Forecasting and the Trucking Industry
Forecasting plays an important role in almost every industry. It can help companies manage their inventory, budgets, capacity, etc. It is important to maintain efficiency- whether it involves supply chain management, human resources, or capacity. One industry offers an interesting perspective on forecasting is the trucking industry, as they rely on the forecasting of other industries-such as e-commerce, automobile sales, and gas and oil extraction.
Peterbilt Trucks, a company that leads the trucking industry in products and services, predicts that the growing economy will lead to an even bigger demand for trucks in 2018. Citing the growth of e-commerce, Peterbilt believes that sales in the industry’s heaviest weight class will be in the 235,000 to 265,000 vehicles range in the United States and Canada, which would be the third-best year ever for trucks in the heaviest weight segment. “With the economy strong, the drivers of truck freight- personal consumption, factory output and construction- are good, plus, the inventory cycle is in favor of motor carriers, so I expect freight tonnage to remain robust in the months ahead,” cites Bob Costello, the American Trucking Association’s chief economist.
Many trucking companies have not managed their forecasting strategy correctly to prepare for this increased demand. While most have focused on replacing trucks with more efficient, newer trucks, a shortage of drivers has kept fleets from expanding. This is a perfect example of the importance of managing human resources with forecasted demand. These errors could result in capacity shortages, leading companies to choose trucking companies that have the workforce capacity to meet their demands.
The industry is at a point where trucks have all the loads they can handle. Loads are not moving when the supplier and customer wants them to because there are not enough trucks and truck drivers available to move them. This can lead to spoilage, loss of customers, and market share, an example of supply chain failure. In addition, outside factors such as the enforcement of an electronic logging device mandate, could take more trucks off the road.
As the economy continues to grow and the demand for trucks and truck drivers becomes higher, it will be interesting to watch and see how the industry adapts to meet the demands of its customers. Forecasting has indicated a need to alter supply chain inventory, and unless truck companies address this problem they may not be able to maximize their output.
Link: http://www.ttnews.com/articles/tonnage-robust-demand-trucks-grows
Link: https://www.trucks.com/2018/02/23/economic-forecast-strong-trucking-industry/
Ben,
It is true that the trucking industry is not slowing down. Not only that, but the technology involved with the industry is moving along with it. I have found an awesome news video that takes place in my scenic and beautiful state of New Jersey and I have attached the link to it at the bottom of this comment. It discusses the “uberization” of the trucking industry. I found it to be incredibly thought-provoking. Many truckers have had to adapt to our technology-driven world and there are apps to help doing just that.
The video discusses the many uses of the app, the main of which being that companies can put on the app that they need something shipped, and then essentially a free-lance trucker with their own freight truck can be on the spot in under an hour. It is truly a revolutionary idea and it is improving the supply chain process of companies all over the United States and the rest of the world.
https://www.youtube.com/watch?v=-MVhCT1NWtM
On one of the first days of class Dr. Youngblood showed us a picture of a bumper sticker that grabbed her attention and I found it interesting as well. I believe she said she saw it one random afternoon on the back of a truck on the highway and it said, “Don’t like trucks? Stop buying stuff.” I think few understand how integral the trucking industry is to our economy so it does not surprise me how important forcasting can be for a trucking company like peterbuilt, like you mention.
Ben,
It’s amazing to see how much other industries rely on the trucking industry. Personally I believe that it will be hard to lower the demand in the trucking industry for many years to come, since drone technology is still in the early stages. Electric cars won’t really harm the industry, it will only require them to switch to electric trucks if that technology ever gets to that stage. Self-driving cars might pose a small problem, but only to the drivers of these trucks. As for the forecasting part of the trucking industry, it would be interesting to see what kind of method they use to forecast their demand since it relies so heavily on others. Would it be one of the methods we already talked about, or something completely different? Maybe a hybrid of some methods? It would be interesting to find out.
Benjamin,
I am glad that you choose to write about the trucking industry, as I find the rapid expansion of the industry to be a very relevant trend in todays economy. I have attached a very informative article on the growth patterns of the trucking industry. The author, Steve Kasper, speaks about the slow growth of the industry in 2017 caused by labor shortages and infrastructure delays, which you mentioned in your post. This is a great example of how important forecasting is for companies and industries to be successful. The trucking industry had immensely growing demand, they were not able to capitalize on this because their forecast and ability to meet this demand was wrong.
The author, who is the Director of Market Data and Research for National Truck Equipment Association, is predicting a better year and higher demand for trucking in 2018. While this is promising for the industry, it is important to use caution not to over compensate and prepare on forecasts. While it is often a difficult task to execute, companies must try to find the right balance between over and under compensating for forecasts to maximize their output.
