Commentary

Light at the End of the Tunnel?

By David Bennett
Vice President, Sales & Development, Globe Express Services

The older I get, the faster the summers seem to go! Last week my twins, Sam and Jake, started school again. As I was sitting in the resulting new traffic jams and listening to the doom and gloom on Bloomberg radio, I found myself wondering, “Where in the world are we headed?”

The bad news

Let’s recap what took place over the summer. In the August edition, I wrote about the potential of a “hidden agenda” behind certain California legislative mandates and environmental programs that are becoming policy. This action will result in new user fees and additional costs for goods moving through the global supply chain. In the September edition, I wrote about the “new era of labor negotiations” where, in spite of claims from the ILWU of promises to negotiate in good faith, they utilized the same old tactics in order to get what they wanted from the PMA. This summer, oil prices hit a record level of $147 a barrel before U.S. consumption dropped by 2%, and suddenly we’re satisfied with paying $3.80 a gallon!

As I write this column, the TSA members are announcing plans to implement another increase to ocean fuel surcharges (EBAF) while continuing to complain that they cannot cover escalating costs and sustain current service levels without increased revenues.

And as I listen to the experts talk about the impact on global markets caused by irresponsible lending practices of the banks over the last five years, I wonder how much longer I am going to have to work as my 401K values drop to levels that no one predicted. Is there any good news out there?

The good news

Fortunately, there are some positive developments beginning to take shape on the global economics front, and there may be a silver lining to this period. With patience and planning, shippers can use this stagnant economic period to find creative ways to hold down the escalating cost of moving product throughout the supply chain. History has a strange way of repeating itself, and I’m convinced that the current lull in trans-Pacific container volumes is just that — a lull. We should take advantage of this time to plan for a better future and develop alternative distribution models that improve our efficiencies of moving products through the supply chain.

Some of the new costs we are dealing with in the supply chain simply are not going to be reduced in the near future. But hard financial times demand solutions to sustain our economic needs, and as a result, we are seeing new supply chain trends evolving. One such trend is the shift in warehousing and distribution closer to manufacturing sources (including overseas vendors). In this way (i.e., pre-distribution at origin), importers can minimize the costly domestic portion of moving product to retailers by instead utilizing container direct shipments and even store door deliveries!

Our studies of such models at Globe Express Services demonstrate that a potential savings of more than 25% can be achieved through a reduction in U.S. transportation, distribution and inventory-carrying costs. Our studies also show the added benefit of increased speed to market by eliminating the need to warehouse goods in the United States, and shippers can achieve a reduction in greenhouse gas emissions by eliminating a significant portion of the domestic transportation piece.

Innovative shippers and their 3PLs are exploring such solutions, which offer logistics and distribution savings, have environmental advantages and provide product to the retailer/consumer more efficiently. I’m convinced that with patience, our global economic markets are going to improve as history has repeatedly demonstrated. At this stage, our larger concern should be finding a way to slow down the summers so that we can step back and enjoy our kids’ time off from school!