Continued supply chain disruptions, scarce capacity, surging customer demand and the continued growth of e-commerce has driven freight rates higher, but also has pushed shippers to depend more on third-party logistics companies and develop private or dedicated fleets.
As the inflation rate has hit record highs so far in 2022, sectors that were booming, such as durable goods, retail, housing, home improvement, and e-commerce, saw a slowdown — although hospitality, restaurants and airlines were still recovering strongly.
Some modes and nodes, such as e-commerce and the last-mile delivery capacity it requires, will retain structurally high demand, according to the latest annual State of Logistics Report from the Council of Supply Chain Management Professionals. However, some supply bottlenecks, such as congested port capacity and the driver shortage, are not easily solved.
The result is that U.S.-based supply chains remain “out of sync” in 2022, according to the report, presented by Penske Logistics and authored by consultancy firm Kearney. And that has led to higher costs for shippers. The report found that U.S. business logistics costs climbed in 2021 by 22.4% to $1.85 trillion, representing 8% of the $23 trillion GDP. By contrast, in 2020, those costs fell by 4%, driven down by the impact of the pandemic.
The report found that the logistics sector has begun to adapt to short-term changes, in ways that may reveal long-term solutions to the disruptions afflicting supply chains.
For instance, a window of opportunity has opened for 3PLs to become more full-fledged, consultative partners to shippers. Last year was a huge year of growth for 3PLs, as well as what Armstrong & Associates called an “astounding” number of mergers and acquisitions. However, the firm said, “the true leaders were those 3PLs with strong carrier management skills that have technologically innovated, allowing them to efficiently tap long-standing carrier relationships to cover shipper demand, versus being over-reliant on using load boards or traditional means to buy capacity at spot market rates.”
The M&A surge wasn’t limited to 3PLs, according to the State of Logistics report, with deals made to reposition companies to better serve the demands of e-commerce — especially in less-than-truckload shipping. UPS Freight, AAA Cooper, and Midwest Motor Express were LTLs that changed hands last year. Another driver for M&A activity was technology-driven consolidation, such as Uber Freight’s acquisition of Transplace.
This data and analysis first appeared in the August 2022 special Fact Book issue of Heavy Duty Trucking.
2022 Fact Book
The Trucking Industry Numbers Impacting the Bottom Line
Heavy Duty Trucking’s annual Fact Book is designed to provide a snapshot of the current state of the industry, where it’s been, and where it’s going. 2022 is the eighth year for the HDT Fact Book. Dive into the other topics: