sc digest
June 22, 2017 - Supply Chain Flagship Newsletter

This Week in SCDigest

bullet State of the Logistics Union 2017 bullet SC Digest On-Target e-Magazine
bullet Supply Chain Graphic & by the Numbers for the Week bullet Holste's Blog/Distribution Digest
bullet Cartoon Caption Contest Winners bullet Trivia      bullet Feedback
bullet New Expert Column and Supply Chain by Design bullet On Demand Videocasts

New Report

Supply Chain Executive Brief: How Distributed Order Management (DOM) 
and WMS Work Together to Power Omnichannel Supply Chains



Satish Kumar from Softeon and Kevin Hume from Tompkins International
Answer Key Questions on DOM and WMS



first thought


Supply Chain Graphic of the Week
Will Long Stretch of Flat Truckload Rates in US End Soon?


Drayage Drivers at Port of Los Angeles being Abused?

Chinese Manufacturers Can't Buy Robots Fast Enough
Which US Regions Adding Most Manufacturing Jobs
Drones and Weather Forecasts


May 15, 2017 Contest

See Who Took Home the Prize!

Holste's Blog: E-Commerce & Next Day Delivery Go Hand-in Hand

Supply Chain Executive Brief: How Distributed Order Management (DOM)  and WMS Work Together to Power Omnichannel Supply Chains

Satish Kumar from Softeon and Kevin Hume from Tompkins International
Answer Key Questions on DOM and WMS


Weekly On-Target Newsletter:
June 21, 2017 Edition

Last Chance Cartoon, WMS Walking Dead? 10 mpg Truck? Top Mnfg Areas and more


This White Paper Discusses the Big Five Elements for Sourcing: Production Facilities, Raw Material Sources, Labor Pool, Logistics and Export Capabilities and Infrastructure.

WMS Vendors - the Walking Dead

by Mark Fralick

Four Supply Chain Lessons from the Amazon book The Everything Store

by Dr. Michael Watson

Great Expectations: Supply Chain Flexibility

by Gary M. Barraco
Global Product Marketing
Amber Road


US manufacturing employment is currently about $12.4 million. What was the peak year – and how many?

Answer Found at the
Bottom of the Page

State of the Logistics Union 2017

The annual State of Logistics report is just out again with much fanfare from CSCMP, with the headline news that overall relative US logistics costs were modestly down for the third straight year in 2016, to 7.5% of GDP from the 7.84% seen in 2015.

Importantly, a revision to how the data is compiled first implemented last year has in fact taken that metric down noticeably from the numbers in previous years. Before the change, for example, logistics costs were said to be 8.4% of GDP in 2014, versus the 7.89% estimated in this year's version.


The total cost of US logistics was estimated at $1.392.6 trillion for 2016, $20 billion or so below 2015 costs under the new calculation.


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I still can't find the details as to how and why the data was revised, but the good news is that the report went back and redid the numbers for the last 10 years using the new methodology. While the numbers are now lower by roughly half a percentage point each year than they had been calculated previously - meaning logistics costs are a lower burden on the US economy than previously thought (all told a good thing) - the changes in percentage terms year-over-year seem about the same even at the new lower absolute levels, so the big picture of the trends seems mostly unaffected.

The peak year in the past decade - as it was under the previous calculation - was 2007, when logistics costs hit 8.59% of GDP.

I will note in passing that in many years some media commentators have opined that dropping logistics costs as a share of GDP is a bad thing, which of course is nonsense unless you are a carrier or perhaps a 3PL. Countries with immature logistics systems have a much higher share of GDP devoted to logistics than does the US - though I will add that such decreases in logistics costs often does result from a weak overall economy.

This now the second report from consulting firm AT Kearney since it took over authorship of the report after a competitive bidding process by CSCMP two years ago. The lead author is Kearney's capable Sean Monahan along with a number of his colleagues, but a number of contributors from industry were also called out (e.g., Dupont's Miguel GonzalezCharles Clowdis of IHS Markit, among several others).

