ENCOURAGING NEWS FOR THE SUPPLY CHAIN

June 23 marked the release of the 26th Annual State of Logistics Report. Authored by Rosalyn Wilson, and sponsored by CSCMP and Penske Logistics, this report has been the “gospel” for costs, developments, and predictions in the supply chain industry for a quarter of a century. The new report shows a total logistics cost for 2014 of $1.45 trillion, up 3.1% from 2013. Percentage of GDP was 8.3%, compared to 8.4% for the previous year. According to Wilson, 2014 was the best year for the industry “since the Great Depression”.

Transportation is of course, the major component of logistics costs and totaled $907 billion for the year, or 62.5% of the total. These costs were up 3.6% as a result of higher volumes.

The rail industry ($80 billion) did particularly well with a 4.5% increase in volume across virtually all commodities.

Inventory carrying and warehouse costs ($476 billion) increased 2.1% as firms continued to build inventories.

On a negative note, Wilson reported a total of 390 motor carrier bankruptcies in the first quarter of 2014. These were all smaller carriers, and Avondale partners suggested there was a direct link between new government safety regulations and small carrier bankruptcies.

Finally, Ms. Wilson identified six issues that could affect logistics during the coming year:

  • Changes in the global economy
  • Increased modal regulation
  • Changes in product sourcing, especially reshoring
  • Panama Canal expansion
  • Drastic changes in fuel prices
  • Continued container shipments to Canada

The full report is available at www.cscmp.org.

Last week, Armstrong & Associates released its report on the state of the 3PL industry. Third party warehousing costs in 2014, totaled $157.2 billion and are expected to increase to $166.1 billion in 2015, reflecting the growth in LSP utilization. According to Armstrong, the 3PL sector is now dominated by about “50 companies based in post-industrial countries.” This report also contains an interesting history of acquisitions in the sector for the years 1997 – 2015. This report is available at www.3plogistics.com.

Finally, also last week, John Larkin of Stifel made some interesting observations about the Eye for Transport 3PL Summit in Chicago. While the formal presentations provided outlooks on technology, supply, demand, and last mile deliveries, there was a continuing undercurrent of M & A discussions in the hallways. Several investment firms and strategic buyers were in attendance, and it would appear the market is good for companies that meet prospective buyers’ financial and strategic objectives.

In summary, it appears that the supply chain industry, while changing dramatically, is growing along with the economy, and most signals indicate a very positive environment for the near future.

Written By: Clifford F. Lynch