The last week in June, I did my annual review and comment on the 2021 State of Logistics Report from CSCMP and the authors from Kearney consulting.
The headline news: absolute total US logistics - from trucking and warehousing to use of inland waterways - fell sharply on an absolute basis in the odd year that was 2020, down 4.0% to $1.55 trillion.
With a smaller decrease in US GDP (-3.5%) than logistics cost fell last year, that took the relative cost of logistics as a share of GDP to 7.44%, down bit from 7.57% in 2019. (See State of the Logistic Union 2021.)
Gilmore Says.... |
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Companies can't try to adjust to a "new normal," as is often referenced in the media, "because it can't be predicted and may never arrive."
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My column focused on the substantial data available in the report relative to logistics spend and trends, but as usual the report also featured some "special topic" material, which I promised then to summarize, and here quite a few weeks later I am finally delivering on that commitment.
Under a section title "Visibility and Automation," the report states that achieving granular visibility today requires "widely distributed sensors connected by the internet of things (IoT). You also need artificial intelligence and machine learning to help analyze all the information" such systems produce.
I will agree generally that this is where we seem to be headed, but the reality of IoT in the supply chain - like its cousin, if you will, RFID - is that the pace of adoption is extremely slow, while the above text from the report seems to indicate such sensor-based systems and AI data mining are commonplace. Not so.
Touching on the automation side of the section head, the report notes the progress being made in robots in distribution centers, and such concepts as "robots as a service," where you pay for the use of mobile robots rather than acquiring them. That model comes with a corresponding ability to contract for more robots for just some period, for example of course peak season. (Though I have some questions on that model, as I will get to in some future column.)
This section ends rather bluntly by stating "to execute effectively across rising consumer demands, companies must improve supply chain visibility and efficiency across the flow of goods. To do that, they need technology-driven visibility and automation."
My reaction: while I am all for visibility and automation, I believe the reality is a bit more nuanced than that.
Under a section titled "Right Shoring," the report notes that so-called "reshoring" - bringing production back to the US - has never really materialized, as the data clearly show. That even as the business case for reshoring/nearshoring remains strong, the report says.
Nevertheless, it appears companies are now reluctant to throw too many eggs in the China basket - though for many that means moving sourcing to Vietnam, Thailand, or India , not to US soil.
 So the report recommends a "right sourcing" model that involves use of multiple sourcing points. While that will increase resilience, among other advantages, it also means "logistics will become more complicated," the report notes. With lots of sourcing options, logistics strategy and execution must manage greater variability.
Moving on, I liked the title of the "Adapting to the No Normal" section, in which it is observed that companies can't try to adjust to a "new normal," as is often referenced in the media, "because it can't be predicted and may never arrive."
Instead, companies must operate in a state of "permanent now," where the condition is on-going "no normalmacy" that can only be navigated successfully through very high levels of supply chain adaptability.
Next, is it my imagination, or have we seen special sections on logistics "control towers" in previous State of Logistics reports?
Regardless, the report states that building high levels of adaptability means having "optionality" at all times. And to get there, you need to connect large numbers of parties in your extended supply chain network together.
The report says new technology such as "micro services" makes achieving that connectivity within and outside a network - a "control tower" - ever less difficult. And, the report says, customers are increasingly demanding that kind of visibility.
It quotes a supply chain executive from a large consumer products company as saying "In the past we competed on how fast we can move stuff. Now we compete on how fast we can move data."
The report says control towers are evolving to offer a lot more than just logistics visibility, supporting such processes collaborative sales & operations planning with customers and "touchless" vendor managed inventory.
Finally, a section on Sustainability notes that it is often difficult for companies used to measuring supply chains on the basis of cost and quality to add sustainability as another key metric. But thankfully it is imade easier by the fact that many supply chain cost reduction programs, such as reducing miles driven, also lower corresponding CO2 emissions.
Report author Kearney presents its "sustainability framework," suggesting companies can consider three key dimensions: sustainable operations, sustainable services, and sustainable supply.
I would say that's pretty good. We've moved, the report says, from "feel good" sustainability pledges to sustainability as a business necessity, citing many company and sector initiatives.
Ok, I think I'll wrap it up there. These special sections contain some good material, but it's a lot to get through. Hope this summary helped there.
I will note again CSCMP members can download a copy of the report for no charge, and others purchase one for a modest fee. I recommend it.
Any reaction to our summary of this year's State of Logistics special sections ? How could the report be improved? Let us know your thought at the Feedback section below
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