More Distribution Centers Now Make Sense with Rising Fuel Costs

Supply chain behavior is changing due to the rise in fuel costs according to CFO magazine’s article on the subject:

“”Once you get to $100-per-barrel oil, the incremental cost of adding smaller warehousing facilities closer to the customer to drive down transport cost makes sense,” says Curtis Greve, executive vice president at Pittsburgh-based Genco, one of the largest third-party logistics providers in the United States.”

Kimberly-Clark’s “customer miles” have been reduced with an associated decrease in fuel use:

“So far, relocating distribution centers has reduced customer miles (the miles driven from a center to a customer) by 2.8 million and cut fuel use by 500,000 gallons. The new network has also enabled Kimberly-Clark to use more intermodal transport — in particular, “trailer on a flat car,” in which the long-haul portion of a product’s journey is by rail. Rail use saved the company almost 2 million gallons of fuel in 2007 alone…”

Kimberly-Clark has been undergoing these types of changes in a flexible way by leasing DCs and running them with third parties. Flexibility seems to be a key in these changes as companies expect oil prices to be unstable.

Has your company been changing it’s supply chain? Are there any ancillary benefits apart from alignment of the business model with cost changes? Some indicate better customer service with the increase in DCs or warehouses closer to the customer. How about you?

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