This represents the 28th edition of the report, which was launched in 1988 by the late Bob Delaney and sponsored by his company, Cass Information Systems. Somewhere along the way, CSCMP took over the sponsorship, and in the late 1990s Rosalyn Wilson, who has a long career in the logistics industry, began to support Delaney in his efforts. Upon Delaney's passing a few years later, Wilson took on the challenge alone, largely keeping the existing methodology, heading the report until Kearney took on the job in 2016.

Again this year, Penske Logistics funded the report development, and the results were as usual released at a major media event at the National Press Club in Washington DC on Tuesday. I almost made it, but was thwarted by a much delayed flight.


There is no question that again this year we have a much more modern looking and better formatted document, with high quality graphics, though in the end it largely plows the same ground as previous reports but with more polish.


That said, even more so this year the report tries to combine a look at the data from 2016 - now almost six months old - with a fresh insight on trends so far in 2017. This is a tough mission that the report accomplshed pretty well, though I expect this will evolve over time. I have some ideas.

The report notes that actual US business logistics costs (for which we now get the new acronym USBLC) actually fell in absolute terms in 2016, dropping 1.5% year-over-year. That is a big change, with absolute logistics costs rising by an average of 4.6% annually between 2010 and 2015, fueled mainly by 3.6% annual growth in transportation costs. Keep in mind the report deals exclusively with nominal costs, not so called "real" changes that are adjusted for inflation.

So, simple to say, harder to calculate, you take the number for US logistics costs and divide it by annual nominal GDP numbers and voila, logistics costs as a percent of GDP emerges. The methodology must use nominal not real GDP as the denominator because the costs for the year are compiled in nominal terms.

The decline in USBLC in 2016 was broadbased. Transportation costs - the largest single component of USBLC at 64.2%  of the total - fell by 0.7% in absolute terms in 2016. The second component, inventory carrying costs (29.4% of the total), fell a significant 3.4% last year despite rising rates for warehouse space, as the cost of capital (which drives the cost of holding inventory) fell sharply during the year. "Other" costs - always somewhat vague and mostly related to certain IT expenses - were down 2.0%, though this is by far the smallest of the three categories at just 6.3% of the total number.

The total cost of US logistics was estimated at $1.392.6 trillion for 2016, $20 billion or so below 2015 costs under the new calculation. It includes things like pipelines and inland waterways in addition to more common cost buckets.

Within transportation, trucking-related spend (including private fleets but excluding parcel) comprise 66.6% of total transport costs and 42.7% of total logistics spend. Parcel was broken out for the just the second time this year as a separate cost category - logical given the rise of ecommerce- and estimated at $86.3 billion in total, or 9.6% of transport costs (up from 9.2 in 2015) and 6.2% of total logistics spend.

At $71.9 billion in 2016, rail comprises 8.0% of transportation spend and 5.1% of the total logistics costs. Rail spend was down sharply last year, mostly due to plummeting coal volumes.

One thing I cannot find again in this year's report that I liked in the past was a breakdown between "local” versus" intercity” transport costs - not sure if it is just gone or buried somewhere I haven't found yet.

In terms of growth in spending by these various categories, the 5-year average annual growth rate in costs by mode or cost category are as follows, according to the report:

Truckload: 4.3%
LTL: -1.2%%
Private/dedicated fleet: 5.7%
Trucking combined: 4.3%
Parcel: 6.4%
Intermodal: -0.5%
Rail total: -1-1%
Air freight: 2.3%
Inventory carrying/warehouse costs: 0.5%

With overall logistics cost rising 2.6% per year over the past five years, comparing the rise in any specific area versus that 2.6% overall number will indicate whether it is gaining or losing share of total spend.

