Supply chain experts forecast stabilization amid rising costs and global uncertainty

A panel of industry experts across different areas of the supply chain provided a detailed overview of market trends and themes this week in a session at the Council of Supply Chain Management Professionals (CSCMP) EDGE annual conference, which was held in National Harbor, Maryland.

The session took a look back at key findings from CSCMP’s 36th Annual State of Logistics Report, which is presented by Penske Logistics and was released earlier this year, while providing a detailed year-to-date look at where things currently stand. A key takeaway of this year’s report was that U.S. business logistics costs reached $2.6 trillion, a 5.4% increase year over year. That amounts to 8.7% of the national GDP. The previous year, the numbers were $2.3 trillion and 8.7%, respectively.

Economic outlook: Addressing the state of the economy, Paul Bingham, Director, Transportation Consulting, for S&P Global Market Intelligence, was direct, observing that the U.S. economy is performing below its potential, with 2025 growth expected to come in below 2024, while there is not a forecast for a recession.

“Consumers have been remarkably resilient in their spending this year,” said Bingham. “Their sentiment and attitudes are very, very strong, but they continue to spend, and that big consumption part of the economy has kept the economy out of recession, faced with some headwinds. We've got some increases in unemployment, which have led to the Federal Reserve resuming, after quite a pause, interest rate cuts, which portend good things for next year if that continues. We actually have some fiscal stimulus in the economy from the federal budget reconciliation bill passed this summer, with some tax incentives and new programs that will provide some fiscal stimulus, in addition to the monetary stimulus for business from the Federal Reserve.”

Looking at inflation, Bingham said it remains intact but with a lag, in the form of tariff-driven inflation and running ahead of the Federal Reserve’s 2% target, coupled with S&P Global Market Intelligence’s forecast of inflation peaking in early 2026 and subsequently coming down,

As for the tariff impact, he said that assuming tariffs don’t continue to increase, there will be a one-time price adjustment at a higher price level, with the inflation percentage actually coming down by the end of 2026, with the caveat that inflation is going to peak at 3.4%, well above the desired 2% Fed target.

“Our forecast for growth next year for the economy as a whole is stronger than this year, with our current forecast at 2.3% for the U.S.,” he said. “For the [global] economy, it is also slightly slower growth from 2024 to 2025 and then a little bit stronger growth in 2026. A weak demand but non-recession scenario is our baseline. The outlook for freight is, I think, reflective at the modal level. We don't have the strong demand surging back to bring the trucking and the railroads back up. For ocean rates, there are overcapacity issues that are coming, at least on the container shipping side, that are going to help pull down those rates, which have already come down quite a bit. Looking ahead to next year's report, I think optimistically, with cost of capital call coming down and some of those transportation costs not going up that much, we might actually be in a position to get off the plateau for next year.”

Nearshoring: Javier Zarazua, Country Manager, Mexico, at CSCMP, discussed the current state of Mexico’s nearshoring initiatives, with a comparison between U.S.-bound imports from Mexico and China, two of the country’s three largest trading partners.

On a year-to-date basis through June, Zarazua noted that Mexico’s U.S.-bound imports increased 6%, with China down 16%, with Mexico rising another 1% in July, whereas China was off 19% for the month—which he called “huge numbers” and also a reflection of what has happened since 2018, when tariffs on China initially took effect in President Trump’s first term in office.

“This translates into more opportunities for Mexico,” he said. “This speaks to how nearshoring is real. Trade between Mexico and the U.S. went up 35% last year, and Laredo is taking over in trade between U.S and Mexico is a big factor. That translates into opportunities for all of us. There are a lot of companies focused on cross-border and a lot of manufacturing coming to Mexico. In my mind, it is very clear what industries are going to come back to the United States and which ones are going to come back to Mexico. There is a very clear definition.”

Shipper-3PL collaboration: Andy Moses, SVP Solutions & Sales Strategy, at Penske Logistics, observed that there has been some upheaval in commodity-oriented freight, in particular, with a shaking out, of sorts, going on within the market.

To that end, he said that carriers are facing a tough road right now, as costs continue to rise and rates remain flattish—which he said is not a fun recipe.

“I will say that I see a lot of ‘great,’ in this industry, in terms of what we [3PLs] are capable doing and the passion to serve shippers,” said Moses. “There is a lot of good work going on, and we are still moving a lot of freight. We're really getting good at moving the data that goes with the freight, and so that's not just data scientists and front-line supervisors and how their roles are changing and having to really provide capability and excellence in that physical world as well as the digital world. In the midst of all of this, it is a transformative time.

AI impact on logistics: A prevalent theme throughout the conference, AI traction within supply chain and logistics has continued to accelerate and will be a strong contributor, noted Michael Zimmerman, Partner and Logistics Leader, at Kearney.

Taking a look back at the fairly recent past, Zimmerman said that logistics professionals have become more appreciated, as they are the ones that have navigated companies’ resources through the “chaos” of the pandemic and the impact of liberation day on global trade.

“We are people who keep calm and carry on, but once the worst of it was over after Covid, companies went back to restructuring,” he said. “They went back to cutting teams or refusing resources. And you hear things like, ‘don't come to me with resources until you've shown me that AI can't do this kind of work,’” he said. And I think it's incumbent on all of us, and it's beyond experimentation. Now it's happening. Digital brokers are using AI to eliminate waste, to automate things, to raise their margins, despite the fact that they're not adding people. There are countless examples of good use cases of AI helping with visibility, with procurement, with rate, audit and pay and what they're doing. I think it's incumbent on everyone to start embracing this technology.

It's intuitively obvious, if you've used chat GPT to create a great rough draft, and for God's sake, don't send the rough draft out. You still got to refine what it's doing. But the point is, is it can create a great rough draft of your RFP. It can create a great rough draft of where your problems are going to be next week. And that means that the drudge work that a lot of these logistics teams are doing today that, frankly, makes the job less interesting, less exciting, will be handed over to AI. So instead of seeing it as a threat, it should be seen as something that's going to replace the drudge work and allow people to do higher value-added work. And I think we're seeing that accelerate.”

Zimmerman added that in the short-term companies with larger spend levels are more likely to see quicker benefits from the application of AI, noting that with the prevalence of the technology small companies are not necessarily going to wait on bigger companies to set the example.

“Maybe they have a head start of a week or a month, but this is a marathon—and the fact that you are at the starting line 20 minutes late does not mean you are not going to finish,” he said. “I think it has become infused into all companies with the big ones setting the example.”

Penske’s Moses said that the impact of the proliferation of AI is evident across myriad business functions.

“It's not just operations, it's finance, it's in safety, and it's really across the board in engineering,” he said. “There are opportunities everywhere. As a case in point, taking a picture of a trailer being loaded, turning that into a data stream and being able to navigate available space is a use case. We have use cases via genetic AI as a hot topic right now, and track and trace is an area that's sort of low hanging fruit, and we're active there. But machine learning hasn't gone away either. So, we have lots of good use cases in machine learning areas. Whether it's Gen AI or generative natural language processing opportunities all over the place, it has made this a topic in our boardroom, it's made governance a topic in our boardroom, and it's something we talk about in every leadership meeting.”