B2B Payments

Clogged Transit Costs Billions, Highlights Supply Chain Weaknesses

Both government and private research agree: America’s freight system is under serious pressure, and supply chains are particularly vulnerable to the strain.

Over the next two decades, 45 percent more freight will move over America’s already crowded roads, rails, seas and skies, according to the Department of Transportation, which recently released a white paper, Beyond Traffic 2045. The report highlights the need to ease congestion and warns that without a solution, companies are wasting significant funds on their procurement operations.

Nike, the DoT found, spends an extra $4 million every week and carries up to two extra weeks of inventory to cover anticipated shipping delays.

But these delays impact more than just the procurers of these goods stuck in gridlock.

One day of waiting requires transportation providers to have 1,300 extra containers and chassis on hand, at an expense of $4 million a year, the DoT reports. Delays will only get worse as more demand is heaped on the freight system. Increasing imports and exports, and the continued rise in popularity of online shopping, only add to the number of goods on the move.

Trucking is the primary way goods are transported in the U.S. and will see a 43 percent increase over the next two decades, the DoT estimates. Currently, roadway congestion-related delays waste $27 billion in time and fuel every year. Levels of congestion on the roads will only rise as more people and goods get on the road.

The railways are not much better, the Department discovered. According to its report, as passenger and freight operations compete for limited capacity in the nation, track congestion becomes and increasingly growing concern. Freight rail is a $70 billion industry, but the DoT found that while it can travel from Los Angeles to Chicago in as little as 48 hours, a trip across the Chicago area can take more than 30 hours because of the region’s urban, high-traffic scape.

The transportation of goods is a multimodal job, often beginning at the port, even further straining the supply chain considering the ongoing port slowdown in Southern California. Just three ports – in Los Angeles, Long Beach and New York/New Jersey – handle nearly half of all foreign U.S. imports and exports, but a labor dispute among Southern California port workers is creating a threatening bottleneck. Over President’s Day weekend, reports emerged of a backup of 30 cargo vessels, and estimates put the total cost of this dispute at $7 billion for retailers in lost sales.

THE SUPPLY CHAIN IS IGNORING TECHNOLOGY


Research shows that technology and innovation will be paramount in smoothing out the congested supply chains across the U.S., and throughout the globe. But findings also show that players in the supply chain are using highly outdated technology, if any at all, to make the procurement process more efficient.

Automation has the potential to completely change how cargo is moved. At major ports, for example, the use of robotic cranes to transfer containers has increased productivity, enhanced capacity and improved safety, government officials found. The DoT’s Beyond Traffic report introduces the use of robotics to maintain machinery and vessels, reducing downtime and extending work periods.

The report finds that while full automation of transportation management systems is still years away, innovation at the supply chain level is integral to lessening the burden on America’s freight systems.

Most companies, however, are not using the technological tools available to them to plan and execute supply chain goals. A study released by JDA that explores the state of the global supply chain in 2015 found a system plagued by outdated technology.

While the majority of suppliers surveyed by JDA agreed that optimizing inventory management is a strategic priority for them this year, the respondents do not have a streamlined way to do so. At least 25 different metrics were reported by manufacturers to measure inventory management performance.

When forecasting the performance of new products, only 3 percent of respondents said they use some type of algorithm to forecast the effects of sales promotions, and a surprising 59 percent of respondents either develop no forecast at all or rely on a so-called backward-looking forecast.

JDA found that the transporters in the supply chain do not fare better at utilizing technology to ease operations. Only about one-quarter of transportation firms, the study revealed, employ a shared service model as a centralized transportation management tool. Additionally, only 43 percent of the companies have implemented a software solution to streamline transport.

Innovators who can utilize sales data to offer fast, flexible and efficient delivery of goods stand not only to improve their own profitability through better inventory management, but can also reduce congestion through transportation pipelines with smart planning.

The DoT is now calling for more public-private partnerships to pay for the structural changes needed to bring the nation’s freight system back from the brink. Major investment is needed to repair roads and bridges, dredge harbors and widen channels to make ports ready for larger cargo vessels, and ease railway jams.

But investment in technology, experts agree, will serve just as much of a crucial role in decreasing gridlock and improving supply chain efficiency.

——————————–

Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out our February 2019 B2B API Tracker Report 

Click to comment

TRENDING RIGHT NOW

To Top