The 2024 “State of Logistics” report – unveiled at a National Press Club media event in Washington, D.C., on June 18 – details how U.S. freight supply chains are being pressured by global economic volatility and how states can play a crucial role in supporting freight infrastructure development.
[Above photo by Georgia Ports Authority]
Produced annually for the Council of Supply Chain Management Professionals (CSCMP) by global consulting firm Kearney and presented by third-party supply chain provider Penske Logistics, the annual report offers a “snapshot” of the American economy via the lens of the logistics sector and its role in overall supply chains.
The 2024 report found that uncertainty is now a “near constant” in the global economy, which is expected to experience sluggish 2.5 percent growth across 2024 – representing the slowest half-decade of output in 30 years.
Report highlights include:
- U.S. business logistics costs topped $2.3 trillion, which translates to 8.7 percent of the national gross domestic product or GDP.
- There are multiple reasons why freight demand has not yet fully recovered, chief among them are simultaneous geopolitical conflicts around the world, climate change (which has affected shipping lanes), high inflation, high interest rates, and – apart from the U.S. – sluggish demand for goods.
- As a result of the economic headwinds and geopolitical instability, the continued fragmentation of global trade is complicating supply chain transactions. For example, over 1,000 U.S. freight brokers have shuttered their doors since the 2023 report was released, Kearney noted.
- Some of the largest manufacturers and retailers are seeking to “monetize” their own logistics capabilities; viewing their supply chain successes as a service they can both market and profit from.
- Freight carriers have been plagued by high operating costs, while lackluster demand and the capacity glut are making it hard for them to charge the kinds of rates that would allow them to sustain rates and protect their margins.
- Third-party logistics providers continue to work through significant near-term challenges, which includes high operating and insurance costs, low freight rates, and excess capacity – issues that could lead to further industry consolidation.
- Investments in emerging technologies such as artificial intelligence, end-to-end visibility, and advanced automation are expected to drive competitive advantage and greater resilience to future disruption in the logistics sector.
- Major global corporations have adopted rigorous environmental goals. Further government funding programs have been launched to encourage de-carbonization initiatives, which indicate progress in both the public and private sector, toward higher levels of sustainability.
The key role states play in the U.S. freight infrastructure sector was highlight in a virtual press conference held ahead of the official release of the 2024 report.
“For example, the state of Georgia done amazing job with the port of Savannah – investing in people, port infrastructure, surrounding highways, and networks to get freight in and out of the port area,” explained Ron Marrotta, executive vice president with NYK Logistics; part of a panel of experts gathered by CSCMP to comment on the report’s findings.
“The [freight] growth in the southeastern U.S. is phenomenal and other ports following in their path,” he said.
Marrotta added that the federal government needs to step up its investment in freight infrastructure as well – along with expanding its maritime policy to protect the “free flow of freight” around the world.
“U.S. naval assets are at an all-time low right now,” he said. “That makes it difficult to ensure freedom of navigation around the world. That is why the U.S. needs to invest more there, in order to increase protections for the global supply chain.”
However, Josh Brogan – a Kearney partner and the lead author for report – said state-level investments in freight infrastructure need to ramp up more evenly across the country.
“We still see a lot of issues in terms of port congestion and road quality,” he explained. “We’re just not investing enough to meet long-term needs in many of the states.”
Brogan stressed that such “underinvestment” is a global phenomenon; not just one solely about state-level infrastructure investment efforts in the United States.
“Continued volatility drives our clients to rethink and rewire the logistics capabilities that drive their supply chains,” he said. “Both shippers and carriers find that the people, processes, and tools that move goods and information in global supply chains are often inadequate for their needs – and that requires accelerated investment.”
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