This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
In the best of times, transportation and logistics is a low-margin business. Unfortunately, these aren’t the best of times, which means that in 2020, we have to concentrate on costs again.
Just one indicator underscores the point. Drewry says vessel operating costs increased for the third straight year in 2019 and are projected to climb again in 2020. No surprise there, given the arrival of IMO 2020 fuel regulations. It also should come as no surprise that the cost burden will spread throughout the supply chain.
So what’s a logistics manager to do? What they’re trained to do: find the path of least resistance. That’s how to contain costs.
Shippers are in a bigger rush than ever. No matter what’s accelerating their deadlines — be it tighter production schedules or impending tariff hikes — delays add cost. The only antidote is efficient cargo movement that wrings delays out of the system.
Here’s how ports can help:
- Expand the work window to ease congestion via night or weekend gates;
- Offer a reservation system to keep freight haulers from waiting in line;
- Improve infrastructure within and connecting to port facilities;
- And co-locate logistics and transportation nodes.
That last point is key, but not easy. Ports that offer supply chain services — from warehousing to distribution — within their footprint reduce a shipper’s cost.
Imagine a transload that takes place just a stone’s throw from docks or intermodal rail. That’s what ports can offer by co-locating transportation and logistics. The payoff for shippers: less time schlepping shipments over the road and reduced total cost.
Unfortunately, there’s a challenge to the preceding scenario. Ports need space — plus visionary business partners — to create a full-service logistics campus. Happily, we could bring those together. We’ll open a Seaport Logistics Complex in 2020. It’s our response to the inevitable rise in supply chain costs.