The 2022 “State of Logistics” report – unveiled June 21 at a press event in Washington, D.C. – indicates that the cost of storing, handling, and financing business inventories is rising steeply in the United States, with “residual challenges” from the COIVID-19 pandemic continuing to “disrupt and damage” supply chain capacity.
[Above photo by Penske Logistics]
This yearly report – compiled by consulting firm Kearney, the Council of Supply Chain Management Professionals, and logistics service provider Penske Logistics – details all the costs associated with moving freight through the U.S. supply chain. It also provides an analysis of the state of the U.S. economy and key logistics trends as well.
Overall, the 2022 report described the U.S. logistics system as “out of sync” in 2021, with “severe mismatches” between demand and supply in everything from labor to transportation and warehousing capacity to supply for raw materials and supplies.
The report found that U.S. inventory-carrying costs increased by 25.9 percent in 2021, with transportation costs jumping 21.7 percent – creating “uneven” supply chain operations and “inconsistent product availability” for consumers shopping both in-person and online.
“It seems clear that the macro-economy in 2022, which once promised to bring strong continued recovery from the pandemic, will instead be characterized by war [currently between Ukraine and Russia] and even greater uncertainty,” the report said.
“The long-term repercussions, though still largely unknown, could soon trigger a whole new level of disruption,” it added.
As a result, the report predicts that efforts to increase “multi-shoring” capability – which means the sourcing of goods and material from more than one geographical location – should accelerate, with companies seeking to move their operations closer to the U.S. in order to respond quicker to fluctuating market demands.
That shift will affect freight infrastructure needs in the U.S., the report noted.
“Supply chains have been under historic pressures to meet erratic and often extreme demands under very challenging circumstances,” the report said. “At the same time, the focus of logistics is steadily shifting away from producing and storing merchandise anywhere in the world and then relying on fast and inexpensive shipping times to deliver product over great distances. Now the focus is on producing and storing merchandise closer to the consumer.”
The report noted that the effort required for such a “fundamental transformation” while “adapting on the fly” to ongoing disruption has significantly strained supply chain infrastructure.
However, the “silver lining” to this massive logistics disruption is that it has “greatly increased public awareness” of the need for “strong and cohesive” supply chain infrastructure.
“What is notable is that the logistics sector has begun to enable changes which should benefit manufacturers, retailers and consumers alike,” emphasized Balika Sonthalia, partner at Kearney and lead author of the report, in a statement.
“We’re especially heartened by the progress the sector has made in rebuilding supply chain resilience via multi-shoring, automation and optionality in last-mile distribution,” Sonthalia said. “This will also improve customer service and bring efficiencies for all parties.”