Proof of the severity of the U.S. economic contraction last year is abundant in CSCMP's 21st Annual "State of Logistics Report," appropriately titled "The Great Freight Recession."
If you really needed more proof of the severity of the U.S. economic contraction last year, you can find it in the 21st Annual "State of Logistics Report," appropriately titled "The Great Freight Recession." According to the report, U.S. business logistics costs plummeted to $1.1 trillion in 2009, a decrease of $244 billion from 2008.
The benchmark industry ratio—U.S. logistics costs as a percentage of Gross Domestic Product (GDP)—hit a record low of 7.7 percent, the lowest point ever recorded in the 30 years that data has been collected. In the past, a low ratio signified that American logistics managers were doing a good job controlling costs and efficiently moving and storing goods. But last year, that number slipped for a different reason. As the volume of goods produced in the United States declined, so did the amount of tonnage to be shipped, thus dragging down logistics spending.
The State of Logistics Report presents the findings of the only long-term study that attempts to quantify the size of the transportation market and the impact of logistics on the U.S. economy. The report breaks expenditures into three key segments: inventory-carrying costs, transportation, and administration.
This year's report pegged inventory-carrying costs at $357 billion in 2009—a notable 14.1-percent drop from 2008. The decline stemmed from both a 4.6-percent decline in inventory holdings and a 10-percent cut in the inventory-carrying rate, which reflected a near-zero cost for credit.
Transportation costs totaled $542 billion for trucking and $146 billion for air, water, and railroad transportation combined. Other costs included $9 billion in shipper-related expenditures and $42 billion for logistics administration expenses.
Rosalyn Wilson authored the report on behalf of the Council of Supply Chain Management Professionals under sponsorship from Penske Logistics.
The North American robotics market saw a decline in both units ordered (down 7.9% to 15,705 units) and revenue (down 6.8% to $982.83 million) during the first half of 2024 compared to the same period in 2023, as North American manufacturers faced ongoing economic headwinds, according to a report from the Association for Advancing Automation (A3).
“Rising inflation and borrowing costs have dampened spending on robotics, with many companies opting to delay major investments,” said Jeff Burnstein, president, A3. “Despite these challenges, the push for operational efficiency and workforce augmentation continues to drive demand for robotics in industries such as food and consumer goods and life sciences, among others. As companies navigate labor shortages and increased production costs, the role of automation is becoming ever more critical in maintaining global competitiveness.”
The downward trend was led by weakness in automotive manufacturing, which traditionally leads the charge in buying robots. In the first half of 2024, automotive OEMs ordered 4,159 units (up 14.4%) but generated revenue of $259.96 million (down 12.0%). The Automotive Components sector was even worse, orders 3,574 units (down 38.8%) for $191.93 million in revenue (down 27.3%). Declines also happened in the Semiconductor & Electronics/Photonics sector and the Plastics & Rubber sector.
On the positive side, Food & Consumer Goods companies ordered 1,173 units (up 85.6%) for $62.84 million in revenue (up 56.2%). This growth reflects the increasing reliance on robotics for efficiency in food processing and packaging as companies seek to address labor shortages and rising costs, A3 said. And the Life Sciences industry ordered 1,007 units (up 47.9%) for revenue of $47.29 million (up 86.7%) as it continued its reliance on robotics for efficiency and precision.
Dockworkers at dozens of U.S. East and Gulf coast ports are returning to work tonight, ending a three-day strike that had paralyzed the flow of around 50% of all imports and exports in the United States during ocean peak season.
The two groups “have reached a tentative agreement on wages and have agreed to extend the Master Contract until January 15, 2025 to return to the bargaining table to negotiate all other outstanding issues. Effective immediately, all current job actions will cease and all work covered by the Master Contract will resume,” the joint statement said.
Talks had broken down over the union’s twin demands for both pay hikes and a halt to increased automation in freight handling. After the previous contract expired at midnight on September 30, workers made good on their pledge to strike, and all activity screeched to a halt on Tuesday, Wednesday, and Thursday this week.
Business groups immediately sang the praises of the deal, while also sounding a note of caution that more work remains.
The National Retail Federation (NRF) cheered the short-term contract extension, even as it urged the groups to forge a longer-lasting pact. “The decision to end the current strike and allow the East and Gulf coast ports to reopen is good news for the nation’s economy,” NRF President and CEO Matthew Shay said in a release. “It is critically important that the International Longshoremen’s Association and United States Maritime Alliance work diligently and in good faith to reach a fair, final agreement before the extension expires. The sooner they reach a deal, the better for all American families.”
Likewise, the Retail Industry Leaders Association (RILA) said it was relieved to see positive progress, but that a final deal wasn’t yet complete. “Without the specter of disruption looming, the U.S. economy can continue on its path for growth and retailers can focus on delivering for consumers. We encourage both parties to stay at the negotiating table until a final deal is reached that provides retailers and consumers full certainty that the East and Gulf Coast ports are reliable gateways for the flow of commerce.”
And the National Association of Manufacturers (NAM) commended the parties for coming together while also cautioning them to avoid future disruptions by using this time to reach “a fair and lasting agreement,” NAM President and CEO Jay Timmons said in an email. “Manufacturers are encouraged that cooler heads have prevailed and the ports will reopen. By resuming work and keeping our ports operational, they have shown a commitment to listening to the concerns of manufacturers and other industries that rely on the efficient movement of goods through these critical gateways,” Timmons said. “This decision avoids the need for government intervention and invoking the Taft-Hartley Act, and it is a victory for all parties involved—preserving jobs, safeguarding supply chains, and preventing further economic disruptions.”
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.