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The great logistics crunch

October 1, 2021 Article 1 min read
Lou Longo

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.

Business professionals holding a meeting in a conference room.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.

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