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  July 7th, 2022 | Written by

State of Logistics Report Sees US Logistics Costs Rise To Highest Levels In Ten Years

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For the US economy, inflation in logistics costs was remarkable over 2021 and had the effect of driving up the proportion of GDP absorbed by logistics to levels not seen for over a decade. That is the assertion from the management consultancy A.T. Kearney which has produced the American 2022 ‘State of Logistics Report’ for the Council of Supply Chain Management Professionals.

With the significant proviso that the years 2020 and 2021 were hardly normal for American logistics markets, overall growth in business logistics costs was an extraordinary 22.4% as compared to a compound annual growth rate of 5.8% over the past five years.

Of the different logistics markets broken-down by Kearney the highest increases were seen in areas such as dedicated road freight services, which leaped by 39.3%, waterborne freight transport which increased by 26.3%, and inventory carrying costs which were up by 25.9%. For water transport, the rate of increase is an enormous departure from the longer-term trend which saw costs fall by over 4% a year over the past five years. Possibly this suggests that markets are not behaving normally at present and further, that the return to their previous behavior might be expressed quite violently. However, the violent increase in dedicated contract carriage is a little surprising, given contract logistics has not shown quite the enormous levels of growth seen, for example, in freight forwarding or airfreight.

It should be remembered that the macro-economic conditions of the US economy also have not been normal. With occasional extraordinary restrictions on the functioning of parts of the economy combined with enormous fiscal expansion, growth has been very strong, focussed disproportionately on certain sectors but also, possibly, unsustainable.

The overall result is that Kearney estimates that at the beginning of 2022, logistics accounted for 8% of US GDP, reversing more than ten years of decline. At 8% the US still has a low-cost logistics base which is a considerable strength for its economy. Even other advanced economies will regularly have logistics costs accounting for one or two percentage points higher than this. However, if the 8% figure were sustained for even a few years, it would represent a considerable fall in the productivity of the US.