The 2022 State of Logistics Report was unveiled on June 21, and presents a detailed look back on 2021 service demand and costs. It’s a welcome update as the logistics industry adapts to a post-pandemic landscape.
The 33rd annual report, produced by the Council of Supply Chain Management Professionals (CSCMP), applies a logistics systems lens to the state of the American economy. In this post, we’ll summarize key findings from the report.
Most notable from the report is the rise in USBLC — a U.S. business logistics costs indicator that includes spend on transportation, warehousing, and ancillary services (such as administration).
According to the report, costs elevated by a mammoth 22.4% to $1.85 trillion, representing about 8% of 2021’s $23 trillion GDP. The sector has not witnessed levels like this since 2008, putting the current state of play into perspective.
Spend on transportation jumped 21.7%, which can be broken down by mode as follows:
- Private fleets and dedicated contract carriage increased by 39%, attributable to businesses desperately seeking reliable carriers.
- Spending on waterborne services surged 23.6%. Though costs increased, revenue soared as carriers pounced on rate increases on international sea routes.
- Road freight represents the largest segment of supply chain spend, growing by 23.4% to $831 billion. Unsurprisingly, trucking freight continues to see more growth opportunities.
Inventory challenges and high e-commerce demand
Business inventories dropped to near historic lows in 2021, while costs associated with storing, handling, and finance increased considerably. Inventory-carrying costs rose by 25.9% due to high warehouse demand, which has been on the rise for several years. This dip in inventory levels has led to inconsistent product availability for consumers (both in-person and online) — demonstrative of a sector “out of sync.”
Furthermore, efforts to increase multi-shoring are expected to accelerate as players buffer against global disruptions. Once operations are established in or closer to the U.S., responsiveness to fluctuating market conditions should improve.
Locally, increased e-commerce sales have seen an increase in last-mile delivery volume. The report states that e-commerce sales grew 10% last year (to a whopping $871 billion), accounting for 14% of U.S. retail sales. Demand for parcel delivery rose by 15.6%.
Progress made in spite of the pandemic
The report also confirms the sector’s widespread belief that residual challenges remain from the pandemic. Last year’s report pointed out the global supply chain restart caused capacity shortages and unexpected bottlenecks. These effects are projected to continue throughout 2022.
Partner at consulting firm Kearney and lead author of the report, Balika Sonthalia, noted, “It’s not surprising that we are continuing to see ongoing disruptions related to the pandemic, but the scope and impact of disruptions continue to weigh heavily on the minds of logistics providers — as they do for all companies contributing to the U.S. economy.”
However, the sector does show promise. Sonthalia added, “What is notable for 2021, however, is that the logistics sector has begun to enable changes which should benefit manufacturers, retailers, and consumers alike. We’re especially heartened by the progress the sector has made in rebuilding supply chain resilience.”
That progress involves adapting to multi-shoring, automation, and optionality in the last-mile, which will bring efficiencies for all parties.
We expect to see next year’s annual report look very different as the impacts of record-breaking inflation ripple through the supply chain. Uncertainties in the U.S. economy have caused consumer sentiment to dwindle, with knock-on effects for discretionary spending. Interest rate rises will also have a contributing role, and looking ahead, the sector will likely contend with cooling demand and potential drops in revenue.
No matter how the logistics landscape changes over the years, GlobeCon is your trusted partner at the ports of LA and Long Beach.