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Warehousing Can Help You Weather a Roiling Economy

By Joel Anderson | 06/18/2012 | 11:31 PM

Last week the Council of Supply Chain Management Professionals released its annual 2012 State of Logistics Report sponsored by IWLA member Penske Logistics. Some of what we learned may startle and alarm you – and it should. The good news is that warehouse operators and their supply chain partners are prepared to help their customers craft the needed solutions.

Rosalyn Wilson a Senior Business Analyst with Delcan, prepared and presented the report at the June 13 press conference in Washington, DC,, which was followed by an hour-long panel discussion by shipper, 3PL, ocean, air and rail carrier executives.

Among the less than happy news was the forecast that the economy will continue to sputter along the winding path of a slow-steaming recovery. Wilson said a full recovery is at least three years away.

One reason is that consumers, who account for 70 percent of spending, continue to be wary and are choosing to save rather than spend. Up until now, the recovery has been led largely by the other 30 percent of the economy represented by manufacturing and business spending.

Even the weak recovery we are witnessing could be threatened by recent declines in domestic manufacturing, financial difficulties in the European Union, China’s slowing economic growth, and the potential shrinking of imports and exports.

No one can say those who work in the supply chain have not been doing their part to try to make things better. Logistics costs in general over the past year rose a modest 6.6 percent to reach 8.5 percent of GDP. Inventory carrying costs were up 7.6 percent and inventories are expected to grow more this year due to a number of factors, including sputtering consumer spending and shippers planning for possible labor actions at the ports later this year.

One trend reshaping the supply chain is the continuing loss of trucking capacity. Wilson and the panel members agreed that trucking capacity will shrink substantially and if your use of trucking services is
transactional, there will come a time soon when you simply won’t be able to find a truck.  

Panel member Rick Sather, vice president, customer supply chain North America, for Kimberly Clark, said he has already seen widespread trucking service failures in the Northeast and Southeast. His observation was backed up by Rick Jackson, Executive Vice President of Mast Global Logistics, the logistics subsidiary of Limited Brands, which includes Victoria’s Secret, Henri Bendel and Bath & BodyWorks.

One result is that shippers have been taking a second look at intermodal and many like what they’ve seen. Larry Lanigan executive vice president and chief marketing officer for BNSF Railway and another panel member, pointed out that his company experienced double-digit growth in intermodal traffic over the past year.

Sather also said companies in the supply chain that previously offered only lip service to the concept of collaboration are now willing to share information to reduce their empty miles. “Otherwise you are just pushing inventory down the line without improving anything,” he said.

One thing that seems clear is that warehouse-based third-party logistics providers are ideally positioned in the supply chain to provide many solutions to these challenges. Spending on 3PL warehouses rose 7.6 percent last year. The CSCMP report credits this growth in part to the industry improving product management in the warehouse and its processes with carriers.

This includes new software and equipment to improve efficiency and maximize throughput, Wilson said.

She also noted that warehouse companies have expanded their service offerings beyond packaging, assembly, light manufacturing and handling-related tasks to include non-asset based 3PL services such as distribution planning, routing and transportation management.

Joe Gallick, senior vice president of sales for report sponsor Penske Logistics, said most of the growth his company has seen has come from existing customers and by increasing efficiency. “It’s really about optimization of the warehouse,” he said.

Gallick also said his company has seen an increase in interest in dedicated contract carriage. Whether it is warehouse- and asset-based 3PLs like Penske offering dedicated carriage, offering customers trucking services from their own fleets, or because they enjoy established, long-term relationships with the best carriers, 3PL warehouses will be part of the future solution to vanishing trucking capacity.

This also is true when it comes to securing the intermodal services, which many IWLA members have proven to be expert at managing. IWLA members represent rail transloading expertise in all major markets. “Intermodal to warehouse, warehouse to regional distribution is more efficient and more cost effective than traditional line haul replenishment,” said Gary Minardi, President of San Jose Distribution Services Inc. and an IWLA board member. 

In addition, as Ms. Wilson pointed out, warehouse-based 3PLs are now  offering the kind of transportation and supply chain management expertise previously believed to be the province of non-asset 3PLs.

Warehouse companies have both expertise and experience in E-commerce fulfillment, which companies like Mr. Sather’s see growing by leaps and bounds. And when it comes to locating partners experienced in dealing with the intricacies of emerging markets like the BRIC countries, you need look no further than many of IWLA’s warehouse members.

To learn more about this industry and its capabilities, visit www.iwla.com. To find a warehouse-based
3PL with the right mix of services and locations to help you overcome the supply chain challenges of today and tomorrow, be sure to check out IWLA’s Logistics Services Locator at www.logisticsservicelocator.com.

 

 

 

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About Joel Anderson

Joel Anderson

Joel D. Anderson is president and CEO of the International Warehouse Logistics Association (IWLA). Based in Des Plaines, Ill., IWLA is the 120-year-old association of the warehouse-based third-party logistics industry, with 500 members in the U.S. and Canada. Before joining IWLA, Anderson spent 28 years at the California Trucking Association, the last 13 as executive vice president and CEO. An economist by training and profession, Anderson was also a past board member of Cascade Sierra Solutions. He is a frequent speaker before supply chain industry groups.



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