Viewpoint: The state of logistics is out of sync

While the supply/demand balance and economic markets continue on what feels like a manic roller coaster ride, Logistics Management keeps things somewhat steady be devoting a major portion of our July issue to the findings of the Annual State of Logistics Report (SoL). In fact, this marks the 33rd year that we’ve offered a deeper dive into this valuable report for U.S. shippers.

Once again authored by global management consulting firm A.T. Kearney in partnership with CSCMP and Penske Logistics, the SoL has become known as the most comprehensive report of its kind, encapsulating the cost of the U.S. business logistics (USBL) system during the previous year (2021) and offering a snapshot of how economic conditions are shaping the current logistics landscape.

The official release of the report—which once again took place in a live event at the National Press Club in Washington, D.C., on June 21—sets our editorial staff on a quest to find out what the findings may mean to current and future logistics management in terms of service, capacity and rates across all the modes (page 18). As he has for more than two decades, contributing transportation editor John Schulz took part in the event.

“It continues to be the most thorough report of its kind, a snapshot taken from 30,000 feet of the previous calendar year through a variety of lenses of all transport modes; but most importantly, it contains a healthy dose of real-world shipper experience,” says Schulz. In fact, the report includes input this year from logistics professionals inside Cisco, Walmart and The Clorox Company.

“Our reporting over the many unsettled months certainly matches up with the authors’ deft assessment of what logistics managers lived through,” says Schulz. “During that time, shippers certainly received the attention from the C-suite that they’ve been looking for, but it was for all the wrong reasons.”

Indeed, shippers watched rates bust through the roof, devasting any budgeting that may have taken place, as demand for freight services in all modes surged and capacity and service levels evaporated in front of their eyes. As a result, supply chains across nearly every industry struggled to keep inventory on hand.

“I keep thinking of something Chuck Hammel, president of LTL carrier Pitt Ohio, told me earlier this year,” Schulz shares. “He had an order of Class 8 trucks held up by the OEM because they couldn’t obtain enough side mirror brackets. Here’s a $160,000 semi that can’t be delivered because there weren’t enough mirror brackets.”

Aside from inventory woes, we know there’s a good chance your transportation budget was decimated last year, and the cold, hard numbers in this year’s report tells the grim story. According to the SoL, USBL costs rose by 22.4% to $1.85 trillion last year. “That represents 8% of the U.S. 2021 GDP of $23 trillion, and signifies a sharp increase from 2020 when USBL dropped 4% of GDP,” says Schulz.

And while those numbers validate that pit you felt in your stomach over the course of 2021, we’re sorry to report that there’s little indication that stability will return soon. However, the authors do suggest some simple, smart steps to steady the ship.

“While it’s beginning to sound cliché at this point, building ‘resilience and agility’ into your operations is now a must,” say Schulz. “What does that mean? Well, it means different things to each shipper, such as creating true partnerships with carriers and even creating a continuous bid process in certain shipping lanes. It means whatever it takes to keep freight moving right now.”