The Annual “State of Logistics Report®” from the Council of Supply Chain Management Professionals (CSCMP) has tracked and measured all costs associated with moving freight through the U.S. supply chain since 1988. Each year, the report presents an overview of the economy during the past year, the logistics industry’s key trends, and the total U.S. logistics costs for the previous year and lays out future and potential trends.
Below is the Executive Summary excerpted from the report.
The strong seller's market that carried over from 2017 well into 2018 began to weaken in the second half of the year as capacity started to catch up with demand and the quarter-on-quarter pace of GDP growth began to slow. Partially thanks to trade and tariff disputes that drove US inventory buildups in the second half of 2018, and despite dramatically rising costs for drivers and warehousing staff, logistics providers managed to complete the year with generally excellent results and cautious optimism for 2019. Conversely, shippers hoped for redress after what for most was the worst year in memory in terms of cost and capacity availability. At the halfway point in 2019, signs of slowdown and talk of recession are abundant but in-year rate cuts and other forms of economic stimulus may be on the way.
United States Business Logistics Costs (USBLC) rose 11.4 percent last year to reach 8.0 percent of GDP, a jump of 50 basis points over 2017 (see figures 1 and 2). Key indicators suggest that the economic momentum that lifted GDP 2.9 percent last year will wane with swollen retail and wholesale inventories being depleted and corporations turning cautious in the short term, while the IMF predicts lower US growth in the coming years. Although developments in the second half of 2018 brought some relief to the capacity shortages and price increases, by the end of Q1 2019, consumer confidence and spending had rebounded from end-of-2018 declines, and quarterly GDP growth turned in a robust 3,1 percent growth rate. That's why we name this year's report Cresting the Hill.
For company leaders, the temptation to see the shoe as being on the other foot and claw back the 2018 rate increases is powerful (and in some cases baked into 2019 logistics budgets). Cautious carriers have been making concessions and have cut back on capacity plans. At the crest of this hill, we see both hope and evidence of a better road being taken. Leading shippers looking to control logistics costs have leaned more in the direction of constructive engagement and innovation than ever before, and carriers have been pleased with the new collaboration while themselves opening up to start-ups and new technologies for novel solutions to transportation challenges. You will see that evidence in these pages; we hope you will share your own experiences with the authors.
A closer look at 2018 numbers shows rising costs across all USBLC components: transportation, inventory-carrying costs and other expenses. Inventory led the way with a 13.2 percent overall cost increase on a 4.6 percent rise in year-over-year inventories as trade-tension buildups met declining demand. While transportation costs fared better with a 10.4 percent increase, certain modes saw big jumps. For example, lntermodal and private fleets jumped 28.7 percent and 13.1 percent, respectively, as shippers sought alternatives to common carriers and the Postal Service powered up 9.7 percent as the big volume winner in last mile.
The full report can be found on CSCMP's website here.