Expectations of consumers for quick delivery will transform the supply chain, says Mike Rutherford, Senior Vice President AmericanPetrolog LLC.
Speaking at the Northeast Association of Rail Shippers, Rutherford, gave a sweeping view of changes in society leading to changes in manufacturing and thus rail movements.
With manufacturing leaving China, more goods will arrive from Mexico or at east coast ports and more manufacturing will occur locally in the US driving commodity movements.
In 2019 Vietnam and other southeast Asia countries increased manufacturing and sent imports to the US via the Suez canal and east coast ports to the 2/3 of American consumers on the East coast.
But the pressure for same day delivery by amazon and Wal-Mart has increased inventory costs as inventory is held closer to delivery points. Retailers are pushing demands for speed and reliability onto suppliers which Rutherford believes will drive manufacturing toward Mexico (because it is closer) or even back to the United States. He sees textile manufacturing coming back to New York and Los Angles as a leading indicator of broader manufacturing trends as textiles have always led industrial revolution cycles. “We’re starting to bring into focus a ‘see now – buy now – produce now.’ It will change the supply chain,” Rutherford says.
The digital transformation is also happening in the railroad industry itself. “There are things they are doing that could improve operations so we could turn freight and provide service. When you talk about reliability you cannot underestimate the importance,” Rutherford emphasizes.
The digital transformation enables better communication, which is a part of reliability Shippers “can’t manage what they don’t know, so the extent you can have good communications I thin we are going to get better supply chain visibility.”
The total effect of digital transformation will “change what is possible on the railroad” Rutherford believes.