World Trade - September 2008 - (Page 23) the cost of oil is causing it to be more acute.” Aimi adds that in the first six months of 2008, AMR Research saw a significant demand for network design studies, beyond what researchers were expecting. “People are concerned about risk mitigation strategies and continued congestion issues at the Port of Los Angeles. So people are very sensitive to the effects of the outsourcing model.” ‘Green’ also figures in the strategy. Companies can reduce their carbon footprint by choosing near-sourcing. “Everything associated with sustainability is very real,” continues Aimi. “We see many of our clients already asking us to include this as part of their planning and decision-making process.” Regardless of whether this is a sea change or not, supply chain executives are taking a harder look at their manufacturing and transportation costs in an attempt to contain total landed costs. “With oil at $150 a barrel, you have to ask the question if it makes sense for you to manufacture locally in order to cut down that transportation piece,” suggests Neil Doyle, executive or free land is being replaced by the population-center vice president of infrastructure and transportation devel- model. What is also coming into play now and revisopment for Chicago-based CenterPoint Properties. The ing the supply chain as we know it is the cheap U.S. firm owns, acquires, and develops industrial real estate dollar, which means it might make sense to manufacture and related rail and port infrastructures, owning 45 mil- goods in the U.S. now more than anytime in the past lion square feet of distribution space on 8,000 acres in ten years.” the Chicago market. “You need to determine if this new Manhattan Associates reports seeing more companies model overrides the cheaper overseas labor manufactur- reevaluating where they source product. “Manufacturing coupled with the longer transportation run.” ing U.S.-consumed products in China added time and Near-sourcing reduces some uncertainties and secu- transportation expenses, but saved on factory labor,” rity concerns related to overseas says Sinisgalli. “Now that transmanufacturing and transportaportation costs are escalating, tion, continues Doyle, pointing to companies are re-examining Wal-Mart’s surge of near-sourcquestions such as, ‘Do I manuProducts with volatile ing in NAFTA countries. “With facture jeans in China or am I fuel costs up, the old model of demand, such as better off manufacturing them in entering an LA port and then getnorthern Mexico to reduce my apparel and electronics, transportation costs?’” ting products where they need to go is being replaced by entering While some companies are are the ones that at the port closest to your constill evaluating the changing sumption base. This means the supply chain landscape, others should be looked at Southeast ports since the majorare beginning to make moves ity of the population is east of the to near-source. But no one first for near-shoring. Mississippi.” can change their supply chain CenterPoint developed a models overnight and it will take number of on-tarmac airfreight some companies time to work facilities, including several at Chicago’s O’Hare Airport. through the process. “Most thought-leading companies “We rolled that concept into developing intermodal cen- continuously examine their supply networks to refine ters across the country with the theory being to locate where they would like to be in two or three years so that your DC next to the rail terminal via the inland port as they make changes today, they are in line with their model, which is no different from locating your DC next desired future end-state,” says Sinisgalli. to a maritime port,” says Doyle. “You get more certainty and substantially reduced cost in your supply chain Economics of proximity because you eliminate the dray movement from the port Certain product groups make economic sense to produce in or near the consumption-market country, notes AMR’s to your warehouse.” Doyle notes DC locations are shifting closer to popu- Aimi. “Products with a volatile demand that is difficult to lated centers than was true in previous years. “The day predict, such as apparel and consumer electronics, are the of the DC located in less-populated areas with cheap ones that should be looked at for near-shoring first.” CenterPoint Properties A cross-dock facility located a few hundred feet from the intermodal facility at CenterPoint Intermodal Center – Elwood, IL. WWW.WORLDTRADEMAG.COM 23 http://WWW.WORLDTRADEMAG.COM
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