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DAY FOUR: Looming Issues in Logistics

Posted 05-06-2009 at 02:37 PM by 94th Annual
Taking a look at the past few years, it’s clear that today’s logistical issues were yesterday’s logistics challenges, as well. In their presentation, “Combating the Logistics Perfect Storm: An Update,” Lee Buddress, Ph.D., C.P.M., Robert G. Gleason Professor and Director of the Supply and Logistics Management Program at Portland State University; and Michael E. Smith, Ph.D., associate professor of management and international business at Western Carolina University, examined a variety of transportation and global issues that will continue to plague our logistics networks.

One of the most telling signs of the volatility and uncertainty occurring in logistics is that logistics costs now represent 10.1 percent of GDP. In essence, more than 10 percent of the cost of goods sold is associated with logistics costs. The presenters recommend that supply managers share their forecasts with their carriers the same way those forecasts are shared with suppliers. By doing so, it provides carriers with enough time to ensure that the equipment is ready when the organization needs it.

What’s also clear is that the same theme appears every year in CSCMP’s “State of Logistics Report”: Something has to be done to address the nation’s infrastructure needs. It’s going to take investment from everyone to make a sustainable difference. This means more lobbying efforts and less earmarks in transportation legislation.

What are the key trends for the remainder of 2009?
1. There will be continued infrastructure deterioration. Whether it’s our highways, ports or railroads, older equipment must be repaired or replaced.
2. Population growth. By 2043, the U.S. population is expected to reach 400 million people. The implication of this type of growth is the inability to serve the needs of the population. Without more investment in infrastructure, it’s going to be difficult to move the increase demand in goods and services.
3. Reverse outsourcing. The increased logistics costs, custom clearance delays and long lead times associated with sourcing from Asia is causing organizations to reconsider those decisions and move operations closer to home.
4. Industry consolidation and privatization. Expect to see additional consolidation in various markets, such as metals and transportation, which will continue to impact pricing. Also, due to the costs associated with regulatory compliance, more publicly-traded companies are moving toward privatization.
5. Sustainability. Internationally, this is an area of great focus and attention. As issues in sustainability gain more importance, expect that to have an effect on product and transportation demands – raising the question about higher prices and greater investment in sustainability initiatives.

One thing is certain, for the United States to remain globally competitive, it must invest in education, logistics infrastructure, basic research for high-wage job creation and technology to help streamline logistics processes.
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