Recession Weighs Upon Logistics Firms

May 17, 2002
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As with any economic downturn, many companies respond by looking for ways to cut costs and rethink their operations.

To Steve Bova, one of the first places they’re bound to look is the industry that stores and ships America goods.

The recession is forcing warehousing and distribution companies, who are already feeling cost-cutting pinches from clients, to take a harder look at how they can improve their operations, said Bova, executive director of the Warehousing Education & Research Council, a Chicago area-based trade association for warehousing and distribution professionals with 4,000 members nationwide.

Bova expects that as the economy limps along, more corporations will accelerate efforts to generate greater efficiencies in their supply chain.

“Warehousing is becoming the place of greater emphasis, particularly during tougher times,” Bova said.

While the push will bring financial pain for some, it can lead to better days ahead, Bova said. Investments made during a downturn that are designed to improve operations will pay dividends in the long run, he said.

They include the increased use of technology to integrate a facility with a client’s logistics and distribution systems in order to improve the management, accuracy, speed and tracking of shipments.

“It’s a good time for them to show how their costs can be more efficient. People have to look at things in the long term, and right now innovation and creativity are really what drives this business,” Bova said. “It’s ramp-up time and it’s an opportunity to emerge from this in a lot stronger position.”

Overall, the warehousing industry “is faring like most” companies in the economic downturn, with reduced business volumes, slashed budgets and worker layoffs, Bova said.

“Warehousing is sharing what’s going on in the overall economy,” he said.

The distribution side of the industry is feeling the pinch as well, said Craig Hall, chairman of Lean Logistics Inc., a Holland company that provides Web-based logistical services to the transportation industry.

“They’re all feeling the effects of the current business cycle,” Hall said.

That business cycle is forcing companies to examine how they can better integrate their systems into their clients’ operations, whether through outsourcing some services or developing new capabilities within.

“There are opportunities for more emerging business models,” Hall said. “Now’s the time for people to look at those things that they may not have looked at before. We have to look at all of our processes and say ‘Is this benefiting our customer?’”

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