skip to Main Content

State of Logistics report examines four issues challenging the logistics market

Supply chains continue to become more responsive, and providers are developing more solutions than ever, Andy Moses, senior vice president of sales and solutions for Penske Logistics, said during a webinar presentation ahead of the recent release of the 2023 State of Logistics Report. “Logistics is largely a solutions-based discipline,” Moses said. “It’s heavily fueled by technology, by process [and] discipline by scale. And I think what we’re seeing is the requirements for the responsiveness of supply chains have never been greater. And our solutions activity is kind of off the charts at the moment.” The 2023 State of Logistics Report is produced annually for the Council of Supply Chain Management Professionals (CSCMP) by global consulting firm Kearney and presented by third-party supply chain provider Penske Logistics. It offers a snapshot of the American economy via the lens of the logistics sector and its role in overall supply chains. Top leaders from across the supply chain came together for the webinar, offering their thoughts on the top issues of the day, and answering questions on the market and some of the findings in the report. The report found that U.S. business logistics costs increased and now stand at $2.3 trillion, up from $1.85 trillion last year. USBLC represents 9.1% of GDP and has grown 46% compared to 2020. E-commerce continues to hum along, increasing 8% in 2022 to $1.03 trillion, making up 14.5% of the U.S. retail market. When it comes to technology investment, 3PLs are leading the way, with 96% indicating they have migrated to the cloud while just 86% of shippers said the same. Shippers also lag in investing in IoT, at 77% compared to 3PLs 80%. For a number of businesses, reshoring has gone from a strategic possibility to a market reality. According to the Kearney Reshoring Index, American imports of Mexican manufactured goods have grown by 26% (dating back to spring 2020). But among the gathered experts, there were other themes that came through as well. Gregory Javor, vice president of global supply chain operations at Mattel, said resiliency is something he has seen, but he is also seeing finance become an issue as inflation and rising rates have pressured businesses saddled with excess inventory. In addition, balancing that inventory with sales and working through the overages is challenging. “It’s like the circulatory system of our supply chain, so it gets a lot of attention,” he said. Paul Bingham, director of transportation consulting with S&P Market Intelligence, noted that rate hikes are also pressuring businesses. “The Federal Reserve Board raising interest rates … for the last year, that’s changed the equation for some of the big companies on trying to manage the inventory of what you’ve got,” he said. “Inventory carrying costs [are] shooting up so much in the face of inflation on the commodity categories. I think I would focus on that as an area to watch. Obviously, the expectation is that inflation gets under control and eventually interest rates come down, but not this year.” Freight rate outlook Capacity continues to outstrip demand in both ocean and trucking, with rates still falling in both cases. “Right now if you look at demand for transportation versus supply, we have overcapacity, that’s part [of the reason] why the spot rates are so incredibly low,” said Bart De Muynck, chief information officer for project44. Balika Sonthalia, senior partner at Kearney, noted that her clients are seeing a big decline in ocean rates the past few weeks, leading many to look for quarterly rate contracts at the moment as “rates are going to decrease.” However, she said that overcapacity is “more regional” and depends on the sector. De Muynck said that as capacity is leaving the trucking market, high rates could return, “the question is how quickly.” Robert Walpole, vice president of air cargo at Delta, said overcapacity in the airfreight market should start to correct itself over the next 6 to 18 months as older planes that have been kept in service due to the elevated rates of the past few years are retired. On the trucking side, De Muynck said fortunes will change as well. “If you look at it next year, we might be in the reverse where volumes are coming back, where imports are going to go up because the inventory levels have gone down and companies are reordering, and all of a sudden you see more demand on domestic capacity, and again, it’s going to even itself out and rates are going […]

Click here to view original web page at State of Logistics report examines four issues challenging the logistics market

Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

Leave a Reply

Back To Top