Mary C. Holcomb of The University of Tennessee and Karl B. Manrodt of Georgia Southern University, in partnership with Con-way Inc., Ernst & Young, and Logistics Mangaement, just released their Annual Study of Logistics and Transporation (The Masters of Logistics Report), and the findings, summarized in this recent article on Study of Logistics and Transportation Trends: Navigating transportation’s Bermuda Triangle that had some scary findings. Namely that, in the average supply chain, there is:
- a lack of planning for the impact of rising fuel prices,
- a rigid network that is incapable of flexing when uncertainty occurs, and
- a myopic internal focus that limits the enterprises’ ability to achive the desired performance results.
Furthermore, the most mature actions being undertaken by study respondents are
- use of core carriers
which doesn’t deal with the fact that they will tack on fuel surcharges when prices get high enough
- use of dedicated transportation
which generally only helps with core routes
- carrier tracking
which keeps on top of rates but does nothing to mitigate or control rates
- load planning
which increases fill rate and minimizes shipments, but doesn’t necessarily optimize the network
- shipment consolidation
which helps, but only if done in conjuction with S&OP planning because, otherwise, there’s a chance that this could increase the probability of costly stock-outs
And none of these are optimal. As the authors indicate, logistics managers need to be looking at route planning in conjuction with network optimization and redesign with respect to overall supply chain needs. This is the only way to adequately mitigate the risk of (rapidly) rising freight prices in the years to come. And any company that keeps doing the same-old, same-old, which is the majority of companies by the looks of things, is in for a rapid rate increase as soon as the (global) economy bounces back.