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You Can't Slow Down The Supply Chain

Manufacturers are responding to high fuel prices by restructuring their logistics operations.

When the price of oil hit $140 a barrel and a gallon of gas reached $4.00, U.S. motorists reacted quickly and logically -- they stopped driving so much. With on-time deliveries an absolute necessity for U.S. manufacturers, slowing down the supply chain is not an option. So what's a manufacturer to do?

According to a new study from research firm EyeforTransport, skyrocketing fuel prices have led many companies to restructure their operations to diminish erosion of their profit margins. The consequences of higher cost fuel, for one thing, have led the majority of those companies surveyed (58%) to push inventory costs closer to the final destination. In addition, companies are shifting some freight from trucks to more fuel-efficient transportation modes, such as rail and water, which also allows them to ship larger loads while reducing congestion on the highways, according to the survey.

When it comes to solutions, respondents point to improved transportation management (70%), inventory management (66%) and fleet management (54%) as the top logistics strategies to fight back against volatile oil prices. More effective use of information systems (45%) and warehousing strategies (40%) round out the top five solutions.

Consequences of Higher Fuel Prices*

Inventory costs pushed closer to final destination 58%
Increased buffer stocks / larger loads shipped 41%
Development of more flexible manufacturing strategy 37%
Nearshoring to reduce inventory 30%
Increased product density 29%
Development of central warehouses 27%
Postponement of product finalization 19%
Insourcing driving changes in warehousing / distribution 14%
Locating production at customer plant sites 14%

* more than one answer allowed
Source: EyeforTransport

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