ATLANTA¡ªAs market conditions continue to change, due to things like fuel shocks, ¡°green¡± logistics, and an ongoing capacity crunch, 3PLs are continually faced with unique challenges in order to provide shippers with the best service possible. At the recent eyefortransport 3PL Logistics/Outsourcing Summit, 3PL industry executives told LM about the industry issues they are focusing on as a time when pricing and quality of service have probably never been more important for shippers.
The topic of companies moving manufacturing operations closer to their customers is something which received a lot of attention at the eyefortransport conference. CEVA Logistics CEO John Pattullo explained that the move from off-shore manufacturing to near-shore is occurring in some instances with consumer manufacturers¡¯ approach towards global sourcing. This approach, he said, is focused on manufacturers using a single global sourcing point for their products in conjunction with setting up new manufacturing sites closer to the customers¡¯ markets.
¡°The balance of companies manufacturing and logistics costs have changed due to things like energy prices,¡± said Pattullo, ¡°and that tends to affect thinking towards sourcing. There are always going to be some sort of regional sourcing models from regional to local to global, depending on specific company needs.¡± In this era of higher fuel prices, the long supply chains of the last decade¡ªwith manufacturing being outsourced to Asia and then being transported back into North America¡ªis being replaced by shorter supply chains, where companies are increasingly looking at doing their contract manufacturing, packing, and other services closer to home, said Ben Gordon, managing director of BG Strategic Advisors. This concept has the potential to result in more manufacturing coming back to North America, which may bring about more opportunities for domestic logistics services and opportunities for entities like regional warehouse players and companies looking to source and leverage manufacturing operations in Mexico, noted Gordon. Regardless of where sourcing is occurring, being ¡°green¡± is not something that can be easily overlooked, even at a time when being fiscally responsible is as important as it ever has been, said Pattullo. As an industry, 3PLs need to move beyond the ¡°warm words¡± when discussing green logistics to good, solid actions in the form of operations and efficiencies as a means to augment operations. But going green does not necessarily mean money will be saved or improvements will automatically be realized, said James Butts, vice president at C.H. Robinson Worldwide. ¡°Rarely have we seen clear situations where by going green you save money or gain a competitive advantage where customers will do more business with you because of your green initiatives,¡± Butts explained. ¡°So the payoff is somewhat more intangible where you are doing it, because there is some value in it. Higher fuel costs and current economic conditions are challenges in making the commitment to green right now.¡± Even though there are financial limitations for fully going green, Butts did offer up some ways in which 3PLs can be environmentally-efficient: providing accurate directions to drivers so time on the road is not wasted; making appointments to reduce dwell times; and drop idling time from five hours to one hour or when a load is filled. Capacity crunch: While capacity is soft in North America, some of its root causes have not been completely addressed, according to Razat Gaurav, vice president and general manager of i2¡¯s Global Transportation and Logistics Group. On top of declining capacity are things like the truck driver shortage, imbalances in equipment and loading for over-the-road trucking, intermodal, and rail, where Gaurav said that length-of-haul issues for over-the-road compared to rail and intermodal are occurring and he said those measures are shrinking due to things like price points and service and cost thresholds. Gaurav said these types of market factors are driving i2 to not only become a technology partner for shippers but also a supply chain results partner as well. ¡°Where a customer was saying ¡®we want to increase inventory turns by x percent or reduce transportation costs, we are now getting into more engagement with customers and their 3PL partners to help operationalize those things,¡± said Gaurav. When it comes to transportation capacity issues, there is no one way to solve it, as it is a complex and systemic issue, notes Guarav. The types of things that could help augment the situation, he said, are creating a safer environment for truck drivers, addressing modal imbalances, and the continuing expansion of East Coast ports will be strengthened by the Panama Canal construction. He explained that this is not something that is going to happen overnight, because it requires strategic thinking and collaboration between industry and government. When it comes to the fuel situation, though, he said there are some things that can be done now to make the situation better for shippers and carriers. ¡°Over the long-term, it is alternative fuels and energy, which is happening in R&D mode,¡± he said. ¡°For the short- and medium-term, a lot can be done with asset utilization and reducing miles traveled by using more optimized ways of routing freight. If you are not doing that and are relying on a manual way of routing freight¡ªlike a paradigm¡ªyour empty miles to loaded miles or total miles traveled ratio are going to keep getting worse with these fuel prices. And it is driving people to take a lot deeper look than they previously have into what changes they can make with their operations from an operations/tactical/strategic perspective to manage fuel prices.¡±