout the delivery cycle will fall on the carriers’ shoulders. So, to maintain margins, carriers have few options but to pass these added costs on to shippers and consumers.
2. Higher Driver Demand, Higher Driver CostsRecent hurricanes have diverted drivers to support FEMA. What’s more, higher demand from holiday sales, cyber purchases, the Amazon effect, and increasingly high expectations from consumers are pushing internal logistic networks to the limit.When you add them all together, you’ve got a formula for greater transport costs fueled by a short-term lack of qualified drivers and equipment. This may be good news for drivers in the immediate future because their compensation is likely to rise. But for the internal logistics network, not so much.
3. Short-term investments, long-term payoutsThe movement toward driverless vehicles is accelerating and putting increasing pressure on trucking companies to invest in driverless equipment, maybe not today but not too far in the distant future. Such investments are a major paradigm shift in our industry, and one that will require a huge up-front investment in the next 3-5 years.To make the challenge even harder, we’re not likely to see any measurable payback on drivable vehicle investments for another 5-10 years. Regardless of how the timing turns out, one thing is for certain—major changes in our industry are underway. And they’re all putting added price pressure on virtually every logistics provider.

In the next blog in this series, I’ll discuss 2018 logistics forecast trends for the medical segment in particular. If you have any comments or suggestions for future blog ideas in the meantime, please get in touch.

2018 Logistics Industry Trend Forecast:Part Two of Three: A Healthy Outlook for MedicalEquipment Transport

By Len Batcha
President
Technical Transportation, Inc

Several trends point to active growth in the medical logistics industry over the coming year. Unfortunately, not all of the trends are the result of good news. In fact, some are due to severe disasters in 2017 that will have a measurable impact on the demand for medical equipment logistics, especially in the early part of the coming year.

Here’s a list of the top 5 trends I foresee in 2018.

1. Healing in the aftermath of natural disastersWith so many severe hurricanes and uncontrollable wildfires in 2017, there is a pressing need to rebuild facilities and multiple infrastructures that must be replaced as soon as possible. Such a massive undertaking doesn’t happen overnight, and rebuilding medical care facilities is among the top priorities for reconstruction in the coming year.It’s not just about replacing potentially life-saving equipment that was destroyed in recent months, the situation also puts a significant strain on the existing logistics network nationwide. The end result will be a rise in demand for both trucks and drivers alike, which is likely to push 2018 transport costs higher.
2. The potential repeal of ObamacareAt this point, it’s impossible to say how the potential repeal of Obamacare will impact the logistics industry specifically, but the reality of what happens will have a direct—and possibly huge—impact on the healthcare industry overall. It could have a significant effect on costs across the board, from the cost of care to the cost of materials and equipment. When the rules change, the demand for new equipment often increases, which leads to a corresponding increase in order placement and shipment activity.
3. Growing demand for pharmaceuticals and hematology equipmentWe’re already seeing a shift back to a greater concentration on pharmaceutical and hematology equipment, and this trend is likely to continue throughout 2018. Also, the ongoing segmentation of the healthcare market as a whole could drive greater demand for additional emerging vertical segments that would require specialized medical equipment as well.
4. A major shift in pharmaceutical dispensing requirementsThe CVS purchase of Aetna could be a game-changer when it comes to medical care delivery and healthcare insurance. What’s more, the shift toward auto-dispensing units for pharmaceutical products in general will require FDA compliance for manufacturers and end users alike. Stricter compliance standards are always an impetus to ensure providers have all the equipment they need to meet the mandated guidelines. The likelihood is an increase in medical
   equipment orders.
5. Higher patient expectations for quality service and careToday, it’s the end consumer, not the provider, who has ultimate control over how and when they want to buy something. Buyer expectations for convenience and quality have risen dramatically, and healthcare providers aren’t exempt from these increasing consumer demands.

Such expectations create a greater need, not only for quality equipment and care, but also for seamless deliveries. In the next blog in this series, I’ll discuss 2018 logistics forecast trends for white glove deliveries in particular.

In the meantime, if you have any comments or suggestions for future blog ideas,
please get in touch.