The Year in Logistics 2020: Resilience tested

This is an excerpt of the original article. It was written for the December 2020 edition of Supply Chain Management Review. The full article is available to current subscribers.

December 2020

Each December, the focus of the issue is our annual Executive Guide to Supply Chain Resources. This is a comprehensive guide to services, products and educational opportunities targeted specifically to supply chain professionals. But, as with years past, we’re also featuring several articles we trust will give you something to think about in the coming year.

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2020 has been a year like no other in logistics. A global pandemic, and measures taken to reduce its further spread, decimated supply chains, scrambled logistics capabilities and destroyed huge swaths of demand. Although most observers expect an economic recovery, its size, shape and timing remain in question.

Across sectors, conditions challenged shippers and providers alike. Logistics leaders responded to crises—often with prescience, efficiency and a welcome dollop of charm. But in the big picture, three stories emerged. First was the accelerating growth of e-commerce, with particular challenges posed by the shift to home delivery. Second was higher rates, resulting in part from carrier discipline as supply chain disruptions pushed demand into the spot markets. Third, and most important, was the move toward more resilient supply chains. Companies placed a priority on adjusting to and recovering from current and anticipated difficulties. Players across industries have a case to shift from single-source, cost-focused supply functions to embrace more adaptive solutions for an uncertain decade ahead.

The data: 2019’s “normalcy”

The latest official U.S. business logistics costs (USBLC) calculation—by Kearney and the Council of Supply Chain Management Professionals (CSCMP)—is for 2019. It shows that costs rose by just 0.6%, far less than the 2019 inflation rate of 2.3%. Although transportation costs grew by 2.5%, inventory carrying costs fell by 4.6%, thanks primarily to a reduction in the weighted average cost of capital (see Figure 1).

USBLC represented 7.6% of nominal GDP in 2019, down from 7.9% the previous year. Given that 2018’s fast GDP growth and capacity shortages had driven logistics costs to the highest percentage of GDP since 2008, 2019 felt like a return to normal—although it has now proved to be a last hurrah of an “old normal” (see Figure 2).

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