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The State of Logistics - Behind the Numbers

By Clifford F. Lynch

DC Velocity, June, 2011

For the past 17 years, I, like many others have looked forward to the annual State of Logistics Report. Each June, until his untimely death, Bob Delaney presented the "official" numbers which became the supply chain gospel for the next year. He also discussed his insights as to why the figures were up, down, or the same. For the past three years, the report has been made by Rosalyn Wilson, who has brought her own intelligent and thoughtful opinions about the figures she reports

The part of the State of Logistics Report that most of us are interested in is the release of the most recent cost of logistics. How much was it? Was it up or down? Why?

Unfortunately, the upward trend started in 2003 continued. The 2005 total logistics cost was $1.183 billion, up from $1.027 billion in 2004, and $947 million in 2003. Costs were higher in most areas, and Rosalyn presented the reasons for the increases.

In any event, for the next 12 months, we will see these figures in hundreds of presentations and articles – so many times that we will know them by heart. But who will remember the theme of the 2005 presentation? Hint: It was the same as the 2004 presentation – security. This year Rosalyn emphasized the need to "embrace security as a core business function" in an effort to find a solution to the overall security issues. To me, however, the real message was that security has been an issue for a number of years, with very little of substance being done about it.

In April, we wrote about the media and government concern over the purchase by Dubai Ports World, of P & O Steam Navigation, the operator of ports at NewYork/New Jersey, Philadelphia, Baltimore, and New Orleans. It became the security crisis du jour, and there was a considerable amount of rhetoric and posturing about port security. At the same time as the firestorm however, we were able to inspect only about 5% of the containers entering the U.S.

This year’s State of Logistics Report estimates that 20 million containers are circulating worldwide, and approximately 7 million of them move through U.S. ports each year. This suggests a theoretical 6.6 million containers are not being inspected.

Now we have the expansion of the so-called inland ports to which containers are being hauled by rail directly from the port of entry to various inland cities where the product goes into distribution centers, or moves on to other destinations. Cities such as Dallas, Memphis, Kansas City, and Chicago, boast impressive intermodal facilities, and billions of dollars are earmarked for railroad and facility construction or expansion.

From a logistics perspective, this makes perfect sense for a number of reasons; but from a security point of view, it exacerbates already serious security issues. We have concentrated on port security, but rail is just as important. The vulnerability of the railroads make them attractive targets. The carriers certainly are aware of this and have installed their own protective measures, but is it enough? Can they afford to do enough?

Probably not.

Personally, I detest government involvement in the supply chain; but in this instance, I believe it is time for Congress to meet the issue head-on. One would think that the Secretaries of Transportation or Homeland Security would have taken more initiative.

What they have done is woefully inadequate.

This of course, is not an easy problem, but it must be addressed. While it is important to protect from the enemy without, when it comes to the supply chain, the enemy within is the real risk.

 

 

 

 

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