Worley Blog

THE STATE OF LOGISTICS 2020/2021

Posted on: July 27th, 2021 by Clifford F. Lynch

 

On June 24, the Council of Logistics Management Professionals (CSCMP) released the “32nd Annual State of Logistics” report. This year’s report was entitled, “Change of Plans”, a reflection on the conditions surrounding the Covid-19 pandemic. The SOL report was launched in 1988, by the late Bob Delaney, one of the leading supply chain experts of his time; and since 2016, A.T. Kearney has conducted the research and published the results. The complete 73-page report can be found at www.cscmp.org, and is free to members. Since non-members are charged $249 for the report, as we have in previous years, we are publishing this brief summary for those who might not see it otherwise.

 

This year’s report was not too unlike last years, in that it reflected the confusion and disruption in supply chains around the world caused by the pandemic. In addition, the report emphasizes that “E Commerce innovations have accelerated faster than anyone could have imagined.”

 

As in previous reports, the last year’s costs and trends were summarized, but the bulk of the report centered around the pandemic, its effects on costs and operations, and what we might expect in the future. 2020 business logistics costs totaled $1.56 trillion, or 7.4% of Gross Distribution Product (GDP) of $20.9 trillion. GDP was 3.5% less than the previous year; and total logistics costs were 4% less than 2019. Some expenses were up, and some were down, but there were no real surprises, considering the environment

 

Briefly summarized, the expense categories were as follows.

 

The largest portion, transportation costs were up only .8%, compared with a 4.7% increase in 2019.

$ Y/Y%
Motor $684.8 T -.6
Rail 74.3 -11.0
Parcel 118.6 24.3
Air 96.5 9.0
Water 26.1 -28.6
Pipeline 58.8 1.7
Inventory * 381.6 -15.0
Administrative 116.9 -4.9
  • Includes warehousing costs that were up 1.4%

 

Motor freight was down due to pandemic influenced reduced capacity.

 

Rail was down due to a 15% reduction in carloads. Intermodal was down only 2.8%…

 

Parcel was up 24.3%, not surprising considering E Commerce volume was up 33% to $792 billion.

 

Air freight increased as passenger flights (which haul 50% of all cargo) were cancelled, driving prices up.

 

Water was down 28.6%, mostly from drops in traffic and a change in calculation methodology.

 

Pipeline transportation was up slightly, as older, higher priced contracts were still in play.

 

Inventory carrying costs were down 15%, due primarily to high volumes and capacity constraints. The warehousing segment was up 1.4% as demand surged and capacity was limited, especially in the E Commerce sector.

 

Carrier administration costs were down, but shippers’ costs increased due to additional charges necessary to manage the pandemic influenced supply chains.

 

A.T. Kearney predicts that many of the current trends will continue, with more attention to sustainability, resilience, and visibility. To meet their needs, more supply chain managers will depend on “control towers” to manage costs and activity. 2021 will be spent rethinking and redesigning logistics networks, as the economy is expected to grow by 7%. ATK believes that “in 2021, even if conditions prove less volatile, the changes may be more profound.