The Council of Supply Chain Management Professionals (CSCMP), released its State of Logistics Report on June 18th. This annual report tracks and measures all costs associated with moving freight through U.S. supply chains and, most notably, showed a significant increase in U.S. business spending on logistics in 2018.
Several high-level takeaways were included in this report and we think it gives fleets and owner-operators a good idea of what’s to come in the industry:
1. Economic Slowdown Is Expected and Trade Uncertainty Is Volatile
U.S. economic growth is forecasted to slow while business and consumer confidence indicators suggest reasons for concerns. Trade uncertainty is being felt throughout the logistics markets while trade tensions can cause inventory buildups that shift demand for logistics services. The time to plan for the future is now.
2. Motor Carriers: Excess Demand with Tight Capacity and High Rates
Freight rates are easing back to “normal” levels after a peak mid-2018 with more capacity now available. Carriers are now realizing that the ongoing driver shortage they are facing is a two-pronged problem: A generational change in the labor pool combined with competition from well-paying jobs such as working at ecommerce fulfillment centers. Carriers and shippers will need to adapt, especially through the use of improved recruiting, on-boarding, training, and retention methods.
3. Parcel and Last Mile: Intense Competition
Amazon is training customers to expect continuously faster deliveries while also training its competitors to meet the standard they’ve set. This intense competition has spurred strategic last-mile innovations, partnerships, and technology advances.
4. Air Freight: Ecommerce and Digitization
Ecommerce and massive consumer demand for quick delivery is fuelling a longer-term positive outlook for air freight. The industry has also made strides in digitization in a move to eliminate paper usage. Additionally, online freight exchanges offer shippers transparency into rates while carriers are now starting to price dynamically.
Warehouse rents continue to increase nationwide, but at a slower rate relative to the past six years. With stable rent increases, warehouse developers are adding to supply, but not quickly enough to meet growing demand. Warehousing automation is being driven by the need to overcome labor force scarcity.
6. 3PL: Growing Strategic Role
Third-party logistics providers provide clients with hugely important benefits including the management of speed, costs, and transparency in warehousing and last-mile deliveries. In order to provide all these benefits, however, 3PLs must differentiate themselves with technology, which, as we all know, require significant upfront investments and ongoing maintenance.
7. Pipeline Capacity: Catching Up
Pipeline capacity is catching up to the strong growth in oil and gas production and demand. As we know, massive oil and gas pipeline capacity was added in 2018 and more is expected in 2019, due to the wave of interest from private equity organizations. These additions should alleviate capacity constraints especially from the Permian basin to the Gulf coast while also boosting exports.
8. Blockchain: The Hurdle Is In Participation
The value of blockchain can only be realized when there exists a robust network of companies that are able to adopt a joint solution. The biggest hurdle associated with blockchain is not the complexity of the technology itself, but in participation. To effectively leap over this hurdle, there must be full confidentiality of member data to minimize risks and incentivize enrolment.
Which of these takeaways from the State of Logistics report do you think will impact you the most?