High Fuel Costs Leading to More Efficient Supply Chains: Report

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OAKLAND, Calif. -- High fuel prices are causing the country's manufacturers, retailers and logistics providers to rethink their transportation strategies, according to a new study.

Eyefortransport surveyed nearly 900 shipping, carriers and third-party providers (3PL) to explore how the industry is responding to high fuel costs. It found this group shipping larger loads, boosting inventory and moving freight along coasts and inland waterways to reduce road transportation.

"Moving freight along coasts and inland waterways is helping 3PLs, shippers and carriers cutting fuel costs and improving their green credentials," the report said. "A logical consequence of this is the flexibilization of the manufacturing process."

Many respondents in "The Impact of High Fuel Prices on Logistics Report 2008" signaled a transition from consolidating distribution centers and warehouses to an increase in individual sites. Low-cost countries closer to home are becoming more attractive. "Near shoring seems to be the word," the report said.

A majority said they are turning to new technology to optimize routes and supply chains, such as systems that can compare alternative routing or improve scheduling precision. Nearly two-thirds called adopting more fuel efficient modes of transportation such as water or rail very important.

Traditionally companies tried to minimize inventory costs by speeding inventory through the supply chain but some are now considering keeping a larger inventory. Nearly two-third of companies said some carriers impose unjustified fuel surcharges to pad their bottom lines.

The survey included executives from Smithfield, Samsung, Caterpillar, Pacific Sunwear, FedEx, GE, Solutia, Aerobox and Celestica, among others.

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