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Logistics Report * USA - Under the Weather
The 19th Annual State of Logistics Report finds that conditions have gotten just about as bad as they can get. But industry analysts affirm that savvy logistics managers will benefit from their time managing through the current storm
San Francisco,CAL,USA -Logistics Management, by Patrick Burnson -1 July 2008: -- When we dissected the 18th Annual State of Logistics Report last July, it appeared that the industry was poised for a rebound. Inventory levels were still problematic and surging energy costs were a concern, as were some so-called “value-added” expenses. But all in all, most logistics managers were looking toward 2008 with some optimism... After all, they reasoned, how high could fuel prices soar? How many more carriers could possibly fall off the vine? How long would consumer confidence continue to lag? Well, the answers to those vexing questions are in; and perhaps now many shippers are wishing they had never asked... A year earlier, when Rosalyn Wilson, an independent consultant and author of the Council of Supply Chain Management Professionals' (CSCMP) 19th Annual State of Logistics Report, researched and wrote the report examining 2006, she observed that third party logistics providers (3PLs) were going to emerge as important players in the execution of more economical logistics operations. And based on what she discovered in 2007, she still thinks this prediction was right on the money: “With so many independent truckers closing up shop,” she says, “3PLs are going to play an even more critical role. My research also suggests that this will be a long-term phenomena, not just something that is crisis-driven.” ... Wilson maintains that while transportation spending as a whole has only grown by 6 percent, the carrying cost of that model has gone up by 8.9 percent—with 10 percent interest. “But we have not seen the revolution of efficiency to accommodate these changes,” she says. “High inventories are not such a bad thing if we can figure out a way to move them.”... Information technology, she asserts, is the “tipping point,” where investment might mean cost savings in the future. However, more automated warehouse systems cannot be created in a vacuum. It is essential, in her view, that 3PLs be involved in establishing links with the motor carrier providers... “The trucking industry is in a steady downward crunch,” says Wilson, adding that a type of Darwinian enterprise system is taking hold. “The weaker players are just shutting down altogether,” she observes. “Will they come back when the economy brightens? Not likely.”... Meanwhile, more regional motor carriers are taking on long-haul business, and local motor carriers are moving into the regional territory. “Truckers are scrambling for whatever revenue they can get,” she adds. “The cost of operating a truck has gone up by 6 percent, mostly due to fuel costs…and bankruptcies are at a record high.”... Which may lead to another problem down the road, says Wilson. When the economy does turn around, there may not be enough motor carriers to handle a surge in demand. “The barriers are simply too high for many start-ups,” she says. “The railroads have a much easier time of it because they can just park their cars on sidings until they are needed.”... Wilson also notes that owner-operators are not eager to invest in modern “green” models if they fear new federal regulations will come into effect with change in the White House. Indeed, another layer of cost for these professionals handed down by government could be the nail in the coffin. “What is really sad,” she says, “is that a lot of these drivers 'pre-bought' new engines last year and now they may soon be obsolete. It's just a shame.”...
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