The State of Logistics Report

Each year A.T. Kearney authors “the State of Logistics Report” which is sponsored by the Council of Supply Chain Management Professionals and presented by Penske Logistics. The current report which is the 30th year of this annual report contains some interesting facts and figures which are worth pointing out.

• U.S. Businesses’ logistics costs rose 11.45% to reach $1.64 Trillion or 8% of 2018’s $20.5% Trillion Gross Domestic Product, the most since 2014
• The report states that 2018 was among the most challenging of years for shippers. Tight capacity which lead to significant and in some cases multiple rate increases to secure capacity
• Logistics professionals were “forced to adjust their business models to maintain capacity” and control costs, including implementing dedicated fleets to assure service and adjusting their operations to become “shippers of choice”
• Overall supply chain costs rose due to several factors including;
  • retooling supply chains to allow for increased on-line sales which increased 14.2% last year; the need for smaller, more costly warehouses
  • “extremely high” utilization of existing truck fleets, driving up rates
  • Increased government regulations on driver’s Hours of Service causing smaller trucking firms to close operations or consolidate with larger firms
  • Tight US labor market and higher wages for truck drivers and warehouse labor forces

It’s interesting to point out that some of the trends experienced in this 2018 report, (especially tight capacity and higher rates), actually may not be trends the industry will experience in 2019.  Already there are signs that truck capacity is opening up giving shippers an opportunity to negotiate lower rates with their freight carriers.

On the import side of the picture, some experts believe that the Import Peak Shipping Season, (soon to be upon us), might result in just a tepid spike in import volumes unlike we’ve experienced in the past few years.

Much however remains to be seen, as economists and business executives continue to try and make sense of the impact of the current “booming” economy and how long it will last; the impact of potential lower interest rates; the continued growth of on-line sales; the need to speed up delivery to customer while at the same time attempting to make a profit for providing these delivery time enhancements; and let’s not forget whatever it is the continuing “Amazon Effect” will have on tomorrow’s businesses.