In today's blog I'd like to discuss an interesting figure I found in the summary of the 20th annual Third Party Logistics Study, led by Dr. John Langley of Penn State University; which challenges view global shippers as the most important in 2015?
As cited sharply by the staff of SCDigest, it is not surprising that the majority of logistics and supply chain professionals chose cutting transportation cost as their biggest challenge. That last couple of years have seem sharp rises in transportation rates, as demand growth has far exceeded capacity, so this seems like a very logic result. Excess capacity during a large part of the recession enabled retailers and manufacturers to negotiate significant cost reductions that lead to lower transportation rates, however, those cost savings that shippers are now taking for granted could disappear in the near future. Today's reality teaches that demand has surpassed capacity, particularly in trucking, and carriers have the upper hand in negotiating rates.
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Remarkably however, cutting transportation costs scores almost double the rank of the runner-up challenge, improving business processes, which in turn was just above number 3 improving customer service.
One of the two surprising factors is the position of "reducing labor costs', ranked at number 7 on the list, cited by just 18% of respondents. Have we leaned out labor about as far as we can in logistics such that it is a minor concern?
The second challenge that is surprising, yet a little concerning, is the fact that the implementation of new technology strategies, is ranked even lower, sharing the last place with 'Vendor Management' at 12 %.
Adopting new technologies to manage transportation cost could offer a solution and improve service and transportation rates of companies. Moreover, shippers must adapt their viewpoint from quick cost savings towards a long-term value-added proposition, rebuilding trust with carriers and invest in strategic partnerships.
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