| Transportation is one of America's largest industries. Its sectors range from automobiles and trucks to airplanes, trains, ships, barges, pipelines and warehouses. In total, during 2004, the U.S. transportation industry (in both for-hire and not for-hire sectors, including support and repair) will account for 10.4% of the nation's GDP, or about $1.2 trillion. Transportation, in its many facets and sectors, employs about 21.7 million Americans or about 15.6% of all workers in the nation.
At a bit more than 10% of America's economic activity, transportation is remarkably efficient, considering the fact that it is a vital service to every other sector of the economy. In fact, thanks to increasing use of advanced information systems and such strategies as intermodal use of containers (sending freight via containers that are easily transferred from ship to rail car to truck as needed, without repacking), the transportation industry's productivity level is excellent. The ratio of ton-miles of freight shipped in the U.S. per dollar of GDP declined by a remarkable 35.3% from 1970 through 2002. (For a thorough presentation of relevant statistics, see the tables in Chapter 2 "Statistics.")
Meanwhile, transportation is growing rapidly. For example, the number of freight ton-miles shipped per capita in the U.S. grew by 23.1% from 1970 through 2002. The total value of freight shipments in the U.S. grew by 45.3% from 1993-2002. Another example: the number of airline passengers boarding a commercial flight increased from 285.3 million in 1981 to 452.2 million in 1991 to 641.8 million in 2003.
Meanwhile, the information age, with its introduction of sophisticated databases that can track inventory levels and shipments on a global basis via the Internet, has created vast efficiencies. As a result, supply chain technology has been one of the fastest growing segments in the information field..
Finally, the rapid adoption of outsourcing has led many companies that find shipping to be vital to their business to turn to logistics services providers for all manner of shipping support, including warehousing and distribution services. The sectors of transport, supply chain management and logistics services are permanently intertwined-creating efficiencies once undreamed of in the transportation arena.
1.Transportation, Supply Chain and Logistics Companies Fuel Globalization
The transportation, supply chain and logistics industry is going global, along with just about every other major industry. These companies, however, hold a unique position because they are the very entities that make globalization possible. This industry is made up of companies that supply the systems and software, run the warehouses, provide the consulting and operate the airplanes, boats, trucks and trains that move raw materials, finished goods, packages, documents and people throughout the world. They act as the arteries of commerce.
Offshoring (that is, the transference of manufacturing, customer service centers and other labor-intensive work from nations like the U.S. and U.K. to developing countries such as China and The Philippines) has been one of the biggest contributors to international commerce in recent years. In particular, to facilitate the offshoring of manufacturing work, it has become essential to ship cargo between distant locations, bringing the right goods to the right locations and doing it cheaply, efficiently and above all, on time. The needs of modern business have spurred many transportation and logistics sectors to become technologically advanced and to build a truly global presence. This trend has forced many smaller companies to consolidate and merge into larger entities in order to compete effectively. The parcel delivery business is a prime example. Business demands have created courier giants such as UPS, FedEx and DHL. Major enterprises have the ability to create global networks of offices and warehouses, purchase vast quantities of equipment such as trucks and aircraft, and invest in the expensive and complex information systems necessary to track shipments as they are moved around the world.
With the need to ship massive amounts of goods across long distances came the need to have vast supply chains monitored, organized and controlled. This led to the advent of logistics companies, which specialize in handling goods on the way to market. Most products in today's marketplace are the result of a global effort. Raw materials for a product may be produced in one country, assembled in another and finally marketed to consumers in dozens of different nations at once. For example, the commercial airlines of Boeing and Airbus aren't made from the bottom up in any one location, or even one country. Instead, parts from Japan, The U.K. and other far-flung countries are brought together for assembly in the U.S. for Boeing or France for Airbus. For example, Japan has a huge aircraft manufacturing industry, making 23% of the world's airplane frames and engines-many of which are bought by Boeing and Airbus. Likewise, the U.K. is among the world's leaders in the manufacture of jet engines. The key to making such globalized manufacturing systems work is modern supply chain technology-the use of specialized software and networks in a coordinated effort to design, manufacture, ship, assemble, and distribute components and completed products
2.Supply Chain Management Evolves to Serve the Global Market
The challenges faced by supply chains are multifaceted: coordinating the arrival of supplies in factories; bringing together all the necessary parts and assembling them into consumer-ready products; and distributing them across oceans, highways and airways to arrive in the correct locations in the right quantities, colors and styles to satisfy consumer demand, all at the lowest possible cost. Compounded by delays and mistakes that can be made along the way due to bad weather, communication breakdowns, accidents, inspections or simple human error, these challenges can quickly become catastrophes. In order to prevent mishaps and manage day-to-day supply issues, companies hire supply chain managers and utilize advanced data systems. In some cases, supply chain services are outsourced altogether.
Third-party logistics companies (known as 3PLs) are quickly assuming a vital role in the supply chain. Logistics services are generally defined as services added onto regular transportation activities, including freight forwarding, which is the handling of freight from one form of transport to another (for example, the movement of containers from ship to truck or railcar to truck). Transportation managers determine the most viable mode of transport (by train, truck, boat, plane or a combination thereof). Value-added warehouses store the stock of other companies and ship the stock out as needed. Supply chain management (SCM) software makers specialize in software that can track or allow communication between the different parts of a supply chain.
The number of logistics services companies worldwide has grown to more than 1,000, despite a rash of mergers between 1999 and 2001. Since the birth of the logistics services industry in the early '90s, it has grown by roughly 20% per year, and it will continue at a steady rate of expansion for the foreseeable future. A joint study by Lazard Freres, a leading investment bank, and BG Strategic Advisors, a logistics consulting firm based in Cambridge, Massachusetts (www.bgstrategicadvisors.com) revealed that while 37% of companies with large shipping activities outsourced their supply chain management in 2000, 73% will outsource by 2005.
Many freight and parcel shipping companies have jumped on
the 3PL bandwagon to provide their customers with turn-key
shipping services. Deutsche Post, UPS and FedEx have all made
logistics acquisitions as they battle for market share. British-based
Exel plc, the largest provider of logistics services in the
world, has made several strategic acquisitions in order to
offer domestic and international supply chain management from
beginning to end, with services including freight forwarding,
warehouse management, multi-modal planning and powerful information
technology. However, the industry has not consolidated to
the point where there is no longer room for small or start-up
companies. Many regional or specific service specialists have
found a great deal of success in their own niche markets.
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