Economic Development / Warehousing

Efficiency is Everyone’s Business

August 6, 2012
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In my last column (June 2012, “Golden State Meddles”  ) I mentioned that when it comes to government policies, the overwhelming interest of the International Warehouse Logistics Association’s   members is promoting supply chain efficiency.

Just how important that is to the economies of Canada and the United States was recently brought home by the 2012 U.S. State of Logistics Report    released by the Council of Supply Chain Management Professionals   Penske Logistics.

Overall the cost of the U.S. logistics business system rose 6.6 percent and logistics costs as part of rose a slim 2.6 percent to reach 8.5 percent of nominal GDP. Inventory carrying costs rose 7.6 percent, due largely to growing inventories and the associated increases in taxes, obsolescence, depreciation and insurance. The cost figure actually would be much higher if it were not for continuing low interest rates. Inventory levels are now close to the levels we saw at the height of the recession.

Which also is a sign that the economy is not improving as robustly as was earlier projected, and that consumer spending is still depressed by widespread public concern about the slow recovery and high unemployment. Inventories surely will rise further because anticipated growth in consumer spending failed to materialize, the slowdown in the Chinese economy, the economic turmoil in Europe and stockpiling to prepare for the threat of labor actions at U.S. ports later this year.

The silver lining is that improved business processes and savvy management have created strengthened warehousing, trucking and railroad companies. A glance at the employment figures shows that our industries have been the major contributors to private sector employment in recent months when employment in other business segments faltered.

According the Penske-CSCMP research, last year’s rise in the cost of warehousing mirrored the inventory carrying cost increase at 7.6 percent.

“The warehousing industry has been improving its product management within the warehouse and its processes with carriers serving the facilities [and] with new software and equipment to improve the efficiency and maximize throughput,” the report said.

The researchers also found that warehouse operations have expanded beyond handling services like assembly and packaging to providing customers with what were previously seen as non-asset-based 3PL services like supply chain and transportation management.

It’s no big secret that IWLA members have been at the forefront of this revolution, moving strongly and swiftly into intermodal transloading, eCommerce fulfillment and managing international import and export transportation in both traditional and emerging markets, leveraging their well-earned expertise to help customers wring costs out of the supply chain.

This is why IWLA members are in the policy arena every day battling unwise laws and regulations that will only serve to make our nation’s competitive position in global markets less viable. What we would like carriers and our customers to understand is that we are all in this battle together. Shippers already are seeing service failures in the Northeast and Southeast in part because of the shortage of qualified driver. New, more stringent hours-of-service regulations will make that situation worse and force the redesign of distribution networks, making the entire supply chain less efficient.

But truckers and shippers need to understand that they will ultimately bear the cost of government bodies imposing taxes and ill-thought-out regulations on warehousing, as well as deploying government bureaucrats to take the side of organized labor over job creators. I urge our customers and transportation partners to learn about these challenges and reach out to help us overcome them. Please join us in protecting the efficiency of this link in the supply chain. wt

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