A look at today’s supply chains
October 13, 2006 by SwizStick
Filed under Supply Chain Management
This month’s issue of World Trade Magazine has a must read interview from logistics industry veteran Chuck Lounsbury. In it he comments on the current state of supply chains, how they have changed over the years, and current and upcoming trends. All of it is insightful and informative. But the part that really jumped out at me were his comments on the state of the transportation systems in the U.S.:
They are in absolute crisis. Let’s start with the ports. Between 70-80 percent of the containers coming out of Asia reach port in Long Beach or Los Angeles. Neither one of those ports can expand physically. The only way they’ve been able to handle more throughput is to run longer hours, which upsets the neighbors. And it upsets the drivers—they’ve put penalties on drivers for picking up freight during the day. With container freight growing at 15 percent a year, these ports are absolutely at capacity. And they have labor issues—the longshoremen there, who’ve had a long history of difficult labor relations, can virtually shut down the retail economy just by walking out or doing a slowdown.
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Rail has real promise, but the railroads are unwilling to make much new investment. In fact, the amount of trackage in service in the United States has declined steadily over the past 20 years. And railroads today are coining money. They’re putting huge fuel surcharges in.Trucks are another problem. We don’t have enough trucks; we don’t have enough drivers. We have openings for 20,000 drivers today; it’s going to be 100,000. We don’t have cheap fuel. We don’t have port infrastructure, we don’t have rail infrastructure. And this adds up to a somewhat disturbing fact.
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What we are now seeing—for the first time in years—is a rise in the percent of total logistic costs compared to GDP. It’s been running about 8.5 percent; this past year it bumped up to 9.5 percent.
As regular readers well know, one of the problems with manufacturing in China are their comparatively higher total logistics costs. As total logistics costs rise higher and take up a greater portion of GDP, competitiveness suffers.
Mr. Lounsbury also commented on the length of supply chains and suggested that we not to be too surprised to see a resurgence of interest in places like Mexico.
Read the whole thing.
Shawn in Tokyo on Sun, 15th Oct 2006 8:40 pm
Same issues in Japan.
3plwire on Tue, 17th Oct 2006 11:05 pm
Seems to be the problem pretty much everywhere, although developing countries such as India and China seem to be hit especially hard.