Near-shoring: The antidote to volatility
Michael A. Levans, Group Editorial Director -- Logistics Management, 10/1/2008
What does an overarching state of global economic volatility feel like? What are its effects? How should shippers manage through the rising cost and risk if their supply chain is stretched around the globe?
Well…while we may not be able to answer every question on today’s volatile global economy and it’s implications for transportation, we can help to put things into perspective—and even offer a little guidance. To do this, we asked our partners at Accenture to follow up on a piece of 3PL usage research we did together back in March and then “cross-tab” those findings with a survey they did last month on the impact of rising fuel costs. The result: Our feature article “Is low-cost sourcing still viable?”, a piece that does a terrific job answering the three challenging questions above. Lead author Bob Gosier, with the help of an experienced team of Accenture analysts, offers shippers a comprehensive explanation of how new transportation costs and rising off-shore labor expense—amid a long list of other factors—should be pushing the world’s supply chain leadership to the board room to reassess their low-cost country sourcing (LLCS) strategies.
“Supply chains were designed in an era of significantly lower fuel prices,” writes Gosier. “Global sourcing and manufacturing decisions traded off longer transport distances for cheaper labor. Inventories were kept low, with materials shipped in smaller batches via faster but more fossil-fuel-intensive modes…Each of these supply chain strategies depended on—and assumed—reasonably priced transportation.” Does any of this strike a chord?
Transportation costs in every lane that supports most LCCS strategies are staggering even some of the world’s toughest heavy weights. And it’s hardly news that the ring in which you’re fighting is shifting right in front of your eyes. So, I guess the next logical question is; how are you changing to stay in the fight?
Even with our extensive reporting over the past year we have yet to figure out where the top of the “price-rise spectrum” may be or if transportation prices will fall at all in next year or two. This continued sense of uncertainty, paired with the data in Gosier’s thoughtful feature, should be enough to trigger a round of near-shoring discussions with every member of your supply chain team right up to your CEO.
Editor’s Note: In the listings of this year’s winners of the 2008 Quest for Quality Awards in the August issue, we regret that Pilot Freight Services was mis-labeled in the listings on Page 49. We’re happy to report that Pilot Freight Services will be among the 121 providers of logistics and transportation services that we celebrated at our Quest for Quality Awards dinner on Wednesday, Oct 8, at the Hyatt Regency Denver.
Comments? E-mail me at michael.levans@reedbusiness.com
Is low-cost sourcing still viable?
09/30/2008
View All On-Demand Webcasts
