Market Overview

Today's Pickup: E-commerce Is Worsening Traffic Congestion

Today's Pickup: E-commerce Is Worsening Traffic Congestion

Cyber Monday is behind us, but the effects of it will reverberate in the weeks ahead. Yes, online shopping is easier, but it may be making traffic congestion in urban areas worse.

That is one of the estimates from research over the past decade that McKinsey points to, noting that e-commerce growth is connected with urban traffic congestion. The firm believes that trucks alone will be responsible for $34 billion a year in urban congestion costs in 2020. That is up some 20 percent since 2014.

The U.S. Postal Service expects to deliver 900 million packages this holiday season and FedEx Corporation (NYSE: FDX) and United Parcel Service, Inc. (NYSE: UPS) are delivering 10 percent more packages than in 2016, a report in Wired said.

"Right now, yes, absolutely: More traffic is induced on net by the online purchasing behavior that we're seeing," Anne Goodchild, a civil and environmental engineer who directs the Supply Chain Transportation and Logistics Center at the University of Washington, told Wired.

If your single online order replaces a trip to the mall, there is probably no gain in congestion. But if four people in your neighborhood order online and that brings four different trucks into the neighborhood, which must stop in areas that are not designed for truck parking, thereby slowing other traffic, or even blocking the street, then congestion worsens, the experts say.

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In the end, online ordering and the expected two-day or less delivery windows is actually increasing the number of vehicles on the road, and making them less efficient as they drive from neighborhood to neighborhood, day after day.

Did You Know?

New research from McKinsey estimates that trucks will be responsible for $34 billion a year in urban congestion costs in America, up 20% from 2014. This is due in large part to e-commerce growth leading to more package deliveries.


"Everyone has a hand in my pocket. Every government entity looks at trucking as a revenue generator. Oregon has a per mile fuel tax. It was 16 cents; now it's 20. California raised its diesel fuel tax twenty cents last year." — Chris Welcher, truck driver.

In Other News

Gas demand plummets in South Korea. Demand for gasoline in South Korea drops 16% year-over-year, the second straight month of a double-digit drop that officials contribute to higher prices and a slowing economy. (Platts)

Washington DOT turns to art for innovation. The Washington State DOT is looking for an artist-in-residence to embed with the agency for a year, hoping the artist can provide creative and fresh solutions to transportation problems. (Washington State DOT)

Online shopping leading to turnkey logistics in Asia. Alibaba's logistics unit, Cainiao, is building a $1.5B fulfillment center at Hong Kong Airport as e-commerce demands alter airport logistics operations. (The Loadstar)

Turkish Airlines buying more freighters to secure capacity. Turkish Airlines is buying three additional Boeing 777 air freighters as it continues to post record increases in cargo demand. (Transportation & Logistics Middle East)

Forwarders face balancing act in upcoming rate negotiations. Air freight forwarders are facing a difficult decision as rate negotiations for 2019 begin: How much capacity to lock in? (The Loadstar)

Final Thoughts

On Monday, General Motors Company (NYSE: GM) announced it was laying off an estimated 15 percent of its workforce and likely shuttering up to five plants – four in the U.S., as it seeks to reallocate resources. The move was stunning, but not surprising to those watching the automakers and follows a similar announcement from Ford last month. Both companies have said tariffs have had a negative impact of at least $1 billion on their operations as higher prices for steel, aluminum and other products. Both GM and Ford, while making significant cuts, are also investing in the future, which they see as autonomous and increasingly electric. Those changes are not easy, and often times hurtful, as less profitable vehicles are cut to make way for new consumer demands. There will be a lasting impact on all the trucking companies that are hauling components to and from the plants that are closing, as well, making the nearly 15,000 workers GM plans are cutting just the tip of the iceberg.

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