With the transformation of the supply chain wrought by the Coronavirus pandemic, manufacturers are going to requirefrom their logistics service providers increased agility, financialstability, transparency and speed—and some companies are seriously considering insourcing at least some of those services.
That is the conclusion of researchers and company executiveswho contributed to the 2020 State of Logistics Report issued inJune by the Council of Supply Chain Management Professionals(CSCMP). The report was sponsored by Penske Logistics and theresearch was performed by the Kearney consulting firm.
“It is abundantly clear logistics have a driving role in assuring
resilient supply chains,” declares Michael Zimmerman, partner
with Kearney and co-author of the 2020 report. “Logistics prac-
titioners will need to become even more agile as they navigate re-
covery in the second half of 2020 and into 2021.”
According to Marc Althen, president of Penske Logistics,
“With the reopening of American businesses, many supply chains
have become off-balance. Supply chain managers must rely on
solid data and experienced advice as they move forward. This is an
important time to reevaluate your supply chain, from distribution
points to modes of transportation.”
Rick Blasgen, president of CSCMP, agrees. “To say that every-
thing changed is an understatement. Many in our industry have
led efforts in adapting, innovating and managing through unprec-
edented disruption while simultaneously creating new operating
models.” The three keys to being prepared for the future, he says,
are being able to adapt, improvise and overcome.
When the State of Logistics Report was first created more than
three decades ago, its main purpose was contributing to the policy
debate over economic deregulation of trucking by measuring the
positive impact deregulation had on logistics costs
over the previous year. After several years of prov-
ing the beneficial effect of deregulation on costs,
the report added more data about other modes and
In recent years that focus has shifted to providingmore of an outlook for what is expected to happen tothe industry, while continuing to analyze the previous year’s performance in various sectors. The 2019report found that U.S. business logistics costs ingeneral last year rose 0.6% to $1.63 trillion, or 7.6%of 2019’s $21.43 trillion GDP. Compared to the7.9% of GDP in 2018, this reflected achievement ofbetter productivity overall.
That seems like ancient history now. The economic slowdown seriously impacted most of the economy, including logistics. Even before COVID- 19hit, a slew of truckload haulers had begun declaringbankruptcy. Some shippers now face higher rates,while others are greeted by over-capacity.
“To get through trying times, all parties will needto make smart investments in technology and usesuch technologies to deepen collaboration,” the Kearney researchers state. “Supply chains will need tobecome more resilient, better able to adjust to andrecover from future difficulties. The shift away fromsingle-source, cost-focused supply functions maypose new challenges to logistics—which itself ishaving its resilience tested in this crisis.”
Most freight in the U.S. is transported at least at some point bytrucks. Trucking was already slowing down in 2019 after a torrid2018, the report notes. After two years of scarce capacity and increasing rates, the 2019 market balance tipped in favor of shippers.They regained buying power and were able to negotiate lowerrates and secure capacity.
At the same time, fleets experienced reduced profits and endedup ordering fewer new trucks. Beyond the resumption of a boom-and-bust cycle now exacerbated by COVID- 19, big carriers areturning to technology investments that promise to increase efficiency, while others are staring into the abyss.
On June 30—a week after the CSCMP report was published—the federal government loaned $700 million under the CARESAct to less-than-truckload (LTL) carrier YRC in exchange for a29.6% equity stake in that Teamsters union employer.
Small fleets will need to scramble to survive, the Kearney re-
searchers assert. “Smaller carriers, especially those in highly af-
fected industries, must look to app-based solutions and brokers to
provide access to better fit routes and backhauls.”
Railroads continued to grow profitability despite declining
2019 volumes, which was largely the function of having pushed
costs onto their shippers in recent years through the adoption of
Precision Scheduled Railroading (PSR), and by changing demur-
rage and accessorial fees to turn into a revenue stream by monetiz-
ing the inefficiencies the railroads created themselves.
However, the COVID- 19 pandemic slashed volumes by another
Managing the Supply Chain
Material handling and logisticswill play a leading role in assuringresilient supply chains in a post-COVID- 19 world.
By David Sparkman
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