@ Supply Chain Management

Logistics Management highlights from their 17th Annual State of Logistics report a finding that rising prices and interest rates will soon push logistics costs above 10% of GDP. They refer to a report written by economist Rosalyn A. Wilson for the Council of Supply Chain Management Professionals (CSCMP) that places logistics expenditures at 9.5% of GDP.

That’s a sharp departure from the three previous years, when those costs ranged between 8.6 and 8.8 percent of GDP (see Figure 1). And it’s perilously close to the 10 percent mark, a long-accepted demarcation separating reasonable and exorbitant cost levels.

Among the factors contributing to this precarious situation are:

One factor is the steady climb in interest rates, which has pushed up inventory-carrying costs. But the biggest cost driver has been rising transportation expenses, which reached $744 billion in 2005, up from $636 billion in 2004. Soaring fuel prices, a driver shortage, and diminished competition have all come together to raise rates across all modes, and for trucking in particular.

The article explains briefly how the value of logistics relative to overall economic activity is calculated:

That formula adds together three components: inventory-carrying costs, transportation costs, and administrative costs. This year Wilson calculated total logistics costs for 2005 at $1.183 trillion, a 15.2 percent hike over the previous year’s total.

The article also offers a snapshot of the US Logistics Market in 2005. That snapshot shows that Transportation costs have the lion share of Total Logistics costs in the US and the major issues there are driver shortages, tight trucking capacity and higher diesel cost.
Longer term, the report outlines aging and inadequate transportation infrastructure and supply chain security as the two long-term challenges for logisticians. Wilson writes that the transportation infrastructure is severely strained in some locations because of the dramatic growth in volume of freight. As for supply chain security, Wilson notes:

Like many other industry observers, Wilson argues for a holistic approach to security. She advocates end-to-end monitoring of cargo and at the same time establishing and preserving a proven chain of custody. Although companies would have to bear the costs associated with those practices, she believes that improved security would justify the expense. “Investment in state-of-the-art cargo- security technology and monitoring solutions can provide a significant return on investment, often at bargain prices considering the value of the capital that could be lost by a disruption in global container shipping,” she writes. Embracing security as a core business function will mitigate the need for invasive government practices, she adds.

Categorized as: News_, Supply Chain Management_
Tags: Logistics Report, Transportation Costs, Logistics Challenges

Logistics Management has a new article that outlines why the Middle East is a booming regiong for logisitics and supply chain services. At least, that is the conclusion of a recent study released by the research firm – Transport Intelligence.

The logistics sector has been benefited as companies invest in upstream and downstream infrastructure projects. And, other opportunities are presenting themselves from investment in construction including tourism (hotels, amenities etc), reconstruction of Iraq, and transportation projects (ports, logistics parks and airports etc). In addition, the importance of consumer markets is increasing as GDP per head soars throughout the region.

That is the key takeaway from the article and I can personally attest to that having visited the Middle East not more than a few months ago on a supply chain consulting engagement. There’s a lot of oil money flowing in the region and that is being put to work building up infrastructure of all kinds. In short the area has been booming for a few years and could concievably continue to do so for a little longer. Current events, notwithstanding, this part of the world is pretty critical to the rest of the world and if there is something that a supply chain fits in nicely with – are the critical things that power/drive the rest of the world.

Categorized as: News_, Supply Chain Management_, Logistics_
Tags: Middle East, Logistics Services, Transportation

Gartner Research has published its magic quadrant (nothing magical about it but its an informative quadrant though) about the relative competitive position of Supply Chain Planning software vendors for the first half of 2006.

There are three key sectors (Process Manufacturing, Discrete Manufacturing and Distribution Intensive) for which the quadrants were created. They’re available free of charge at Oracle’s site (Magic Quadrants for Supply Chain Planning) at the following links:
1. Magic Quadrant for Supply Chain Planning in Process Manufacturing Industries, 1H06
2. Magic Quadrant for Supply Chain Planning in Discrete Manufacturing Industries, 1H06
3. Magic Quadrant for Supply Chain Planning in Distribution-Intensive Industries, 1H06
What I wanted to determine from perusing these quadrants was the criteria by which certain firms’ SCP software was categorized as visionary and others as followers or laggards. Here is the summary of firms seen as visionaries (as opposed to niche players) in various segments of the SCP marketplace.

According to the report, a visionary has to demonstrate:

• A developing global support strategy
• Five customer references in each targeted vertical industry
• Differentiated vertical-industry domain expertise and unique industry-specific functionality
• Development beyond a third vertical-industry-specific solution
• Development support for a multi-enterprise architecture on an SOA platform
• A targeted presence leading to influence and activity into how aspects of the market evolve