SOURCE: https://www.monitordaily.com/article-posts/cyclical-expansion-continues-commercial-truck-industry-will-fare-well-2018/
Luke, I find this comment to be spot on in terms of future trends and how forecasting affects trucking. I replied to Nicholas’ post on forecasting in the auto industry and discussed how the outlook is not favorable due to increasing trends in the market. I would be interested if these trends (eco-consumerism, etc.) will come to affect the trucking industry as well. For example, if a company is moving towards become environmentally based, yet has a need for mass logistics that would involve trucking, will change their forecasting needs to match these ideals. However, the author of the article you attached feels that demand will increase. It will be interesting to see what happens in the market in the years following 2018.
Ben,
I thought it was really interesting how you took the principles of forecasting we learned in class and applied them to a new industry that we haven’t discussed in depth before. We always think about the way that manufacturers have to forecast demand to ensure sufficient product but how do people forecast for transportation of their goods? In the growing age of E-commerce, more and more products will need to be shipped on time to a growing range of locations around the United States and the world. You mention the shortage of drivers which leads me to think about Christian’s comment about the rise of alternative shipping methods. Delivery drones are now becoming more popular as testing continues to show promise as it cuts down on delivery time and the environmental impact that delivery methods have. This new technological advancement could have a lot of promise for companies that are struggling to find sufficient drivers to meet their forecasted demand schedules. The use of drones during peak seasons could alleviate a lot of the stress that peak seasons put on shipping companies.
Source:
https://www.forbes.com/sites/ericmack/2018/02/13/delivery-drones-amazon-energy-efficient-reduce-climate-change-pollution/#7df308426a87
Ben,
The rapid acceptance and growth of e-commerce, as well as a strong U.S. economy, have created significant tailwinds for the transportation and logistics (T&L) industry. As you succinctly discussed in your post, these tailwinds have forecasting implications for trucking companies and have led them to increase orders for new big rigs in anticipation of greater demand for their services. These market forces also have forecasting and inventory implications for the manufacturers of these big rig trucks.
ACT research, a trucking industry expert, recently estimated that 2018 big rig demand would be 322,000 orders (WSJ). However, the WSJ noted that in recent years, freight demand has fallen short of industry forecasts, suggesting that they have been overly optimistic. Truck manufacturers likely have their own internal forecasts, however, these forecasts have major consequences for manufacturer’s management decisions. For instance, in the presence of strong customer demand, some manufacturers such as Navistar International are raising prices while others are taking the opposite approach and lowering the per-unit-price in an effort to win business. If these forecasts are incorrect—and demand is lower than expected—either strategy could materially impact a manufacturer’s business.
Words: 190
Ben,
I really find it interesting that the trucking industry has to rely on other industries’ forecast in order to accurately predict their own demand. I never actually realized how interconnected some industries are to one another. In this case, the e-commerce and oil industries have to do well for trucking industry to prosper. This reliance on other companies is very risky and could end up being the downfall to the trucking industry when these companies will no longer need their services.
In the near future, the trucking industry looks bright because of the growth e-commerce and people’s dependence on oil. However, what happens to the trucking industry when we move to electric cars and Amazon fully implements their drone shipping strategy? Eventually, the need for the trucking industry will be reduced but until then, it seems like there are some major growth opportunities in the near future. In order to capitalize on these, they will need to fix the shortage problem that you discussed above. According to an article that I was reading, the American Trucking Association is starting to raise the salaries in order to attract more drivers. Additionally, they are encouraging drivers to become more qualified so that they can maximize the freight carried per truck. All of these strategic moves are taking place due to historical experience as well as forecasting where the future will go. Without forecasting, the trucking industry wouldn’t know how many more drivers to hire or how much to increase the salary by.
https://www.npr.org/2018/01/09/576752327/trucking-industry-struggles-with-growing-driver-shortage
Ben,
Thanks for taking the time to share some insight on forecasting in the trucking industry. There are some evident similarities between your post’s and Nick’s, in which he explores the automotive industry as a whole. I thought it was also very interesting how you mentioned that there exists a shortage of truck drivers. While the trucking industry can forecast demand for shipping all day long, if they are not enough drivers to move the product, the forecasts are useless in the end. This is definitely a problem that needs to be addressed.
An interesting shakeup in the industry occurred recently. As we all know, Tesla is the world’s leader in electric cars, and anything it does is automatically news. Last November, the firm unveiled “Semi,” its new electric semi-truck. Companies like Peterbilt will now have to adapt to the shortage of drivers, increase in e-commerce, and the introduction of these new trucks. It will be interesting to see how it all turns out, given that logistics and trucking are so connected to our everyday lives.
http://fortune.com/2017/11/20/inside-tesla-electric-semi-truck/
https://www.tesla.com/semi