How Fuel Costs Affect Logistics Strategies

By: Leonard Sahling

Release Date: February 2012

Rising fuel costs have caused freight transportation to become the largest, most volatile cost component of companies' supply chain/logistics operation, accounting 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. They have responded in many different ways, and the objective of this white paper is to review the primary strategies that they have embraced, including: reconfiguring distribution networks; enhancing supply chain visibility; upgrading their TMS software; collaboration and pooled distribution; and improving cube utilization to name a few.

In reviewing these disparate strategies, the research discerns which of these strategies are the most commonly used and how and to what extent they have impacted the demand for warehouse/distribution space.