Viewpoint: Freight moves the economy

If you’re looking for a good summer read to slip into your beach bag, look no further than the issue of Logistics Management (LM) that you’re currently holding—especially if you’re a fan of “feel-good” bestsellers.

As we have for the past 25 years, LM has devoted a significant portion of our July issue to putting the Annual State of Logistics Report into context for logistics professionals. The report, which encapsulates the cost of the U.S. business logistics system during the previous year, represents the clearest snapshot available of how economic conditions will mold the future logistics and transportation landscape.

The release of the report—which took place on June 23 at the National Press Club in Washington, D.C.—sparks our team’s annual investigation into the details of the findings and sends our entire editorial staff on a quest to summarize where each transportation mode stands in terms of service, capacity, and rates.

This year’s event marked the 26th year that the report has been released. It also marks the 12th year it has been authored by Rosalyn Wilson, a 33-year industry veteran who’s now a senior business analyst with Parsons Corporation where she focuses on the progress of the overall supply chain industry. Wilson has been working on the report since 1994 and assumed full responsibility in 2004 following the passing of the report’s creator, Robert Delaney.

Beginning on page 24, Contributing Editor John Schulz—who was in attendance at the Press Club last month—kicks off our comprehensive coverage with his high-level analysis of the report. So, what is the state of logistics coming out of 2014?

“There’s good news on all sides of the logistics and transportation equation,” says Schulz. “Transportation costs rose by 3.6 percent last year due to stronger shipment volumes, signaling growth in all modes except air.”

At the same time, overall logistics cost as a percentage of GDP dropped to 8.3 percent—a near historic low. “The percentage of GDP number indicates that logistics managers were able to hold costs in check despite fluctuating volumes and tight capacity due to infrastructure constraints and labor issues on the West Coast—and that’s pretty damn impressive.”

And according to Wilson, when you roll up all of the numbers—inventory carrying costs as well as transport costs—along with the cost management performance by logistics professionals, “2014 was the best year for the overall supply chain industry since the Great Recession.”

At the foundation of this industry “feel-good” story is the fact that U.S. consumers have stepped back up to the plate and are swinging for the fences.

“It’s quite simple,” says Schulz. “Consumer confidence was clearly the missing element over the previous three or four post-recession reports. All of a sudden consumers started to spend, ratcheting up shipments and pressure on a burdened freight network—and that network was equal to the task despite the many challenges.”

Let’s keep in mind that while consumers play a large part in driving freight volumes, it’s the efficient delivery of that freight that moves the overall economy. “All logistics managers should take some pride in this report,” adds Schulz.