By Clifford F. Lynch
DC Velocity, August, 2005
As the summer draws on, it’s become clear that
one of the weakest links in the supply chain continues to be transportation –
or to be precise, a shortage of transportation capacity. This isn’t the first
time shippers have had trouble finding trucks to haul their freight, or course,
but these days, they seem to have fewer options to fall back on. In the past,
shippers whose freight was turned down by one carrier could simply go out and
find a more accommodating hauler – or even shift their business to another
mode. But in 2004, that didn’t always work. In the end, many have been forced
to make wholesale adjustments to their operations.
To find out more about how shippers and receivers are modifying their
operations, this magazine and the Warehousing Education and Research Council (WERC)
conducted an online survey earlier this year. Though the complete results have
yet to be published (look for more on the survey in DC Velocity’s
October issue), several things have become clear from the preliminary results.
For example, it’s evident that shippers are not taking the situation lying
down. Almost half of those surveyed have ended up revising their warehouse
operating procedures and shipping schedules. Some have extended their shipping
and receiving hours. Some have made expensive physical improvements, adding
staging areas, trailer drop areas or dock doors. And some have hired more people
to load and unload trucks.
A few are doing more than just adjusting their shipping receiving operations,
however. Ten percent of the respondents said they were considering starting up
their own private fleets. It’s important to point out here that while this may
give them more control over their destiny, they’ll still face all the same
issues plaguing for-hire carriers. And those issues – the driver shortage and
rising fuel costs, in particular – present a formidable challenge. The
American Trucking Association projects a shortage of 111,000 drivers by 2014,
and we’ve already seen the price of oil approach $60 per barrel.
Aside from the physical changes, several survey respondents also indicated
that their companies had undergone a kind of attitude adjustment as a result of
the capacity crunch. One company noted that in an effort to build better
relationships with carriers, it had adopted a policy of paying detention
Previously, it had simply ignored them! Although only a relatively small
percentage (14 percent) said they had attempted to ease the problem by
collaborating more closely with their carriers, those who had tried that route
were generally pleased with the outcome. Several companies reported that they
had achieved excellent results by setting up regular meetings with carriers to
discuss forecasts and hash out problems.
What’s also clear is that even as they adjust their operations, the survey
respondents have been hedging their bets. Almost 30 percent of the respondents
said they had increased their stocks. That may not be a majority, but that
number is nonetheless significant. For years, U.S. businesses have obsessively
pursued the holy grail of inventory reduction, embracing programs like Quick
Replenishment and Efficient Consumer Response in their never-ending quest to
trim stocks. But now these same companies have been forced to abandon those
programs and begin stockpiling both materials and merchandise to offset declines
in transportation service. In fact, the Council of Supply Chain Management
Professionals’ 2004 State of Logistics Report showed inventory carrying
costs at their highest levels since 2000.
As for the future, more than half of the respondents (53 percent) said they
didn’t expect to see much improvement in 2005. If they’re correct, shippers
will be forced to continue looking for ways to cope. But even if those
projections turn out to be unduly pessimistic, shippers should be forewarned: It
will be some time (if ever) before things get back to normal.