DOES the world seem to be getting a little larger?
After decades of hearing how the world is shrinking, we are beginning to notice some faint whispers saying, “No, not really. The world is a pretty big place after all.”
And if the folks doing the whispering are correct, some changes may be coming in the way we buy and where truck- and trailer-related products are manufactured.
Our perception of the world has changed over the past couple of decades, primarily the result of advancements that have been made in telecommunications and transportation. We now can talk to people around the block and around the world with equal ease. The Internet has made it possible to send computer files, voice, and other “electronic cargo” around the globe instantly. Meanwhile, the growth of air freight and the increased sophistication of motor carriers and logistics companies have made it substantially easier to buy things from those faraway places.
But you know all that stuff — it's old news by now. The thing that is interesting and more recent is whispers about what we might call “post-globalization.”
Trailer/Body Builders has captured a couple of examples of those whispers and has included them in this year's Buyer's Guide. For example, the president of Marmon Highway Technologies (of which Fontaine Trailer is part) is convinced that his global company increasingly will source products from suppliers closer to home. And his company will not be alone in that assessment.
In a nutshell, two major factors could bring us back to neighboring suppliers.
- The growing cost of fuel
In a presentation to a major fleet customer (see story, inside back cover) Kelly Dier displayed a graph of projected costs of diesel fuel — which will begin to rise this year and could hit $6-8 per gallon by 2015. Escalating transportation costs — including ocean freight — undercut the lower production advantages currently enjoyed by manufacturers a hemisphere from here.
- The need for compressed supply lines
If we are serious about putting lean principles to work in our businesses, we probably will want to buy in smaller quantities and will demand quick and precise deliveries from suppliers. This can be difficult when dealing with a supplier a dozen time zones away.
Dier is responsible for Marmon's Fontaine Companies (Fontaine Trailer, Fifthwheel, Spray Suppression, and Modification) along with brands such as Triangle Suspension, TSE Brakes, and others that supply brakes, clutches, wheels, and drums. Those products currently are produced from sources around the world.
“We expect dramatic changes in our future pattern of logistics because of rising cost of transportation,” he says. “It's harder to do business in China than it was two years ago. We will source more in the United States, elsewhere in North America, and in South America.”
Dier's comments are consistent with those of the chief economist for the Fabricators & Manufacturers Association. Dr Chris Kuehl, in our story on “nearshoring,” complements Dier's points with some additional reasons to source closer to home. Bullet points from his story include:
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Geopolitical risk.
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Exchange rate concerns.
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Unknown vendors.
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Language and culture.
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Loss of control.
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Reduced costs of shipping and importing goods.
A survey by Supply Chain Solutions released in January indicated that 51% of respondents found no financial benefit in offshoring and that 20% brought sourcing closer to home last year.
“We believe this trend is real, but it's still in a sort of seedling stage,” says Harry Moser, a proponent of moving sourcing closer to home. “It needs fertilizing and water, and that's what we are doing.”
To the extent that goods are produced in North American countries, the implication for trucks and trailers is obvious.
“Trucking will continue to be the market leader in transportation,” Dier says.
In 1519, an expedition under the command of Ferdinand Magellan left Spain. It returned three years later after sailing around the world. As Magellan's expedition demonstrated, the world is round, vast, and can be a tricky place to navigate. Most of the crew — Magellan included — did not complete the voyage.
Our industry has discovered much the same thing in recent years. Doing business internationally can be challenging. There are those in our industry who have traveled the globe searching for suppliers and/or places to manufacture. Now that we have seen the world, our industry is showing at least a few signs of coming full-circle.
Agree or disagree? Make your voice heard by visiting trailer-bodybuilders.com and clicking on “Contact Us.”