The global recession forced many logistics firms to seek out less-expensive shipping options, cut staffing levels and focus on other cost-cutting measures to weather the impact of reduced business activity. These strategies have become more widespread over the past year, but new reports suggest that prolonging efforts to keep costs low may set logistics companies at a competitive disadvantage, particularly as the global logistics market recovers from the downturn.
According to supply chain solutions firm Kewill's latest annual shipping and global trade report, released last week, 96 percent of United States logistics firms across industries reported making changes to their business in 2010 to deal with the effects of the economic downturn, up significantly from 34 percent that reported recession-combating effects in 2009.
Among the primary measures taken in response to the downturn, 60 percent of respondents reported switching to lower-cost shipping options, 48 percent reported reducing headcount, 34 percent said they changed their carrier mix to include regional carriers or consolidated carrying channels, 8 percent reported bringing logistics in-house and 7 percent said they outsourced logistics.
"This study confirmed what we often hear; the consistent theme is that companies have cut back on staffing and complicated the tasks by adding options and focusing on cost reduction — so fewer people are being asked to do more," Brian Hodgson, vice president of marketing and business development for Kewill, said in an announcement of the findings. "While that may have been an acceptable strategy when business was down, as the markets recover, companies should pursue automation to help the smaller teams handle increased demand."
The study found that 95 percent of shippers use two or more carriers, with the largest shippers more likely to use five or more carriers (28 percent) than small shippers (9 percent). More than half of respondents (53 percent) reported using manual processes to handle licensing requirements for exports and import regulations.
"Despite headcount reductions, employees are spending considerable time and effort processing import and export documents, and have reported a measurable level of errors that cause delays and rework," the report explains. "International shippers also tend to rely quite heavily on customs brokers, freight forwarders and other outside resources to handle much of the burden."
Kewill recommends that companies automate their basic shipment processing, adopt optimization software for high-volume shipping, implement reporting and measurement processes to continuously identify improvements, and explore the potential savings of using more carriers.
Incorporating new technologies and seeking ways to improve service quality rather than simply keeping costs low will become increasingly important in remaining competitive, especially as the shipping and logistics market recovers from the effects of the downturn.
According to an April report from industry research firm Datamonitor, the global logistics and express market is expected to "shake off the effects of the recession" and grow from its present value of $3.5 trillion to $4 trillion by 2013. As a proportion of global gross domestic product, logistics spending is forecast to regain its 2008 peak of 9.3 percent in 2013.
"Customers are looking for cost-effective solutions and, at the same time, shippers require sustainable transport solutions without compromising on quality of service," Erik Van Baaren, senior logistics and express analyst at Datamonitor, said.
Despite the changing needs created by the logistics market's recovery, a recent survey from IT solutions firm IDC Manufacturing Insights found that reducing costs was the top supply chain priority among manufacturers and retailers, as well as expanding forecasting capabilities and improving responsiveness to demand changes.
"As companies begin to recover from the recession, managing the ability to respond to change and prepare for the return of demand is increasingly critical for business success," according to IDC.
The global recession forced many logistics firms to seek out less-expensive shipping options, cut staffing levels and focus on other cost-cutting measures to weather the impact of reduced business activity. These strategies have become more widespread over the past year, but new reports suggest that prolonging efforts to keep costs low may set logistics companies at a competitive disadvantage, particularly as the global logistics market recovers from the downturn.According to supply chain solutions firm Kewill's latest annual shipping and global trade report, released last week, 96 percent of United States logistics firms across industries reported making changes to their business in 2010 to deal with the effects of the economic downturn, up significantly from 34 percent that reported recession-combating effects in 2009.Among the primary measures taken in response to the downturn, 60 percent of respondents reported switching to lower-cost shipping options, 48 percent reported reducing headcount, 34 percent said they changed their carrier mix to include regional carriers or consolidated carrying channels, 8 percent reported bringing logistics in-house and 7 percent said they outsourced logistics."This study confirmed what we often hear; the consistent theme is that companies have cut back on staffing and complicated the tasks by adding options and focusing on cost reduction — so fewer people are being asked to do more," Brian Hodgson, vice president of marketing and business development for Kewill, said in an announcement of the findings. "While that may have been an acceptable strategy when business was down, as the markets recover, companies should pursue automation to help the smaller teams handle increased demand."The study found that 95 percent of shippers use two or more carriers, with the largest shippers more likely to use five or more carriers (28 percent) than small shippers (9 percent). More than half of respondents (53 percent) reported using manual processes to handle licensing requirements for exports and import regulations."Despite headcount reductions, employees are spending considerable time and effort processing import and export documents, and have reported a measurable level of errors that cause delays and rework," the report explains. "International shippers also tend to rely quite heavily on customs brokers, freight forwarders and other outside resources to handle much of the burden."Kewill recommends that companies automate their basic shipment processing, adopt optimization software for high-volume shipping, implement reporting and measurement processes to continuously identify improvements, and explore the potential savings of using more carriers.Incorporating new technologies and seeking ways to improve service quality rather than simply keeping costs low will become increasingly important in remaining competitive, especially as the shipping and logistics market recovers from the effects of the downturn.According to an April report from industry research firm Datamonitor, the global logistics and express market is expected to "shake off the effects of the recession" and grow from its present value of $3.5 trillion to $4 trillion by 2013. As a proportion of global gross domestic product, logistics spending is forecast to regain its 2008 peak of 9.3 percent in 2013."Customers are looking for cost-effective solutions and, at the same time, shippers require sustainable transport solutions without compromising on quality of service," Erik Van Baaren, senior logistics and express analyst at Datamonitor, said.Despite the changing needs created by the logistics market's recovery, a recent survey from IT solutions firm IDC Manufacturing Insights found that reducing costs was the top supply chain priority among manufacturers and retailers, as well as expanding forecasting capabilities and improving responsiveness to demand changes."As companies begin to recover from the recession, managing the ability to respond to change and prepare for the return of demand is increasingly critical for business success," according to IDC.
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