Report: U.S. logistics costs fall in 2016 after five years of growth

The average U.S. logistics cost for shipping goods fell 1.5 percent last year after growing at a 4.6 percent compound annual rate from 2010 to 2015, according to the annual State of Logistics Report released Tuesday by the CSCMP and A.T. Kearney.    The average U.S. logistics cost for shipping goods in 2016 fell 1.5 percent compared with the previous year after growing at a 4.6 percent compound annual rate from 2010 to 2015, according to the annual State of Logistics Report released Tuesday by the Council of Supply Chain Management Professionals and A.T. Kearney and presented by Penske Logistics.
   Falling rates were experienced among the surface transportation modes, as well as a softening of inventory carrying costs.
   “The declines reflect overcapacity, slack volumes, and rate pressures in several sectors, even as demand and prices rose in others,” the report said.
   Although overall transportation costs dropped 0.7 percent last year, the report noted that spending on package delivery services due to the rise of e-commerce transactions increased 10 percent.
   “Parcel and express delivery has surpassed railroads as the second-largest logistics sector behind motor freight,” the report said.
   CSCMP and A.T. Kearney said 2017 could be a “pivotal” year for the shipping and logistics industries.
   “Demand patterns are shifting, technological advances are altering industry economics, and new competitors are challenging old business models,” they wrote. “This year could bring significant moves that reshape individual sectors and even then industry as a whole. Major business combinations, large-scale shifts in distribution flows, deep capacity cuts, massive infrastructure investments—anything is possible.”
   Yet, the report warned that the current economic and political uncertainty leaves many shippers and transportation and logistics industry executives concerned about whether the year’s end will be punctuated positively by an upswing in freight business and rates.
   “An array of mixed signals vexes decision-makers, who see consumer confidence rise while GDP growth disappoints, and government officials struggle to take clear action related to stimulating growth, addressing infrastructure requirements and trade policy,” CSCMP and A.T. Kearney said.
   “The logistics industry appears destined for a prolonged bout of cognitive dissonance, coupling frustration over subpar growth with the optimism reflected in rising stock market values, technology investments, and consumer confidence data.”