Delivery

Amid eCommerce Rise, Logistics Costs Up 11.4 Pct In 2018

freight logistics

A rising tide lifts all boats, and trains, and trucks….all in service of getting packages where they need to go.

To that end, in the Council of Supply Chain Management Professionals (CSCMP) State of Logistics Report 2019, presented by Penske, AT Kearney reported that logistics costs are continuing to rise, buoyed by continued strength in the economy.  The trade war may have given a lift to inventory build, too — but may prove a double edged sword over the near term.

In terms of stats, and continuing a trend, costs are going up.  As noted in the report, total U.S. logistics costs rose by 11.4 percent to an overall $1.6 trillion. The latest tally is a record, as stated in the report — the latest annual reading in a series that stretches back 30 years.

To get a sense of how big that $1.6 trillion is: it’s eight percent of the GDP, and that’s up from a 7.5 percent share of GDP as measured in 2017.

The growth comes in tandem with double-digit advances in eCommerce spending, up 14.2 percent in 2018.  And as noted in this space earlier in the month by Karen Webster, the emergence of the “search pay and logistics” continuum has fostered growth in the embrace of eCommerce, speedier delivery times, and, of course, a growing emphasis on syncing physical deliveries with online transactions.

Yet, looking out over the near term, geopolitics may serve as a speed bump, at least as noted in the CSCMP report.  The growth in logistics may see a bit of headwind, as inventories have already been built up amid a slowing economy.  Amid a what might be termed a “pull forward” of inventory, storage and other inventory costs outpaced overall logistics costs, rising by 14.8 percent, and inventory values surged by 4.6 percent.

In terms of pricing, the ripple effect will be one where a pullback would slow price increases charged to shippers, and carriers may see volume decreases.  The rates truckers charge “will come down, but not as dramatically as they have in the past,” according to the report — likely in the low- to mid-single-digit percentages.

As detailed, too, in the report — and as relayed by Logistics Management — all modes of transport saw growth.  Drilling down a bit, full truckload logistics costs came in at $296 billion for the year, up 7.6 percent; motor carriers surged by 10.1 percent to $668 billion, and parcels overall gained 8.7 percent to $104.9 billion.

 

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