Trucking, for example, is still gaining in share of spend versus rail, while truckload and parcel are gaining share versus LTL. I am very surprised intermodal costs have been averaging less than GDP or overall logistics spend growth. Inventory carrying costs are flat, again the result of lower interest rates even as storage costs are up (3.6% annual growth over 5 years) and inventory-to-sales ratio levels are rising modestly over 5 years until the second half of 2016 saw a downward trend. 

The report has a lot more detail on each mode and cost bucket, as well as the overall economic and logistics environment, which I don't have room for here.

The 2017 report again has a decent amount of overall commentary on the current environment, under the theme of what it calls "accelerating into uncertainty." The sense of that is that there are so many unknowns out there, such as the direction of the economy, where global trade is headed, the regulatory environment, and more, at one level the smart move would be to hunker down on logistics investments until the path forward is more clear. 

But it may never be clear, and falling behind in this era of great logistics innovation is a recipe for losing competitive advantage or worse.

On that same theme, I liked this chart from the report, which shows what it calls an "innovation grid" that positions a variety of new age technologies based on their likely timeframe of being ready for prime time versus their impact on logistics.

So, a good effort again by Kearney and CSCMP. I would like to see a bit more commentary on what the data as a whole is telling us, beyond all the detail for individual cost buckets, but I am sure we will see improvements over time after this solid second edition under AT Kearney's stewardship.

CSCMP members can already download a copy for no charge, others purchase one for a modest cost.

Any reaction to our summary of this year's State of Logistics Report? Do you like the new style?  How could it be improved? Let us know your thoughts at the Feedback button below.

View Web/Printable Version of this Column

On Demand Videocast:

How DOM and WMS Work Together to Power Omnichannel Supply Chains

Experts from Tompkins International and Softeon Set the Record Straight in Fast Paced, Q&A Format

This discussion will be based on an outstanding new "Executive Brief" on this same topic, developed jointly by Kevin Hume of Tompkins International and Satish Kumar, a vice president at Softeon.

Featuring SCDigest editor Dan Gilmore, Kevin Hume of well-known consulting firm Tompkins International and Satish Kumar, a vice president at Softeon.

Available On Demand

On Demand Videocast:

New Cloud WMS Solution is Game Changer for Warehouse Management Deployment and Flexibility

New Technology and Deployment Approach Offer a Simply Better Way to WMS Implementations - Learn How

In this outstanding Videocast, we will cover the latest in each-picking robotics, co-bots, artificial intelligence, autonomous vehicles, sensors, drones and droids.

Featuring  Dan Gilmore, Editor, along with Mark Hawksley and Bruno Dubreuil of TECSYS, a leading provider of WMS solutions.

Available On Demand

On Demand Videocast:

Innovation in Shipper-3PL Relationships Benchmark Study Results

New Research will be Unveiled from SCDigest and JDA On This Increasingly Important Topic

In this outstanding broadcast, SCDigest and JDA recently completed new research study on innovation in shipper-3PL relationships, with the goal of obtaining the perspectives of both shippers and service providers on this increasingly important topic. All registrants will be sent a copy of the report will all the data shortly after the Videocast.

Featuring SCDigest editor Dan Gilmore and Danny Halim and Lori Harner of JDA.


Available On Demand


Some of the many emails we received on SCDigest Editor Dan Gilmore's column on Irrational Shipping Prices and the Demise of Brick and Mortar Retail and Reader Respond - Irrational Shipping Prices and the Demise of Brick and Mortar Retail.

More soon.

Feedback on Irrational Shipping Prices and the Demise of Brick and Mortar Retail Parts 1 and 2


Great article by Dan Gilmore, I think he's spot on with his commentary. The state of brick & mortar retailers is hard to watch from a consumer's standpoint versus and investor standpoint. When it comes to apparel, for the most part I personally I have to feel it, touch it, and try it on. Certain on-line purchases make sense and are extremely convenient. I guess it comes down to comfort level and how tech savvy the consumer tends to be with technology.

It will interesting to see how things play out with Amazon and their quest to dominate the world's global supply chain. When does it stop or does it ever stop? Will the success/failure continue to be investor driven, consumer driven or both?

