Logistics demand may be softening

The industry is at “a new crossroads,” according to the co-author of a state of logistics report titled “Cresting the Hill.”

Logistics demand may be softening

The industry is at “a new crossroads,” according to the co-author of a state of logistics report titled “Cresting the Hill.”

Logistics demand may be softening

The industry is at “a new crossroads,” according to the co-author of a state of logistics report titled “Cresting the Hill.”

 

   The Council of Supply Chain Management Professional’s 2019 State of Logistics Report says U.S. business logistics costs last year rose 11.4% to reach $1.64 trillion, or 8% of the U.S. $20.5 trillion gross domestic product. That was much faster than the compound annual growth rate over the past five years of 4.4%.
    Costs were up for all transportation modes: trucking up 10.1% (with costs for private or dedicated fleets rising more quickly than for FTL and LTL trucking); parcel up 8.7%; rail costs up 12.9% (with intermodal rising 28.7% compared to 7.2% for carload freight); air freight up 9.2%; water and ports up 12.8% (including domestic and import and export shipping); and pipeline up 12.7%.
    The publication, written by the consultants A.T. Kearney and sponsored by Penske Logistics, noted that “supply chain capacity is tight enough that a number of major companies have reported in their Securities and Exchange Commission (SEC) filings that they exceeded their 2018 supply chain budget spending.”
    The report said, “Growing demand led to a strong job market and rising wages, which carriers and warehouses passed on to shippers as higher prices. Shipping activity was especially intense in Q4, as companies prepared for heightened U.S.-China trade tensions and U.S. business inventory reached an all-time high of $2.75 trillion, driving increased inventory carrying costs to eclipse increases in transportation costs.”

   Inventory carrying costs rose 14.8% last year “on a 4.6% rise in year-over-year inventories as trade tension buildups met declining demand,” the report said.
    The market may be changing.
   “At the midpoint of 2019, many experts expect the economy’s momentum to slow due to the potential for trade tensions to accelerate, global economies to deteriorate or climate-related risks to materialize,” the report said.
   A.T. Kearney pointed to a number of reasons why supply chain costs are rising:
   • Retooling of supply chains to account for more e-commerce sales; online purchasing increased by 14.2% last year. The need for smaller, more costly warehouses has spiked.
   • Extremely high utilization of existing truck fleets. That limits available freight capacity and drives up rates.
    • Increasing government regulations on driver hours of service, causing smaller trucking firms to cease operations, consolidate or be acquired by larger transportation companies.
    • A tight U.S. labor market and higher wages for truck drivers and warehouse workers. The report said attracting and retaining labor remains challenging for transportation and logistics companies.
    But Michael Zimmerman, a partner with A.T. Kearney and co-author of the report, said, “The logistics industry is at a new crossroads.”
    This year he said “demand has softened and growth is in doubt — but not to the point where a steep decline is visible.”
    The change is reflected in the report’s title this year: “Cresting the Hill.” Last year the title was “Steep Grade Ahead.”
    The report said that “trends such as e-commerce growth, lower fuel prices and technology-driven efficiency gains could bode well for logistics. Historically, slowing growth and rising capacity have caused shippers to aggressively seek lower rates, causing suppliers to respond by slashing costs and investment — a boom-bust cycle beginning anew.”
    It noted, “Silicon Valley has devoted time, energy and resources to automation and robotics with inventions like automated trucks and automated warehouses.
      “Vehicle electrification will lead the way to a more sustainable transportation network,” the report predicted and added an “upgrade to a 5G communications network is on the horizon, which will improve logistics operation execution, planning and management and high-security encryption.”
    The report said logistics is “on the cusp of technological change” and pointed to work on driverless trucks, automated warehouses and blockchain-enabled collaboration.
   But the report also cautioned, “Some of these developments are years away.”

I really can’t think of a worse response to the myth of the driver solution than to reduce the driver age or reduce the already low standards to get a CDL.

The fastest liner transit (excluding transshipments) from China to the Netherlands is from Yantian to Rotterdam at 23 days, according to BlueWater Reporting’s Country to Country Transit Analysis by Service tool.

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Logistics demand may be softening

The industry is at “a new crossroads,” according to the co-author of a state of logistics report titled “Cresting the Hill.”

Jun 19, 2019 on Dec 27, 2018AmericanShipper.com

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Logistics demand may be softening

The industry is at “a new crossroads,” according to the co-author of a state of logistics report titled “Cresting the Hill.”

Jun 19, 2019 on Dec 27, 2018AmericanShipper.com