Transportation is now the biggest hurdle in the supply chain of consumer-packaged goods (CPGs), according to a new report by The Boston Consulting Group (BCG) and the Grocery Manufacturers Association (GMA).
Eighty per cent of supply chain leaders highlighted transport as their greatest worry in the 2015 BCG/GMA Supply Chain Benchmarking Study, which focuses on manufacturers’ outbound supply chain logistics.
According to BCG/GMA, the CPG industry spends approximately $15.5bn (£9.9bn) each year on transportation, representing a 14 per cent increase in freight costs since 2012. In its report, titled A Hard Road: Why CPG Companies Need a Strategic Approach to Transportation – based on the study – the BCG/GMA said that this increase has reversed other supply chain cost-saving efforts.
Daniel Triot, senior director of the Trading Partner Alliance of the Food Marketing Institute and Grocery Manufacturers Association, said: “Supply chain leaders are caught between two challenging transportation trends, as they either must pay more to meet service-level expectations or sacrifice speed and reliability for cost efficiency.
“That is hardly a prescription for long-term success.”
The report shows that driver shortages and chronic capacity squeezes, along with growing congestion and delays, are threatening delivery times, inventory management, and service levels. In particular, it points to aging transportation infrastructure as a key failing.
BCG/GMA said that these challenges can be overcome with a number of efficiency moves and the choice of ownership model to new partnership approaches, with customers, carriers, and even other manufacturers, as well as network redesign. BCG estimates that implementing a suite of tactics within an integrated approach can lead to potential cost savings of seven per cent of transportation spending, or roughly $1 billion, industry wide.
Peter Dawe, a BCG partner and coauthor of the report, said: “Supply chain leaders used to view transportation problems as cyclical, but these problems are here to stay. Now we’re seeing such an acute capacity shortage that it can be near impossible to get loads on some lanes moving. Transportation is becoming a strategic planning consideration, not a simple commodity to be sourced.”