The Council of Supply Chain Management Professionals (CSCMP), along with Penske Logistics, has released the 26th annual State of Logistics (SOL) Report, which provides an overview of 2014 supply chain industry trends and statistics. These serve as important forecasting tools for supply chain professionals to gauge the health of the US economy.
The report, authored and presented by transportation consultant Rosalyn Wilson of Parsons, has tracked and measured all costs associated with moving freight through the U.S. supply chain since 1988. This year’s report presents an overview of the economy during the past year, the logistics industry’s key trends, and the total U.S. logistics costs for 2014.
“This highly anticipated report contains the statistics and industry insights that will not only help our members do their jobs better, but also better prepare them for the business demands ahead,” said Rick Blasgen, president and chief executive officer of CSCMP. “Knowing how logistics and supply chain costs affect and are affected by the larger economy is a key part of this understanding. We are grateful for the support from Penske Logistics in issuing this critical industry intelligence.”
The report reveals total US business logistics costs rose to $1.45 trillion in 2014, a 3.1 percent increase from the previous year. However, the growth rate for logistics costs was lower than the US gross domestic product (GDP), resulting in a slight decline in logistics as a percent of GDP from 8.4 percent to 8.3 percent.
US GDP grew faster than 3.5 percent in four of the last six quarters; however, the second estimate of GDP growth for Q1 2015 showed a 0.7 percent contraction. This contraction is indicative of the rising US Dollar Index as prolonged dollar strength leads to lower global sales and a downturn in exports. Conversely, the costs of foreign products in the US have been driven down which should, in turn, boost imports.
In 2014, the supply chain industry experienced its best year since the Great Recession. The research examines the economic vitality and associated challenges facing each segment of the logistics industry and concludes with a brief overview of industry indicators for the first half of 2015 and thoughts about performance for the remainder of the year.
This year’s State of Logistics Report reveals the transportation sector grew by 3.6 percent in 2014 due to stronger shipment volumes rather than higher rates. The US economy was on solid ground. New job creation was consistent, real net income and household net worth inched up, inflation was low-to-moderate and gas prices tumbled, providing consumers with additional buying power.
As consumer spending increased, freight levels climbed as retailers replenished inventories. Consumers had been the missing component in the recovery from the Great Recession, but in 2014 they began returning to the marketplace.
The truck driver shortage remains a key concern for the logistics sector with the American Trucking Associations estimating the current shortage ranges from 35,000 to 40,000 drivers. A key indicator of this was the driver turnover rate, which was more than 95 percent on an annualized basis.
“Today’s market-leading companies use their supply chains to drive innovation and competitive advantage,” stated Marc Althen, president of Penske Logistics. “This in-turn drives demand for logistics providers. While demand for logistics is increasing, the industry faces a talent shortage and needs more logistics engineers, technology professionals, warehouse workers, and truck drivers to meet the needs of current and evolving freight fulfillment models businesses and consumers rely on for their goods and services.
“The first quarter of 2014 saw 390 US trucking companies, each averaging 27 vehicles, go into bankruptcy. Smaller trucking companies are also being forced out of the business due to cost-related pressures stemming from new federal safety regulations. Although these companies represent a small part of the industry compared to the largest carriers, they are often an important source of competition.
Freight volume is expected to continue growing at a moderate rate this year, but as seen in 2014, capacity is not expected to keep pace. In fact, the impact of the sustained growth in freight volume on capacity and cost is one of the most important trends to monitor in 2015. It is likely that most of the freight logistics industry’s problems over the next three years will relate to capacity issues. For 2015 specifically, industry experts expect bottlenecks across almost every mode of transport.
In Q4 2014, congestion at the Port of Los Angeles/Long Beach reached crisis levels, with delays reaching three weeks in October. A glut of supply was, and remains, the chief culprit. The economics of supply and demand came back into play as chassis, trucks and drivers became scarce commodities; however, rates did not rise.