Five catalysts driving profound change in the global supply chain

Source: Material Handling Industry of America

Oct 22, 2010

Globalization, risk mitigation, volatile oil prices, the expansion of the Panama Canal and sustainability pressures will change the landscape of logistics in the coming years. This according to a recent Jones Lang LaSalle perspective on supply chain management and corporate real estate report.

Globalization, according to the report, will drive companies to seek alternative, “greener” modes of transportation and improved network efficiencies. Access to multimodal logistics hubs will become an important consideration is industrial site selection, as well as low-cost labor and materials.

Improved technologies, including visibility tools, will help manage complexities, mitigate risk, and allow for more flexibility and efficient inventory management.

Rising oil prices, and their impact on transportation costs, will lead to more regionalized distribution networks closer to the end customer, and a trend toward alternative transportation modes. Representing approximately 50% of total operating costs, companies will seek alternative transportation modes to cut costs and to make their operations more sustainable.

While 75% of freight transportation is currently via truck, Jones Lang LaSalle sees a growing trend is toward rail transportation as its popularity rises among supply chain professionals. They site the fact that two of America’s wealthiest investors, Warren Buffett and Bill Gates, have made significant investments in rail. The report also notes several advantages of rail over long-haul trucking including greater sustainability, lower freight costs and reduced traffic congestion.

The Panama Canal will also drive change up due to a $5.3 billion expansion of the Canal to accommodate larger container ships. The expansion is on schedule to be complete by 2014. The project is expected to boost shipping in the southeastern United States and Gulf Coast ports, which could drive supply chain and logistics development in the region.

Read the complete report, Five catalysts driving profound change in the global supply chain.