I look forward to reading Dan's future columns and appreciate the opportunity to provide feedback. Wishing SC Digest much continued success in 2017 and beyond.

John L. Antonucci
VP Corporate Accounts
721 Logistics LLC


While I see the truth in what you are saying generally, I think you are being a bit too broad. Retail is surely suffering in some places, and some malls are having tough times. But I think it is tied more to the geo and the forward thinking of retailers. Most should have joined the on-line bandwagon sooner rather than worrying about B&M operations losing out. Most should have figured out how to incorporate the stores (kiosks, store pickup, etc.). I love that I can order from Walmart (and others) online and pick my order up at the store 1 mile away in 2 hours or less. Most should have figured out the Gen X and Millennials a long time ago.

On the subject of malls and geo. Consumers like the trick, new thing. Upgrade your mall (and your thinking) and you may find a real winner.

I live in the Salt Lake City area - a pretty tech savvy place (Ogden, Salt Lake, Provo). Recently the LDS church opened a new downtown (City Creek) mall to rave reviews and lots of business. There is a suburban mall (Fashion Place) which is almost too busy to visit with a soon to open, very large Macy's plus Nordstrom, Dillard's (replaced Sears), Crate & Barrel and many other high end stores. Fashion Place has been around for 50 years and has recently been revitalized to focus on a more selective (high income, young) market.

Another recent success is the Valley Fair Mall - which has been revitalized. Another downtown mall that was extremely popular until City Creek opened was the Gateway. Gateway (an open outdoor type mall) is going through modernization (although it is less than 20 years old) to better compete with City Creek.

A common feature of the successful locations seems to be the Apple Store. Hip, young (or young at heart) shoppers seem to enjoy good shopping, good food and features that appeal to them. Apple was at Gateway until City Creek opened.

Older malls and retail need to take notice.

Steven R. Murray
Supply Chain Visions

Editor's Note:

I think you are missing a few critical few points:

What would happen to ecommerce sales if appropriate pick pack and ship costs were charged?

Items in store should actually be priced lower than online products, because the costs are way lower - but they are not.

Because these things, brick and mortar woes, and the unbelievable change ecommerce is bringing, is happening much faster than it should.

Someday, these costs will have o be charged. They simply must be.

Dan Gilmore





Great article, really interesting perspective on how Amazon may be accelerating the penetration of ecommerce.

I would contest one statement you make about the price of typical goods, and that in most cases they should be priced cheaper than ecommerce. I understand the point you are making, that shipping costs are built into the in-store price but are not being built into the ecommerce prices yet; however, there are other brick and mortar costs (facilities, rent, equipment, labour, etc) that need to be built into an in-store price - many of these represent costs that ecommerce avoid completely. To me, these costs are material, and comprise the basic essence of why ecommerce is winning.

Mark Johnston



I do agree with Gilmore!

On this track, I read not so long ago that about 90% of new business strategies fail. Further, that it is typical to find that there's something that will work arising out of the failure, thus it is wise to maintain resources in reserve to apply in support of that successful element going forward. There are many stories of massive all-in, bet-the-farm commercial disasters. The other salient observation offered was that long term success was more often achieved by strategies that started small and achieved profitability early and then leveraged to gain share vs. those that stressed rapidly building market share at a loss from the start while striving to cross some far off break-even tipping point.

By appearances, Amazon's journey seems like it falls prey to the considerations above. Maybe they made some money early on when they only sold books. Since then, my sense is that it's been 2% or less profit or losses, and should revenue growth sputter- look out?

Meanwhile Mass Merchants and other retail leaders are dealing with the disruption, and from what I can tell, are mighty worried and not just a little grumpy about dealing with all the challenges associated with Omni channel.

Meanwhile, the ‘music continues to play'.

Tom Miralia
Distribution Technology



Q: US manufacturing employment is currently about $12.4 million. What was the peak year – and how many?

A: 1979, at 19.5 million.

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