Good Company

Good Company
Good Company

Tuesday, August 01, 2006

Logistics costs- Going up!

A report on a report on the State of Logistics here:
Now in its 17th year, the annual State of Logistics Report, which is sponsored by the Council of Supply Chain Management Professionals, provides an accounting of the nation's total logistics bill and tracks trends in transportation costs, inventory-carrying costs and total logistics costs. And last year, those costs moved in just one direction: up. Collectively, business logistics costs climbed to record levels last year, topping $1.18 trillion. "This represents an increase of $156 billion over 2004, almost double last year's rise, and the largest year-to-year change we've seen since we launched this annual report," reported Wilson, who is the author of the study."
After running through the numbers, Wilson turned her attention to the future, outlining the challenges the profession faces in the next decade. She began with the nation's deteriorating transportation infrastructure. "The physical transport network—the roads, rail lines, ports, airports, freight yards, etc.—is the backbone of our nation's freight system and economy," she said. "Its continued health, or lack thereof, will determine our position in the global economy—and we are losing ground."

Part of the problem is a lack of investment, she noted. State and federal funding has fallen far short of the levels needed to maintain the existing infrastructure, never mind expanding it to accommodate population, economic and freight volume growth. "We face capacity constraints at virtually all major freight gateways and congestion and bottlenecks throughout the systems," she said. As for the infrastructure's condition, she noted that when the American Society of Civil Engineers recently issued a "report card" on the nation's transportation infrastructure, the grade was a D+. "If we do not respond with immediate and long-term investment ..., we will begin to experience regular failures in the system."

Another threat to supply chains is the heightened risk of terrorist- and weather-related disasters worldwide, she continued. "More disruptions are occurring, and [they] are having a more significant impact," she said. The globalization of our economy has only heightened the risk. Nowadays, a natural disaster anywhere in the world, not just in the United States, can have a profound and negative impact on a company's supply chain. "With each piece of the global transportation network increasingly tied to every other part," she said, "the cascading impacts from adverse events can now extend further than ever before."
Okay, you can start singing "It's a Small World" now.

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