Is Your Supply Chain Ready for the Congestion Crisis?

BCG Is Your Supply Chain Ready for the Congestion Crisis
A few years ago one of us (George) and his wife decided to sell their large house in the center of Toronto. With only one of their six children living at home, it was time. But who in this age of smaller families would want this house? To everyone’s surprise, it sold in 20 minutes for 25 percent more than the asking price. A childless couple who lived 20 miles away bought the house because they were sick of commuting into the city! Longer commute times are just one sign that congestion is creeping into our lives. Highways and bridges are in desperate need of repair, making travel slower—and more dangerous. Our overburdened air-traffic-control system struggles to deal with increasingly crowded skies. Port congestion is a growing problem, exacerbated by the new supersized container ships that take far longer to unload than older, smaller ships. “Expect delays” has become the recurring theme of our transportation system. With growing congestion a global megatrend, companies have a choice. Either accept it (and its higher costs and lower profits) or take control of your fate with strategic, game-changing actions that cut time and costs from the supply chain.

In the article:

A Looming Crisis. First, it’s important to understand the magnitude of the coming congestion crisis and its underlying drivers.

There’s not enough port container capacity. …
Railway systems are near capacity. …
Highways can’t keep up with demand. …
Air freight isn’t the answer.  …

The Impact on Supply Chains
The shortage of transport capacity relative to demand will have a profound effect on businesses. For instance, Procter & Gamble’s logistics costs already exceed such key value-adding costs as manufacturing, even though the company mainly ships by land. Longer supply chains also increase inventory levels and carrying costs related to financing and warehousing. …

The bottom line: companies must redesign their supply chains or become victims of the direct and indirect costs of increasing congestion.
What Companies Can Do
Companies can minimize the business impact of congestion—and gain a strategic advantage over less-prepared competitors—by enhancing their supply chain performance in four critical ways.
Improve process efficiency.
Improve information flows.
Reduce variability.
Compress transit times.
In the end, the above four measures are just tactics. …

Such tactics and strategies for improving supply chain performance can increase market share, reduce costs, and dramatically improve profitability. Companies that take action now can turn the looming congestion crisis into a major strategic opportunity. Use it against your competitors before they use it against you.
by George Stalk and Petros Paranikas
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