Transportation Industry Cyclical in Nature - Essay Prowess

Transportation Industry Cyclical in Nature

Transportation Industry Cyclical in Nature

  

Transportation Industry Cyclical in Nature

Question 1: Why is the transportation industry cyclical in nature?

The transportation industry can be described as cyclical in nature because it is affected by business cycles and is heavily dependent on economic status of a country especially changes in interest rates. The transportation industry is heavily involved during the periods of economic prosperity and experiences downturns during the low economy seasons. The transportation industry involves entry of many businesses and individuals during seasons of economic prosperity and reduction in a number of businesses and individuals during the seasons hit by economic downturns. The reduction in the number of people is characterized by cyclical operations including layoffs of some employees and cutting down costs. In seasons of economic prosperity, the industry is characterized by massive hiring and bonuses (Rushton, Croucher & Baker, 2010).

A good example of the cyclical nature in the transportation industry is the airline industry that experiences high and low seasons depending on the changes in the economy. For instance, during good economic times, the airline industry has many customers since people are willing to spend money on vacations. In such seasons, the airline industry offers bonuses on specific travel packages. In low seasons, the industry lays off some employees to cut down on compensation costs since there is a reduction in the number of customers. The transportation industry is also affected by the changes in other industries that have major impacts on the economy. For example, the agriculture industry has high seasons where some crops are harvested. In such high seasons, the transportation industry experience increased number of customers and operations. These cycles in economic activities have a direct impact on the transportation industry hence its cyclical nature (Gray & Graham, 2012).

Question 2: The Steps that Transportation Companies Can Take to Avoid or at Least Mitigate the Negative Effects of Economic Downturns

            The transportation companies should focus on strategic views instead of tactical views to overcome capacity shortages. Long term strategies can help the transportation companies to overcome excess supplies as shortage in capacity during economic downturns. The process requires planning and management of the cycles that are caused by economic changes (Gorman, 2013). Use of new technological advancements can help the companies predict changes and plan on mitigation strategies. Planning can assist the companies to shift on alternative goods to transport during low seasons of the major goods. It can also help the companies to identify common changes in the economy and plan for mitigation measures. The companies should also device strategies to deal with seasonal changes without using extremely radical measures such layoffs. Strategic planning can assist the companies to experience seamless transitions from one season to another (Heizer & Render, 2014).

            Leveraging the companies’ assets can make them achieve their optimal capacities. Such strategies include ensuring that all transportation facilities carry optimal loads. The companies should also ensure that all fleets are fully utilized to avoid wastage of resources such as fuel and transportation fees. Good relationship with suppliers can also assist the transportation companies to track the trends in the industry. The suppliers can also provide crucial information concerning the capacity of products and seasonal changes that could affect the transportation companies. Most importantly, the companies should be ready for unexpected incidences that occur due to changes in the economy. Such occurrences include the unpredictable changes in fuel prices (Rushton, Croucher & Baker, 2010).

References

Gorman, M. (2013). Integrating Strategic and Tactical Rolling Stock Models with Cyclical Demand. Jtts,03(02), 162-173. doi:10.4236/jtts.2013.32016

Gray, L., & Graham, I. (2012). Transport. London: Dorling Kindersley.

Heizer, J., & Render, B. (2014). Principles of operations management. Boston: Prentice Hall.

Rao, S. (2004). Transport management. Delhi, India: Nidhi Book Centre.

Rushton, A., Croucher, P., & Baker, P. (2010). The handbook of logistics & distribution management. London: Kogan Page.