The great logistics crunch
The recent logistics crisis has laid bare the need for companies to take a more strategic approach to foreign supply chains. In CFO, Lou Longo discusses how CFOs can reduce current risks and fortify against future shocks.
Over the past 30 years, the winning formula for U.S. manufacturing firms has been simple: outsource as much production as possible to low-cost centers in Asia and ship the goods across the Pacific.That model had a good run, but the unprecedented supply chain disruption affecting every corner of the economy is a glaring sign that manufacturers’ luck has finally run out.
A surge in shipping costs is hammering middle-market firms. It’s showing little sign of abating amid rebounding U.S. consumer demand and persistent supply disruptions abroad. It costs around $20,000 to send a 40-foot container from China to the United States, up around 500% from a year ago. Dozens of ships have to anchor for days or even weeks off of key U.S. ports like Long Beach that cannot cope with the swell in import demand.
