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Tom’s Takes: U.S. Business Logistics Costs Experiences Larger-Than-Expected Year-Over-Year Increase From 2020

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The 33rd Annual State of Logistics Report, prepared by the Council of Supply Chain Management Professionals (CSCMP) and their partners was released in late June. Following a retraction in U.S. Business Logistics Costs (USBLC) in 2020 due to the global pandemic, USBLC increased from $1.509 trillion in 2020 to approximately $1.847 trillion – representing a 22.4% year-over-year (YOY) increase in 2021. 

Similar to previous years, transportation spend, at $1,205.7 billion continued to be the predominant contributor to 2021 USBLC. It accounted for 65.3% of total USBLC in 2021, up 21.7% from 2020 transportation costs of nearly $991 billion. 

All individually reported transportation modes shown had a greater-than-10% YOY increase with motor carriers up 23.4%, parcel shipping up 15.2% and rail up 18.8% from 2020. Over the past five years, overall transportation costs have risen by an annual average of 6.1%

Inventory carrying costs came in at 27.1% of USBLC in 2021 at just over $501 billion. This was up 25.9% from 2020 inventory costs of just over $398 billion, with the 5-year average cost increase of 5.0%. These costs are attributed to warehouse operations, inventory on hand, and the cost of capital. Supply chain bottlenecks – such as ships awaiting unloading, port congestion, lack of containers, fuel increases and a driver shortage – were key reasons for increased transportation costs in 2021. Although inventory levels were reported to be down in 2021, the cost to handle the inventory due to such issues as increased warehouse labor and storage costs led to the 2021 increased carrying costs.

Tom’s Take: “With a 5-year CAGR of 5.8% for USBLC, supply chain leaders will need to continue to evaluate the benefits of investments in people, process optimization and supply chain technology to help mitigate expected 2022 cost increases due to increased fuel prices and surcharges, higher labor wages, growing fulfillment center operations costs and rising interest rates. 

The balance of labor versus automation projects and technology investments in transportation management systems, warehouse management systems, order management systems and labor management systems will differentiate the leaders from the laggards in not only reducing costs, but also grow top-line revenues with improved ability to execute and better manage the customer experience.”

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