Supply chains out of sync, logistics report says

Supply chains are out of sync, costs are climbing and companies are looking to nearshoring to better meet demand.

These are some of the findings in the 2022 State of Logistics Report produced by the Council of Supply Chain Management Professionals (CSCMP).

A key statistic the report generates is the United States business logistics costs (USBLC). In 2021, USBLC climbed 22.4 percent to US$1.85 trillion, representing eight percent of 2021’s $23 trillion GDP.

“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,” said Balika Sonthalia, partner at Kearney and lead author of the report.

“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 via multi-shoring, automation and optionality in last-mile distribution. This will also improve customer service and bring efficiencies for all parties.”

Inventory costs

Business inventories dropped to near historic lows, but the costs associated with storing, handling and financing these items rose considerably. Inventory-carrying costs rose by 25.9 percent in 2021, while transportation costs jumped 21.7 percent. This led to uneven supply chains and inconsistent product availability for consumers, both in stores and online.

Efforts to diversify supply and manufacturing locations are expected to accelerate. Companies are seeking to have operations move closer to the U.S., to respond quicker to fluctuating market demands.

Last year’s report noted the effects of the pandemic on the supply chain. The residual challenges of the pandemic remain, with some disruptions, such as port congestion, continuing to deliver damaging effects on capacity.

Over-the-road increases

Last-mile delivery volume is trending upward. The 2022 report notes that e-commerce sales grew 10 percent last year (to $871 billion), accounting for 14 percent of U.S. retail sales.

Truck freight continues to see more volume and opportunities. With road freight accounting for the largest segment of the U.S. supply chain spend, it expanded by 23.4 percent, to $831 billion.

“We have seen an incredible amount of resiliency among private truck fleets and dedicated contract carriage truck fleets,” said Andy Moses, senior vice president of sales and solutions, Penske Logistics.

“Demand has been up sharply year-over-year and these fleets continue to manage the complexities they face in the trucking supply chain including headwinds caused by shortages of parts, equipment, drivers, and most recently rising fuel costs.”