Logistics Viewpoint: A symbiotic solution
Michael Levans -- Logistics Management, 7/1/2009
Chances are good that you’ve already pored over the highlights from the 20th Annual State of Logistics Report (SoL) that was released back on June 17. I would also bet that there was very little in that report that surprised you if you only digested the top line data.
If you missed it, I’ll cut to the chase. Over the course of 2008, the cost of the U.S. business logistics system fell 3.5 percent, that’s the first drop in six years. Total spending on logistics fell to $1.3 trillion in 2008, or a decrease of $49 billion over 2007 spending—which, by the way, is still the second highest number on record. And, after inching up past the 10 percent mark in 2007, logistics costs dipped down to 9.4 percent of the nominal Gross Domestic Product (GDP) in 2008.
Carriers and providers have been battered by the global recession and many are struggling to survive; but hey, rates are at historic lows. Anyone surprised?
But wait; there’s more background to this complex picture. In fact, Executive Editor Patrick Burnson does a terrific job of reporting the relevant details from the report (page 24) and digs deeper into the startling statistic that inventory carrying costs fell by 13 percent last year—clearly accounting for most of the decline. But more importantly, Burnson also spent some time with Roz Wilson, a 25-year industry veteran and author of the much anticipated SoL report, in an effort to put some context around the deluge of data.
While she gave up any effort to reveal a sliver lining to the 2008 numbers for carriers and service providers, Wilson does offer a few words of advice for shippers who may now need to approach these “partners” from a slightly different angle.
In fact, her sentiments around “collaboration” and “symbiosis” (the living together of unlike organisms) echo those that John Gentle and Wayne Bourne, our Sage Advice columnists, have been advocating in these pages over the past two years. Today, you need to bring a level of compassion to the table when you’re working with your carriers—especially while they’re taking it on the chin.
“The second half of 2009 is no time for shippers to squeeze more margin out of already beleaguered carriers,” Wilson tells us. Rather, she believes that shippers need to make some sacrifices to mitigate carrier losses and help return them to profitability. This idea may border on “radical” for many, but is certainly food for thought if you’re able to see past the next six months and into a time when the slow, but inevitable rebound will start to eat away at the capacity and flexibility you’re currently enjoying.
“Do whatever you can to help your supply chain partners,” adds Wilson as she wrapped up her interview with Burnson. “Shippers can take time to review contracts, renegotiate rates, and lock in carriers now; but they shouldn’t lose sight of the dependence we have on one another. Don’t burn your bridges.” I’d call that a symbiotic solution for tough times.
Comments? E-mail me at michael.levans@reedbusiness.com
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