In September 2024, Hurricane Helene landed in Florida and became one of the most devastating storms to hit the U.S. In the aftermath of the storm, supply chains were thoroughly disrupted. Trucks were unable to reach some of the harder-hit areas damaged by the storm, including hospitals. SupplyChainBrain reported in early October that “the fallout from Hurricane Helene is threatening the medical supply chain in the Southeast U.S., after forcing the country’s largest manufacturer of IV fluids and dialysis solutions to temporarily shut down its plant in North Carolina.”
Before the country even had the opportunity to move forward with hurricane recovery plans, the International Longshoremen’s Association announced a strike that would commence on October 1, 2024, closing ports all along the East Coast and the Gulf. And while it has been suspended after only three days, the threat alone has highlighted the potential impact of a strike that would seriously disrupt supply chains around the country. The cost of such a strike could be as high as $2.1b per week, and the disruption would be more costly than that in terms of shortages, instability, and the scarcity of toilet paper (I jest, but people did begin clearing the shelves of toilet paper following the initial strike announcement).
These are but two recent events that have emphasized the importance of an area of supply chain management that can often be one of the most unpredictable: logistics and transportation. Transportation is a huge component of supply chain cost management, making it a crucial piece of the supply chain excellence puzzle.
Key Challenges in Logistics and Transportation
We know that disruption is the new normal and that the only way to achieve antifragility is to lean into disruption. As you push to achieve antifragility in your supply chain, developing an effective logistics and transportation strategy is critical. And to do that, you need to understand the challenges you will face and how to navigate them effectively. Here are a few of the logistics and transportation challenges that must be considered:
Unpredictable Fuel Costs
Fluctuations in fuel costs make it difficult to manage operational costs. Unexpected cost spikes can impact the profitability of your organization and lead to increased uncertainty and risk in supply chain planning. Higher fuel costs may require you to adjust inventory levels, production schedules, and distribution strategies to account for the changing transportation costs. Making these unexpected changes can impact the overall operational efficiency and responsiveness to customer demands.
Because fuel is such a significant chunk of your overall transportation expense, price increases can put pressure on profit margins and force supply chain professionals to explore alternative strategies to mitigate the impact.
What options do you have to limit the impact of unpredictable fuel costs? You may need to renegotiate contracts with logistics providers, optimize delivery routes, and explore more fuel-efficient transportation modes, such as electric or hybrid vehicles. Some of these efforts can be made easier by implementing AI technology.
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Many companies are also considering strategic positioning and nearshoring to help alleviate cost and time issues. NewStream Enterprises explains:
The closer your inventory is to key markets, the shorter your lead times will be. Consider using centralized production and warehousing facilities to reduce any supply chain shortages caused by transportation snafus. In addition, nearshoring, or shifting your manufacturing and production to the USA, is an excellent way to reduce supply chain issues, lower transportation costs, and deliver your products faster.
Lack of Reliable Transport
Unobtainable and unreliable transport – trucks, planes, cargo ships, and trains – as well as failures in infrastructure, such as roads, railways, and ports, can result in significant obstacles, leading to delays and disruptions.
Transparency is the key to better management. According to IndustryWeek:
Factory capacity, quality issues, and inventory are among the most critical information that supply chain teams work with to mitigate bottlenecks and tame costs. A scalable and secure infrastructure contextualizes and integrates data from a variety of sources, to achieve transparency across operations.
As well, climate change has impacted some ports around the world. MarineLink reports that a dry August left the Rhine River low enough that fully loaded cargo ships could not be accommodated. “The Rhine is an important shipping route for commodities, such as grains; minerals; ores; chemicals; and coal and oil products, including heating oil,” they explained, but cargo ships were unable to reach many of the river ports.
Due to aging or inadequate equipment and infrastructure, bottlenecks and delays can ripple through the entire supply chain. Increased lead times, higher transportation costs, and reduced customer satisfaction are often the result.
On an industry level, governments and private sector organizations must collaborate to identify and address infrastructure gaps, modernize transportation networks, and ensure the efficient movement of goods. This may involve initiatives like road and bridge repairs, port expansions, and the development of multimodal transportation hubs.
On an organizational level, companies must invest in technologies, such as RFID, blockchain, and cybersecurity, to better manage cargo destination and movement. They must also build strong supplier relationships.
Other Logistics and Transportation Challenges
There are many other challenges that supply chain managers face when dealing with transportation and logistics. Global trade regulations and compliance requirements can create additional hurdles, including complexities associated with customs, tariffs, and documentation. The industry has also been charged with achieving significant sustainability goals, with new environmental protections and emissions standards forcing a reevaluation of which transportation modes are used and what delivery routes are most economical. As the transportation industry works to achieve these goals, supply chain professionals may find themselves needing to adjust their own strategies as well.
Technological Advancements in Logistics and Transportation
There has been a surge of technological advancements that are transforming the way supply chain operations are managed. From the integration of AI and machine learning to the adoption of blockchain and the Internet of Things (IoT), technologies are enabling supply chain professionals to enhance efficiency, improve visibility, and make more informed decisions.
One of the key innovations in logistics and transportation is the use of data analytics and predictive modeling. By leveraging data from various sources, such as transportation management systems, GPS tracking, and weather forecasts, supply chain professionals can optimize their transportation routes, anticipate delays, and proactively address potential disruptions.
Additionally, the integration of automation and robotics in logistics and transportation is revolutionizing the way goods are handled and moved. Autonomous trucks and drones, along with automated warehousing and fulfillment centers, are helping to reduce labor costs, improve safety, and enhance the overall speed and accuracy of supply chain operations.
Final Thoughts
The future of logistics and transportation in supply chain management will be characterized by increased automation, enhanced visibility, and greater collaboration among supply chain partners. From the adoption of autonomous vehicles and drones to the integration of blockchain technology for seamless trade documentation, the industry is poised for a transformative shift that will redefine the way goods and services are moved around the world.
The threat of a dockworker strike underlines the urgent need for supply chain agility and resilience, as extended disruptions will strain businesses’ ability to meet consumer demand. Forward-thinking companies should anticipate this possibility and implement mitigation strategies. To minimize risk, companies must diversify their supply base, increase inventory buffers, and build agile response plans to adapt swiftly to changing conditions.
Conducting thorough end-to-end risk assessments at least twice a year is essential to gauge the likelihood and impact of critical risks, ensuring businesses can protect profitability and customer satisfaction with minimal disruption.
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