As rough as it was in managing the supply chain roiled by the Coronavirus pandemic in 2020, this year calls for even greater agility and creative collaboration, according to the annual State ofLogistics (SOL) report.
“Logisticians came off the ropes of a bruising 2020 with anew appreciation that, while resilience resulting from the capabilities they had built got them through the main disruptiverounds of the pandemic, 2021 is confirming that the abilityto change plans and execute under adversity has risen to bethe top priority,” said Michael Zimmerman, partner with theKearney consulting firm and the report’s lead researcher.
Kearney consultants put together the 2021 report, titled“Change of Plans,” which is sponsored by third-party logistics provider Penske Logistics on behalf of the membershipof the Council of Supply Chain Management Professionals(CSCMP). The annual SOL report has been produced in various forms over the past 32 years.
In 2020, United States business logistics costs (USBLC)
fell 4.0% to $1.56 trillion, representing 7.4% of the year’s
$20.94 trillion GDP. The pandemic made shippers’ and car-
riers’ assets less efficient and destroyed any idea of predict-
ability, the researchers concluded. “While service outcomes
largely deteriorated, logistics was remarkably effective given
The U.S. economy is now expected to grow by 7.7% in
2021, and the global economy by 6.3%, barring unforeseen
developments. In fact, such disruptions are sure to continue.
“The pandemic’s aftereffects and new surprises will force
continuous plan redevelopment and adaptation,” the research-
In 2020 transportation costs rose by 0.8%. This was far lessthan the 4.7% growth in 2019, or the 10.4% rise in 2018, butcertainly a contrast to an economy that shrank overall. The increase was driven by a 24.3% expansion in the parcel and last-mile segment, as e-commerce and home delivery exploded.
Looking at the other transportation modes can be deceptivebecause of unique situations that arose during the pandemic,such as congestion at ports and the disruption of over-the-road trucking by lockdown measures and other factors.
Warehousing growth remained strong in 2020, the researchers noted. Many industry fundamentals were up froma record-setting 2019. Net absorption increased 11%, to 268million square feet. Asking rents grew at a faster rate than theprevious year, to $6.76 per square foot. While the vacancyrate was higher than last year, it was still remarkably low.
In short, e-commerce spurred continued high demand for
MANAGING WAREHOUSING’S BOOM
warehousing space. The pandemic shifted many consumers to
online shopping, which boosted needs for warehouse space.
Providers, especially of urban last-mile facilities, hurried to
keep pace. This effect then outlasted the spring 2020 restric-
tions placed on physical retail stores.
Fourth quarter 2020 warehouse leasing volumes were26.9% higher than 2019. Vaccine distribution added furtherpressures in early 2021, especially for cold storage. But evenas vaccine pressure fades, other demands will keep capacitytight, the researchers believe.
“E-commerce fulfillment centers are a special category ofwarehouse, ideally featuring high ceilings and multiple mezzanine floors,” the report contends. “There’s demand for verylarge facilities ( 3+ million square feet) and for downtownurban facilities.” Also in demand by customers are advancements in technology and sustainability.
With rising e-commerce and a new appreciation of the
dangers of supply chain disruptions, businesses will likely
increase safety stock drastically, which will require a great-
er warehouse footprint, the researchers explained. “Greater
inventory requires both more space and more management
The warehousing labor market has been tight for years, and
COVID- 19 didn’t change its basic characteristics, including
seasonality and difficult working conditions. Beyond com-
petitive compensation, warehouses could attract
workers by emphasizing safety and flexibility,
factors that the pandemic brought to the fore, the
“Warehouses vary in supplying personal pro-
tective equipment (PPE) materials, enforcing
enhanced protective measures, and offering
flexible scheduling,” they said. “Enhanced train-
ing programs and standard retention strategies
(tracking key performance indicators for reten-
tion, conducting robust exit surveys, and so on)
can also help improve conditions for workers.”
He added, “I don’t think we should stay at
one-to-one over the long term because it would
hurt our ability to service customers and hurt
The State of US Logistics 2021:
BUILDING AN AGILE SUPPLY CHAIN
Agility and collaborationremain essential in managingthe supply chain.
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