Reader survey findings show concern over possible double-dip recession

Amid the swell of turbulence the economy is riding on, due to an incredibly shaky and unpredictable economic recovery, the downgrading of the United States credit rating and subsequent giant swings in the stock market, it is fair to say logistics professionals are concerned about the possibility of a double-dip recession rearing its ugly head.

By ·

Amid the swell of turbulence the economy is riding on, due to an incredibly shaky and unpredictable economic recovery, the downgrading of the United States credit rating and subsequent giant swings in the stock market, it is fair to say logistics professionals are concerned about the possibility of a double-dip recession rearing its ugly head.

But while a double-dip is top of mind, should it come to fruition does not necessarily mean that shippers will be quick to revamp its supply chain operations or logistics planning processes to a large degree—or at all.

These were takeaways from a Peerless Media readership survey, which found that 78 percent—or 266 of the 339 respondents—are concerned that the economy is on the verge of a double-dip recession. In a separate question, 37 percent—or 125 respondents—said that they plan on making changes to their supply chain operations or logistics planning processes, with another 63 percent—or 214 respondents—indicating they have no such plans.

Political gridlock, flat demand and growth, and a stalled employment picture were prevalent in the reasons listed by respondents as to why a double-dip may be on the horizon. Other reasons included the U.S. housing market and consumer confidence, which both remain sluggish, and the financial condition of many European nations.

In terms of how shippers would make changes to their supply chains, the reasons varied from things like reducing inventory, slowing down manufacturing or production operations to simply waiting it out until things get better and the recovery shows more evidence of a sustained recovery.

“Changes we would consider include evaluating supplier capacity, improved delivery time frame—particularly for international suppliers, reviewing internal procedures, earlier adherence to S&OP calendar, and an evaluation of systems we are using,” said a sporting goods shipper.

Other possibilities included things like downsizing the logistics efforts to match customer needs, cease logistics budget planning for any software upgrades or improvements, and looking to cheaper Mexican carriers to replace higher cost U.S.-based carriers.

Another shipper observed that with lower inventory-carrying costs and higher transportation costs, there could be a proliferation of regional warehouses rather than a centralized focus on premium transportation services.

“My clients are making significant changes,” David K. Schneider, president of DKS & Co. “Some are moving more warehousing operations over to 3PLs to shed employees.  Some are looking to major mode shift changes, but do not want to invest in the staff or skills to make and coordinate the needed changes.  Those shippers are getting seduced by the transportation brokers for the 20 percent cost reduction where the real return could be 50 percent if done internally.  A few are listening to us about going for the real return and not fattening the profits for brokers, and others are opting for the fast and easy 15 percent.  Sadly, there is so much fair to good talent available in the job market that can execute the tactics with guidance on the strategy that many companies are giving up more return for ease of implementation.”

While shippers are clearly thinking about next steps, there is not a clear sense of panic in the form of major volume declines or job losses as a direct effect of the uneven economy, explained Brooks Bentz, a partner in Accenture’s supply chain practice.

In fact, Bentz said there are some indications that this year’s Peak Season could be better than it was a year ago, coupled with shippers taking a renewed focus in making improvements in the area of supply chain performance.

“That is an ongoing thing; nobody can convince me that all costs have been removed from the supply chain,” said Bentz. “This is especially true now, as shippers are dealing with fuel volatility, capacity, and demand fluctuation.”

Stifel Nicolaus analyst David Ross noted in a research report that annual tonnage and volume growth comparisons are tougher and industry growth is minimal, with little evidence of things falling despite the high level of economic uncertainty.

Taking that a step further, Ross explained that retailers are maintaining low inventories and being cautious in the current environment, with no signs of inventory destocking that needs to take place—which he said is good for trucking volume stability.

“Any abatement of current fears should lead to a nice pickup in demand, in our opinion, as there is no housing bubble left to pop, no auto bubble left to pop, fuel prices have been declining (which is a decent tailwind for consumer spending), unemployment is relatively stable, borrowing rates are expected to remain low and the population is growing,” wrote Ross. “That’s why our fear of a recession is less than others.”


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Modern Materials Handling Magazine!

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Article Topics

Economy · Reader Survey · · All Topics
Latest Whitepaper
Capturing Labor, Space, and Accuracy Returns with AS/RS
Find out how the demand of e-commerce and digital age expectations are driving the need to automate material handling with AS/RS solutions to improve labor productivity, save space, and reduce costs associated with inaccurate picks
Download Today!
From the November 2017 Modern Materials Handling Issue
A new facility, iPhones and a new WMS allowed cookware manufacturer Lodge to double its business for the fourth time in 20 years and shorten order delivery time from 10 days to three.
10th Annual Salary Survey: The Price of Performance
Let’s put Automatic Data Capture (ADC) Technology to Work
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
The State of the DC Voice Market
A lot has changed in the last 10 years, especially in voice technology. This webinar will cover the state of the voice market, review two leading voice solutions and help you gain a better understanding of the options and capabilities available today.
Register Today!
EDITORS' PICKS
Lodge Manufacturing: Distribution Cast in Iron
A new facility, iPhones and a new WMS allowed cookware manufacturer Lodge to double its business for...
Rochester Drug Cooperative: Robots ready for work
It’s still early stages, but Rochester Drug Cooperative is proving that mobile robotic piece...

System Report: Pouch sorter powers Stage’s fulfillment needs
How a hometown department store chain transformed its e-fulfillment processes with pouch sortation...
Cubing and Weighing Equipment: Measure Up
The use of cubing and weighing equipment is growing beyond dimensional weight applications.