'The times,' wrote Bob Dylan in 1965 'they are a-changin'. and his words are probably more pertinent today than they were then.

In a world marked by change on every front, the need for companies to accelerate their own pace of change increases exponentially - and nowhere is that more marked than in the critical area of supply chain networks, yet many are failing to do so.

With global trade patterns continuing to shift on a scale unimagined even a decade ago, the difference between companies standing or falling can hinge on making sure that their supply chain networks perform optimally in order to ensure competitiveness for the future.

The problem is, the changing pace of the world is outstripping the pace at which many companies are effecting those necessary changes - and that's ultimately short-sighted, because the supply chain configuration that worked so stunningly yesterday certainly won't be making anywhere near the same kind of impact today.

Of course, the issue remains the same - creating the ideal balance between cost and service - but with the cost of logistics on the rise, and cost dynamics on a roller-coaster that continually sees the appearance of new influences, companies need to assess the optimal supply chain strategy more frequently.

'Best In Class' companies are the ones that frequently re-evaluate their network design configuration in the light of ever-changing trends, and companies aspiring to this position must adopt the same attitude. The alternative is unthinkable.

One of the major changes in recent years has been the inexorable rise in the cost of fuel. The price of standard crude oil on NYMEX was under $25/barrel in Sep 03. By Aug 05, the price hit $60/barrel. Today, we see prices at $75/barrel; it is not difficult to understand why the cost of transporting goods has almost doubled in just a few years.

Now, many companies have simply absorbed this cost into their operations - but only because they failed to see that by re-evaluating their supply chain configuration they could have largely offset those increased fuel costs as they happened.

Even as recently as three or four years ago, a consumer good company's typical US network might have involved five or six distribution centres, while today, costs could be saved by operating seven or eight distribution centres. Sounds illogical? No, not at all, because the increased cost of operating the extra distribution centre can be offset by reduced transport costs from fewer 'pallet miles'. Not only that, but as an additional benefit, companies adopting this route have found that they improved service quality at the same time.

But while rising fuel costs have hit companies directly in transportation costs, the additional impact of increased interest rates has also hit hard, mainly in terms of higher inventory holding costs.

Over the last 12 months, all the major central banks of the developed world including the Federal Reserve have raised their interest rates. Increasing oil and raw materials prices, rising global food prices as farmers switch to produce crops for the growing bio-fuel market, global inflationary wage claims, growing demands for carbon neutrality and continued consumer growth in Asia, notably China and India all suggest that inflationary pressures look set to remain in the short-term, thereby maintaining pressure on interest rates.

Historically low interest rates have permitted companies to hold large quantities of inventory - but these record levels of inventory and safety stock are now costing them considerably more than it did a few years ago.

As a general principle, inventory holding costs are held to range between 15% of product value and as much as 45% for fast-moving, fashionable 'hi-tech' goods, so for a company with a £50 million inventory, for instance, inventory holding costs at 15% could realistically be equated to £7.5 million per annum when costs surrounding capital, obsolescence, storage and handling, spoilage and pilfering, damage and insurance are taken into account.

A single percentage interest rise escalates that figure by a further £500,000, so even a quarter percent rise could be seen to equate to £125,000 additional costs. The figures at stake are just staggering.

In the last year then the cost/service ratio has shifted - further underlining the need to reassess existing supply chain policy, practices and inventory levels to ensure that the service levels can be financially justified.

That's why CEOs and CFOs need to understand how changing future economic scenarios will impact their supply chain costs and should be deploying the appropriate solutions to consider those scenarios before they happen.

Another major trend that's fundamentally affecting supply chain efficiency is the increased global sourcing of goods.

The industrialization of China and other Asian economies has prompted organisations to outsource much of their production in order to obtain the financial benefits that these low cost economies can offer - but in so doing, the manufacturer's business focus changes from producing goods to importing and marketing them. The logistics has also changed from a relatively short supply chain to a much longer and more complex one, with extended lead times and an increased element of risk. This has inevitably led to rising inventory levels in the country of consumption so as to off-set the longer lead times and increased risk of sourcing product from overseas.

Furthermore, despite the longer distances goods now need to travel to reach the end-customer, businesses are increasingly required to assess their supply chain in terms of its carbon footprint. The environmental impact of businesses is now being carefully scrutinised by government, consumers and investors, with corporations needing to stand up and have their green credentials counted.

In line with the Kyoto Protocol and other regional initiatives, major reductions in carbon dioxide emissions are being called for, with governments and now consumers pushing business to do more.

The combined impact of all these global trends on US business is clear, as outlined by the Council of Supply Chain Management Professionals (CSCMP) 18th Annual State of Logistics Report published in June 2007. According to the report, 2006 logistics costs as a percentage of GDP in the US rose from 9.4% to 9.9%, or US$130 billion. Transportation costs rose 9.4% in 2006 and inventory carrying costs rose 13.5% in 2006 rising faster than transport costs for the 3rd year in a row - Total logistics costs are up 63% in a decade.

So what can companies do in order to stay profitable and competitive in response to these dramatic cost increases in the supply chain?

Network design is key to identifying and deploying the necessary and responsive supply chain strategies required to thrive in an increasingly complex supply chain environment. An Aberdeen Group study of 160 companies concluded that '.companies should increase the frequency of their network strategy assessment to at least once a year.'

The Aberdeen Group report also found that the top 10% of business performers are more likely than their peers to be maximising the use of network design technologies to support business growth, consider supplier network changes and improve transportation costs and capacity.

In addition to helping companies understand and adapt to these changing global trends and their associated rising costs, network design technologies are necessary to help companies assess and subsequently implement the required responsive configuration in their domestic supply chain strategy.

The US in particular has seen the emergence of new supply chain configurations in recent years due to the ongoing closure of, particularly low technology, commodity product manufacturing and the off-shoring of such production to low cost Asian economies. As a result, warehouse operations are now geographically located, independent of the historical US based plant. Instead, increasingly organizations are looking to place warehouses around the major transport gateways of ports, airports and LTL hubs. Recent examples are the retail giants Target, Wal-Mart & Home Depot who have all established major warehouses in Savannah GA, where container volumes continue to grow as the US appetite for cheap Asian imports remain. 2006 saw a 3.5% increase in US port container volumes which continued to put pressure on the existing supply chain infrastructures.

The US East coast in particular has seen strong growth driven by historical problems on the West Coast with port unions, and now crippling port capacity constraints and rail capacity constraints from the West to the East. It is a pattern replicated in Canada. Subsequently, West Coast congestion is also driving a trend for shipping lines to sail from Asia to the US via the Suez Canal, instead of through the Panama Canal, since this already allows the use of post-panamax vessels of over 8,000 TEUs. Of course, work is now underway to expand the capacity in Panama.

In conclusion, the world will continue to change, the global economy will continue to develop and businesses from one continent may be sourcing goods from another to sell in a third. As such, it is important to recognize that the supply chain cost dynamics of today will have changed by tomorrow.

If US business is going to win in a world where supply chain is increasingly the crucial driver of competitiveness, it must develop flexible and responsive supply chain policies and learn to analyze and anticipate these subtle, yet significant shifts in cost drivers, in order to evolve their supply chains as the economic environment demands it.