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CSCMP Releases State of Logistics Report

by KC SmartPort Intern | Jul 28, 2017
In this year’s annual report, CSCMP focused on the ever-changing nature of logistics. For starters, United States Business Logistics Costs (USBLC) were down for the first time since 2009 even though energy prices increased. This could signal that energy prices are no longer the driving force, but that consumer on-demand eCommerce deliveries have taken their place. The motor, rail and water industries continue to struggle with overcapacity, rate pressure and sluggish demand. On a macroeconomic scale the discrepancies between consumer confidence, GDP predictions, and actual economic growth leave businesses to prepare for uncertainty. Times like these call for innovation and positive change, which CSCMP predicts will improve the industry as a whole. 

CSCMP breaks down each sector of the industry to provide a snapshot of its current state. Overcapacity in the motor sector has led to an increase in rates, but early data from 2017 shows that carriers are optimistic that rates will flatten out due to economic growth. Also, an improvement in technology has increased efficiency and changed how shippers and carriers conduct business with each other. As for trucking, self-driving trucks are being tested for commercial use and electric engines for Class 8 tractors are in development. Parcel volumes were up six percent in 2016. In response, major parcel carriers have raised their rates, invested in better technology and changed their distribution channels. On the other hand, the rail sector is struggling to adapt to changes in demand. In 2016, railroads saw a decrease in coal demand and Class I railroad revenue and volumes, but an increase in carload volumes the first quarter of 2017. 

The shipping industry experienced historically low rates, alliances and mergers that changed normal business operations, and saw many United States ports prepare themselves for bigger ships due to the Panama Canal improvements. Air freight took some of the demand from the shipping industry, giving the sector a boost, but prices continue to rise. As for pipelines, the political climate and improving demand trends give the sector a positive outlook. Many freight-forwarders struggle to handle more complex supply chains while new technology disruptions change the inner-workings of the sector. The third-party logistics market grew for the seventh straight year and is predicted to continue growth for the rest of 2017. CSCMP noted that small and large shippers are asking that their third-party logistics providers be a “one-stop-shop” in order to meet their needs. Lastly, warehousing struggled to meet the demands of eCommerce and customers. Available space is at historically low levels, which means that warehouses are utilizing technology more than ever to control and monitor their operations. 

With technological innovations, a strong economy, and an uncertain political climate, CSCMP created four future scenarios. The first being, “plain sailing,” where less regulation allows for more global trade and an increase in efficiency due to better technology. Or, “choppy waters,” meaning that pro-United States manufacturing policies would force the industry to adapt and implement new technology. More strict regulations, an increase in operating costs and better cost-saving technologies are predicted in a “stemming the tide” scenario. The worst case scenario, “in the doldrums,” raises overall prices and leads to a decrease in technology investment. Businesses will strategically prepare for all four, but those who prepare for the worst and are able to adjust will be the most successful. 

Access the full CSCMP 28th Annual Report

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