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How Poor Transportation Capacity Hurts the Supply Chain

Roads are crowded, trains are running nearly full, port container capacity is running low, and there are more logistics jobs than can be filled. All of this will tumble down the electronics supply chain, a spiral that is already beginning.

Just a quick look at some recent headlines about transportation, logistics, and infrastructure in the U.S. alone will drive this point home.

In Washington, DC, politicians are wrangling over how to pay for upgrades and repairs to highways, roads and bridges. The current infrastructure measure expires on July 31, and President Obama has proposed a $478 billion transportation bill covering six years worth of projects. There's talk that these infrastructure projects could be funded by taxing corporate profits that are stored overseas or via a gas tax increase, but the verdict is still out, for now at least. What matters is that some major transportation overhauls will be needed in the near-term, and how this will impact traffic, on-time delivery, and route planning will be anyone's guess.

The legislative tug of war will play out as supply chain executives also try to absorb information in the recently released Council of Supply Chain Management Professionals' (CSCMP)

26th Annual State of Logistics Report, done in conjunction withPenske Logistics. The report found that total US business logistics costs rose to $1.45 trillion in 2014, a 3.1% increase from 2013. Media reports citing the CSCMP report also point out that the cost of warehousing climbed 4.4% last year as vacancy rates dropped and growing inventory levels fill all available capacity.  Additionally, inventory-carrying costs were up 2.1%, and transportation costs rose 3.6% in 2014, with stronger shipment volumes accounting for the hike. Citing US Bureau of Labor Statistics figures, Team One Logistics pointed out in its monthly newsletter that the number of job openings at U.S. transportation, warehousing and utility companies jumped 70.3% year-over-year in April, the highest point in a decade.

Over at the Harvard Business Review, contributors George Stalk and Petros Paranikas write about the looming congestion crisis supply chain executives would be wise to start preparing for. They're looking at the problems creeping in at the ports, along the rail lines, on the roads and other places that will inevitability have to be dealt with.

On the port front, they note, “Shipment volumes through North American ports, which fell 20% in 2009 from a record peak in 2007, are now higher than they were in 2007, and port-expansion plans from Vancouver to Los Angeles/Long Beach are bogged down by political wrangling.”

Railway capacity is also in a pinch, running at near-full capacity. They say, “The average transit times to move containers from the ports of Los Angeles and Long Beach to Chicago grew from 84 hours at the end of 2004 to 120 hours by early 2015.”

All of this is to say, that as companies and industry rebound from the recessionary slump, the ability to meet demand and get goods into customer hands is going to require even more planning forethought and finesse in finding different solutions as infrastructure becomes more stretched and in need of repair.

What skills are you adding to your transportation management war chest? What areas do you think will pose the most risk or introduce the new supply chain challenges?

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