Worley Blog

THE STATE OF LOGISTICS – 2022

Posted on: June 23rd, 2022 by Clifford F. Lynch

 

On June 21, 2022, the Council of Supply Chain Management Professionals (CSCMP) released the 33rd Annual State of Logistics Report. As we have done in this space for the past several years, we have tried to summarize the 51-page report, but urge our readers to take a look at the entire document. This year’s report is entitled “Out of Sync”, and to a large extent, is a continuation of the discussion of the effects of the pandemic and other economic conditions affecting the supply chain.

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. This year’s report is sponsored by Penske, and can be found at www.cscmp.org. It is free to members, but since non-members are charged $295 for the report, we are publishing this brief summary for those who might not see it otherwise.

In the 2021 report, Kearney said that Covid-related challenges were introducing a new era in which we must expect continual change. This statement was very prophetic as we go through another year where the predicted changes are sometimes occurring faster than we can deal with them. Port bottlenecks, reduced capacity, half filled trucks, and most importantly, rising costs, have hampered the supply chain manager in providing excellent service at a reasonable cost.

As in previous reports, last year’s costs and trends were summarized, but the bulk of the report centered around the pandemic and its effect on operations and costs, as well as what we can expect in the future. 2021 business logistics costs totaled $1.847 trillion, or 8% of Gross Distribution Product (GDP), These costs were a significant 22.4% higher than last year.

Briefly summarized, the expense categories were as follows. Note that every segment of the 2021 costs was higher than last year. This comes as no surprise to those of us who are dealing with the supply chain every day.

                                          2021 Logistics Costs             

 

                             Trillions of $                                    Y/Y %

Motor                      830.5                                          23.4

Rail                           88.3                                          18.6

Parcel                     134.5                                           15.2

Air                            52.7                                           19.2

Water                       32.4                                            28.3

Pipeline                    67.3                                            18.2

 

Inventory*              501.3                                            25.9

Administrative          62.9                                             23.6

  • Includes warehousing costs that were up 19.9%.

Motor Freight revenues grew 23.4%, and many carriers recorded significant profits. Carriers that had reduced capacity during the pandemic, reversed course, hiring more drivers and adding new trucks. Service has not always been satisfactory however, and captive truck fleets are on the rise. This could reduce common carrier margins.

Rail costs rose but increasing issues with service have forced shippers to seek other alternatives, and file complaints with the Surface Transportation Board.

Parcel and Last Mile grew rapidly as E Commerce grew to $871 billion, 13% of all retail sales.

Air increased as demand exceeded capacity, driving rates upward.

Water costs surged, and according to Kearney, ocean carriers earned more profit in 2021 than in the previous 20 years combined. Port congestion of course, kept service levels at abysmal lows for several months.

Pipeline costs rose, but they face increasing regulatory and environmental pressures.

Ironically inventories were at an all time low, but this was offset by higher handling, storage, and financial costs.

Kearney predicts past conditions will continue throughout the year; and once again, encouraged sustainability and control towers as efficient methods of measuring and controlling costs, while protecting the environment.