Friday, April 29, 2011

44 Feet per Gallon

Rising fuel costs force shippers to become more efficient.

So, you think your gas mileage is lousy? How about 44 feet to the gallon, or about 120 gallons per mile? That’s what a typical container ship gets.

Not surprisingly, shipping lines have moved to “slow steaming” to save on fuel, and a new generation of super-container ships now being developed by Maersk will have lower top speeds than current designs. Cutting fuel consumption has taken priority over speed of delivery.

On land, gas and diesel prices also continue to spike. For the first time in history, many common carriers are realizing the cost of fuel is now more than the cost of the driver on a per mile basis. Even truckers in Shanghai are protesting high gas prices, blocking port operations with a 40-truck blockade.

In both the short and long run, this added cost has implications for supply chain decision-makers. Companies must manage their inventories more carefully, with more buffer stock to offset longer lead times. And increased fuel costs means transportation becomes a larger share of finished goods costs.

What can you do to better manage your costs? Do you have mechanisms in place to accurately capture and monitor increased fuel costs from your vendors and to your customers? Does it make sense to source your products closer to home?

Look to the experts to find answers in these volatile times.

Kirk Shearer
TOTALogistix, Inc.
800-989-0054 x103

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