This year’s annual “State of Logistics Report,” released today by the Council of Supply Chain Management Professionals (CSCMP), comes at a time when many businesses are re-evaluating their logistics and supply chain strategies in the face of the Covid-19 pandemic and its related economic effects. As such, the report seeks to pause and provide a big picture view of the past year as well as some perspective on the path forward.
Now in its 31st year, the “State of Logistics Report” is researched and prepared by the consulting firm Kearney and sponsored by Penske Logistics. The report seeks to provide an in-depth look at the logistics industry, most notably by calculating U.S. business logistics costs as a percentage of gross domestic product (GDP) and pointing out major trends.
According to the report, logistics expenditure rose to $1.652 trillion in 2019 or 7.6% of the U.S.’s GDP of $21.4 trillion. This represented an improvement over 2018, when costs were at 7.9 percent of GDP. Indeed, 2019 felt like “a return to normal” after a “torrid” 2018, which saw increased logistics costs due to fast GPD growth and capacity shortages, according to the report.
[Figure1] In 2019, USBLC represented 7.6% of GDP—a return to normal for the industry
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However, that normal ran smack into an unprecedented pandemic, which led to measures such as social distancing and business closures. These efforts have derailed the economy and plunged the country into a recession. As the report’s introduction states, “The pandemic and global measures taken to reduce its further spread have decimated supply chains, scrambled logistics capabilities, and destroyed huge swaths of demand.”
The effects of the pandemic on the different logistics modes and nodes have been variable and unpredictable according to the report. For example:
The way forward
Many economists are tentatively predicting an economic rebound to begin in 2021. But according to Zimmerman, “the size, shape, and timing of the recovery remain in question.” Furthermore, for that recovery to happen, companies will need to quickly adapt and change their logistics abilities. Both the report and the panel discussion following the press conference outlined some of the changes that might occur. These included:
In spite of the immense challenges that transportation and logistics companies have faced these past three months, the report asserts that the industry’s prospects are brighter than other sectors of the domestic economy. Zimmerman and his co-authors maintain a hopeful position that logistics is “an industry initially traumatized but ultimately resilient.”