15 June 2005

Supply chain links 'maturing'

The following article is excerpted from the 15 June 2005 edition of “The Journal of Commerce”.

The relationship involving retailers, suppliers, third-party logistics providers and carriers is maturing as the transportation community adjusts to increasingly complex supply chains and capacity-constrained infrastructure.

This maturing is marked by better forecasting, a mutual sharing of information and collaboration across the supply chain. Even rate negotiations can take place in a spirit of partnership….

Today's collaborative environment is necessitated by manufacturers' search for low-cost labor. Importers find they are sourcing merchandise deeper in China and Southeast Asia.

As supply chains become more complex, lead times grow longer and there are more hand-offs of the shipment before it reaches its final destination. The trade-off for sourcing in low-wage countries is that transportation costs as a percentage of the total delivered cost increase,… .

In the U.S., transportation accounts for less than 10 percent of the cost of the product. In China, where infrastructure is improving but is still somewhat of an impediment to trade, transportation accounts for 20 percent of the product cost. In Asia as a whole, it is 25 percent. …

Freight rate negotiations can also take place in a collaborative environment. In a true partnership arrangement, shippers and carriers work together to take cost out of the supply chain and optimize load planning and routing, with both partners sharing in the reduced cost of the transportation move.