A wave of scorching, humid weather had settled over the Midwest. During one particularly oppressive stretch, temperatures in Chicago topped 90 degrees for eight straight days--an early summer blaze not seen in more than 50 years.

Tempers were flaring as well. Notably, executives at electric utilities in America's heartland were hopping mad at rail-cargo operators after a series of derailments in Wyoming's coal-rich Powder River Basin, combined with track-maintenance problems, triggered delays all down the line. Soon, power-plant stockpiles had dropped to dangerous levels. Some nonregulated power producers, many of which had embraced just-in-time (JIT) inventory concepts, had to ship in coal from Central America or buy natural gas on spot markets--costly alternatives. "They took chances with their safety stock," recalls Rick Navarre, CFO at coal company Peabody Energy, which operates three huge mines in the Powder River Basin: "I think they've changed their view now."

A lot of supply-chain managers have changed their view about safety stock. JIT manufacturing may be standard operating procedure among U.S. businesses, but the approach requires finely tuned, well-synchronized supply chains. And while managers have long worried about transportation snafus in less-developed countries, they're growing increasingly concerned about bottlenecks closer to home--on American highways, in rail yards, and at deepwater ports, the so-called "last mile" of the supply chain.

It's hard to assess the extent of the problem. Few executives are eager to talk about missed shipments. (Motorola, Best Buy, and Dell all declined interviews.) Moreover, finance departments typically do a poor job of calculating the hit to earnings from botched consignments. But in announcing a new infrastructure initiative in May, then--Secretary of Transportation Norman Mineta estimated that freight bottlenecks and delayed deliveries cost U.S. businesses $200 billion a year. Says AMR Research senior vice president of strategic research Kevin O' Marah: "Financial calculations go out the window if your goods are floating off the coast of California while your promo is being rolled out in stores."

The shipping news isn't likely to get much better, either. America's 50-year-old interstate highway system is in desperate need of repair. Plans for new port facilities are few and far between. Rail lines require double-tracking. And nobody seems to want to drive a truck anymore.

At the same time, U.S. businesses are sourcing more from Asia and Europe. All told, the World Shipping Council reckons cargo movement in the United States (both domestic and international) will increase by roughly 60 percent between now and 2020. And logistics experts predict that the mounting tide of cargo may overwhelm the nation's aging transportation network. If so, the last mile could become one gnarly stretch. "It's a tightly strung system," warns O'Marah. "A minor bump along the way can turn into a major problem."

ROAD WORRIERS

These days, just getting a load on the road is an accomplishment. A wave of mergers and acquisitions in the trucking industry--including YRC Worldwide's $1.5 billion purchase of USF Corp. last year--has left customers with only a handful of national carriers to consider. "Over the past three years, demand has clearly outstripped supply," notes Tim Coats, vice president, supply-chain logistics, strategy and grain, at General Mills. "Many companies have been caught short."

Given the capacity constraints, trucking operators have become very choosy about the routes and customers they will service. Some operators have shut down marginally profitable routes or lines that

no longer fit with their strategic goals. Last year, for example, YRC shuttered USF Dugan, a line it acquired when it purchased USF a few months earlier. USF had itself shut down Red Star, a Northeast-based carrier, following a union strike in 2004.

Most truck firms have also negotiated rate increases with customers. The rise in diesel-fuel prices has not slowed their momentum, either. Many have simply passed the costs on to customers in the form of fuel surcharges--a telling sign of the carriers' newfound leverage. "The situation has completely shifted," says Beth Enslow, supply-chain service director at the Aberdeen Group consultancy. "Manufacturers and distributors used to have the upper hand in setting prices."