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Plan long-term for transport costsPlan long-term for transport costs

November 1, 2005

3 Min Read
Plan long-term for transport costs

One can''t avoid conversations about rising transportation costs these days. The real topic of interest is what processors and suppliers can do about them.

Certainly I had no intention of mentioning fuel pricing in my editorial. We''ve written about it and every mainstream media outlet is flooded with news of gas and oil prices and how these (negatively) affect so many aspects of our lives. And prices had dropped a bit, to a two-month low by early October. I thought the message was clear: high fuel prices are yet just another dose of tough medicine, deal with it and move on to the next topic. I was wrong. In talks at three different events across Germany in September-the IAA international automotive exhibition in Frankfurt, the Drinktec beverage expo in Munich, and the AVK''s composites conference in Baden-Baden-it never, ever, took more than a few minutes before the person with whom I spoke turned the subject to high energy and gas prices. At least two dozen processors and/or Tier automotive parts suppliers, more than a few materials suppliers, machine manufacturers too; all of them wanted to discuss fuel costs, and more directly the increasing costs of transportation. The concern that prices for transporting goods will stay high or move even higher is real and constant. What I did not hear, however, were any novel ideas on how to reduce these costs. "Try to pass it on to our customers" is not novel. Saving money on shipping and receiving goods was always important, but it is obvious that the ante has been raised. Experts are lined up left and right-the political spectrum is in play-arguing whether fuel costs are most likely soon to drop, remain near current levels, or continue to rise. If we can agree that hope is not the basis for a company''s long-term strategy, then let us assume that fuel costs will in the long-term almost certainly rise. A prudent processor may have little time on his hands, but he likely should free some up to consider what his options around these problems-to-stay might be. Switching trucking lines is a short-term response to what almost certainly will be a long-term problem.For some, the answer may be in re-thinking your supply lines, both into and out of your facility. An interesting article in the Oct. 6 edition of the International Herald Tribune detailed how one firm outside the plastics realm, French furniture manufacturer Conforma, has shifted a majority of the miles it ships product from trucks to barge, and is saving a bundle in the process-and doing it all JIT. Barge traffic on inland waterways in Western Europe has jumped in the last three years in a near-direct relationship with climbing fuel prices and truck freight charges.Waterways are an interesting option for some. Another for processors in Europe is the ability, since March of this year, to ship and receive goods from a freight train in Frankfurt, Germany, that makes twice-monthly runs to Hohot, a city in Inner Mongolia. Service is sporadic now (twice a month) but as China''s interior grows, expect that frequency to climb.Waterways may not make sense for you, and the train link between Frankfurt and China can only benefit so many. But your next great logistics idea likely is out there too, and the time to find it is nigh. I''d welcome the chance to hear your thoughts on reducing transportation costs. Want help? Great, tell us what transpiration options interest you and we''ll pursue them for an upcoming article. As always, we welcome your responses and your input. Matt Defosse, Senior Editor[email protected]

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