Disruptive opportunity

Jan. 1, 2013
Trucking can benefit during times of crisis

Noted author Richard Bach once mused that, “There’s no disaster that can’t become a blessing, and no blessing that can’t become a disaster.” Viewed through such a lens, then, there should be many opportunities for truckers to benefit from a growing number of “supply chain disruptions,” which include natural disasters, energy shortages, cyber attacks, and the like.

Hurricane Sandy provides perhaps the most immediate example of at least the first part of Bach’s observation. Noel Perry, senior consultant for FTR Associates, said motor carriers should garner a big slice of the roughly $10 billion to $15 billion worth of transportation business being generated to help the Northeast rebuild. Perry expects demand for such “super-storm” related transportation to peak in April of this year.

According to the “2013 Third-Party Logistics Study: The State of Logistics Outsourcing,” compiled under the auspices of Penn State University, between 2009 and 2011 economic losses due to supply chain disruptions increased 465%—climbing from $62 billion in 2009 to well over $350 billion in 2011.

In a conference call late last year, Shanton Wilcox, one of the study’s authors and a principal at Capgemini Consulting, warned that the probability of supply chain disruptions is only going to increase in the future.

The study, which polled 1,510 shippers along with 832 third-party logistics (3PL) firms, also determined that 50% of the supply chain disruptions that occurred in 2011 were due to natural disasters such as earthquakes, tsunamis, volcanic activity and fires. Another 45% of such disruptions were due to what’s called “unplanned system outages,” led by unexpected transportation network disruptions, cyber attacks, and energy scarcity.

Capgemini’s Wilcox also stressed that in many respects, shippers and 3PL companies alike may not be investing in the proper tools to help mitigate such disruptions in the future. For example, he noted that the survey indicated 69% of 3PLs and 68% of shippers plan to invest more in supply chain partnerships over the next two years, with 62% and 61%, respectively, looking to invest more in business continuity tools during that same time frame.

Only 32% of either group plans to invest in supply chain mapping tools, which Wilcox believes is a vital tool to help alleviate the impact of various disruptive events. “If you don’t understand the structure of your supply chain, you won’t know how to fix it,” he warned.

The study states that almost 40% of supply chain disruptions occur among Tier 2 suppliers and below, so that becomes even more critical. Yet Wilcox pointed out that 75% of those polled in the annual logistics survey said they maintain almost no active involvement with suppliers below the Tier 1 level. “That can certainly handicap mitigation efforts,” he said.

The opportunity for carriers here is that domestic transportation remains one of the most highly outsourced logistics functions within the supply chain. According to Penn State’s study, it was outsourced 71% of the time. Thus, it offers trucking providers a broad opportunity to help shippers alleviate concerns about the impact of disruptions. Something to contemplate as the new year gets rolling.

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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