When the going gets tough…
By Mike Levans, Chief Editor -- Logistics Management, 1/1/2005
It's OK if you feel a bit queasy when you look at this month's cover image. Go ahead, take another look. That pit is where your logistics budget is headed in 2005 if you don't manage wisely.
To help prepare you for the year ahead, Executive Editor James Cooke offers his analysis of an exclusive LM reader survey concerning 2005 rates (Page 15), then delves into the factors behind this year's rising costs in our annual Logistics Outlook (Page 38).
At the risk of sounding like a broken record, I'll offer some advice based on our findings: Accept the fact that you're managing in a climate of escalating costs and decreasing capacity—it's the new normal. How can you respond? For starters, it's time to aggregate loads and develop closer carrier relationships in order to have capacity at the ready. And instead of fighting the inevitable, perhaps it's time to dust off some of the cost- and time-saving tactics you've been clipping out of LM over the years and heed Joe Kennedy's words: When the going gets tough, the tough get going.
Many importers took that phrase to heart when port congestion in Southern California had container ships stacked up in the harbor. At press time, the ports of Los Angeles and Long Beach (LA/LB) were reporting that those bottlenecks were clearing, but for savvy shippers last fall's traffic jam was the last straw. As a result, they're making short-term, peak-season diversions to Pacific Northwest, Gulf, and East Coast ports into permanent solutions.
In a candid interview for the story "Tight Squeeze" (Page 45), Rob Steere of beverage maker Red Bull told me that he had approached local authorities to ask what was being done about the congestion. He heard few answers that satisfied him. For the time being, he's keeping some volume heading into LA/LB. But with the help of his 3PL, Steere is also implementing innovative solutions that will cut costs and save time in the long run.
Shippers won't be the only ones putting innovation to the test in 2005. In an effort to increase retention rates, Schneider National (Page 16) recently announced a new compensation package that will raise salaries for the company's 15,000-plus drivers by roughly $4,000 a year—you do the math.
Both Red Bull and Schneider were responding to challenging situations, and neither of their approaches will be cheap in the short term. What's encouraging is that both companies are taking steps toward achieving long-term solutions. Now we'll see whether others follow suit—and if those strategies are enough to make a difference.
Mike Levans, Chief Editor
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