Tuesday, July 27, 2010
Critical Supply Chain Link
Although it may not be glamorous, it is a critical link in the Supply Chain. All the great product design, inexpensive outsourcing and great advertising mean nothing when the product cannot get in front of the (potential) consumer. Supply and demand forces are evident in this article - with pricing allocating the scarce resource.
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I am experiencing some of these effects where I am working right now as I send materials around the world. Whether it is ocean, land or air all the rates have gone up.
Shipping companies are still scared to invest the cash they are piling up into their business. It is the same situation with hiring right now in the US. Companies are building up cash and waiting to hire.
Unfortunately, the more companies see their cash building with the same employees the less likely they will be to hire. It seems that the only way companies will hire right now is if their volume greatly increases and they get behind on their orders. The days of milking each employee for more than their net worth are here. Many employees are afraid of losing their job and will do extra work to feel safe. The new scared employees are giving employers an illusion that additional employees are not needed.
As far as increasing ocean freight around the world these shipping companies are milking the manufacturers at a time when the shipping should actually be the same of cheaper. The shipping companies’ prices are higher because they are attempting to make the same money they were making a few years back without all of the customers.
I have spoken about this on several occasions with book publishers whose books cannot become digital books such as comic books or art magazines. Obviously they can go digital but photographs always appear better in print over an e-reader. The small publishers who will not go digital realize as the big publishers move over to the digital side their printing prices will go up. The printers will increase their pricing as they lose customers and try to make the same money off the customers they have left. This is what the shipping companies are doing right now.
Keith Gosselin
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