Alternative Supply Chain Management Strategies for Mitigating the Impact of Higher Fuel Costs

December 20, 2012

Leonard Sahling and Paul Nuzum, (2012).  NAIOP Research Foundation, February.


Freight transport has become the largest, most volatile cost component of companies’ supply chain/logistics operations. Oil prices currently are hovering around $100 a barrel, after having topped out at $145 a barrel in midyear 2008 and then plunging to $33 a barrel at year-end 2008.  Since then, freight transportation costs have soared and account today for about 63 percent of total U.S. logistics costs and 6 percent of GDP. With companies under mounting pressure to contain or offset the increases in freight transportation costs, supply chain executives have been tasked with figuring out how to squeeze more capacity and efficiency out of the existing systems.  This white paper reviews the primary strategies they have embraced, including: reconfiguring distribution networks; enhancing supply chain visibility; upgrading  TMS software; collaboration and pooled distribution; improving cube utilization; centralizing command and control ; becoming a preferred shipper; shifting to less costly modes of transportation; near-shoring; fuel surcharges; increased reliance on rail versus trucks; and manufacturing merging with distribution.