I am back this week with Part 2 of my summary and comment on CSCMP's State of Logistics Report for 2023 - a repository of a vast amount of information and data across logistics as a whole, key issues, and by individual modes, from watersways to trucking.
Last week, I summarized some of the key data from the report (authored by Kearney consultants), starting the headline news that what the report several years back started calling US Business Logistics Costs (USBLC) rose sharply on an absolute basis in 2022 to $2.3 trillion. That was an increase of a huge 19.6% from 2021.
With a smaller increase in US nominal GDP (9%) than logistics costs rose last year (19.6%), that took the relative cost of logistics as a share of US GDP to a record 9.1% in 2022, up significantly from 8.0% in 2022, which was up big from 2021. (See State of the Logistics Union 2023.)
Gilmore Says.... |
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The report says a new paradigm is needed, observing that companies are "not only deploying tech to improve total productivity, but also to better compete for human talent.
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This week, I am going to summarize some of the themes and special topics in this year's report.
The sub-title of this year's report is "the Great Reset."
So what does that mean?
In the introduction, the report says that it is time to rethink relationships between shippers and carriers and other logistics service providers - especially when some shippers feel carriers were gouging them in 2021 and some of 2022, when supply chain disruptions sent freight and cargo rates soaring.
Time to put those hard feelings away, the report says.
To that end, "It's becoming increasingly clear that shippers and carriers are unified by a need to think more seriously and proactively about building strategic capability - to not rely so heavily on temporary [current] market stability, and to instead focus on building the agility to respond effectively to whatever disruption erupts," as the report puts it.
Then in the executive summary, the report states that thoughtful executives are seizing this moment for "a revisiting of former arrangements, some of them overtaken by recent events, some of them cobbled together rather hastily amid the confusions of the pandemic," adding "It is time to get clear about what is working now, and what is needed ensure resilience for an uncertain future."
Switching gears, the report introduced two new "special topics" discussions.
The first was on the subject of logistics network trends. The report says that "Traditionally, network strategy has been synonymous with analytical exercises aided by off-the-shelf network optimization software to optimize product flow paths, routing, logistics modes, and logistics providers, all with a focus on short-term cost reduction or service improvements."
I am not so sure that most networks designs are so short-term oriented, but let's go with this flow.
This mindset results in the following network design issues, the report says:
Overemphasizing the tactical at the expense of the strategic
Thinking in silos: succumbing to the common fallacy that all logistics and distribution problems are solvable within logistics and distribution alone, when in fact the most challenging logistics issues are cross-functional and require thinking across the enterprise and throughout the end-to-end supply chain
Underestimating the magnitude of change
Instead, the report said, companies need a long-term planning philosophy -"networks 2030."
My view: often some event, such as an acquisition, triggers a network design exercise, while the growth of ecommerce has led many companies to change their networks, some radically.
The reality, I believe, is that you need to balance the tactical - because there are often immediate savings opportunities - with the strategic.
In summary, the report says, "rethinking logistics networks is no longer a recommended action, but an imperative." I would largely agree.
This section was OK, but I would like to have seen a little more insight into getting this challenging effort done right (planning and execution).
 In a section on logistics labor, the report notes that "To put it bluntly, there simply aren't enough longshoremen, long-haul drivers, package handlers, and other workers to keep the logistics industry rolling" - and that is not likely to change soon, given an aging workforce and other factors.
The report introduces a new concept to me: an employee value proposition (EVP) framework. That framework includes compensation and benefits of course, but also: nature of the work; culture and relationships; development opportunities; work/life integration; and purpose and meaning.
I certainly agree today's white and blue collar workers are increasingly seeking and even demanding improved offerings in these non-monetary dimensions of the job. Warehouse staffing firm ProLogistix, for example, recently found DC workers now rate schedule flexibility almost as much as wage level in terms of deciding where to work.
Similarly, the report says that "We are seeing companies pursuing differentiated strategies related to the EVP framework, such as significantly improving their onboarding and training procedures, managing schedules with greater responsiveness to worker needs, and finding better ways to align work with the company's core purpose and mission."
Automation is an obvious response and that is happening, but the report says a new paradigm is needed, observing that companies are "not only deploying tech to improve total productivity, but also to better compete for human talent by improving the overall labor experience, such as increased safety or more flexible work scheduling."
The section concludes by noting that "those companies that choose to pursue traditional worker retention strategies will increasingly find themselves competitively disadvantaged in the market for talent."
This was a better discussion than the network trends section.
I think I will leave it there. There is still a lot of the report to wade through, and I may be back with one more look.
Again, CSCMP members can download a copy for no charge, and others can purchase one for a modest fee. I recommend it.
Any reaction to our summary of this year's State of Logistics Part 2? How could the report be improved? Let us know your thought at the Feedback section below.
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