US logistics inflation remains high despite 11% drop in costs

U.S. business spending on logistics services dropped 11% in 2023 to $2.4 trillion as supply chains normalized in the wake of massive disruption caused by the COVID crisis, according to the “State of Logistics” report from the Council of Supply Chain Management Professionals released on Tuesday.

Logistics costs are still relatively high after rising 22.4% in 2021 and nearly 20% in 2022 from a baseline of $1.5 trillion prior to the pandemic.

More significantly, the ratio of business logistics costs to nominal U.S. GDP last year was 8.7%, compared to 9.1% in 2022 and 7.7% in 2019. The lower the ratio, the more efficient the country’s logistics system because the cost of moving goods consumes a smaller piece of the total economic pie. Between 2012 and 2019, the ratio of logistics expenses to GDP only ticked above 8% one time.

The report, compiled by Kearney, said there is increasing recognition among logistics executives that volatility is the normal condition for supply chains, which makes it critical to have a robust, flexible transportation and warehousing network. Many shippers and logistics service providers have not meaningfully invested in technology and assets that make it possible to minimize disruption, such as longer transits circumnavigating Africa to avoid Houthi rebel missile attacks in the Red Sea or low water levels in the Panama Canal limiting voyages, by pivoting to alternative freight services, they said.

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