Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
One word could best sum up the state of the U.S. logistics industry last year.
Ugly.
The cost of operating the nation's business logistics system declined in 2009 to $1.1 trillion, an 18.2-percent drop from 2008 levels and the steepest year-on-year fall since record keeping began in 1981, according to the annual State of Logistics Report released today in Washington, D.C.
In all, business logistics costs last year declined by $244 billion over 2008, the report said. In the past two years, logistics costs fell by almost $300 billion, with most of 2008's drop occurring after the financial crisis hit in September and U.S. and world economies went into virtual free-falls.
The 2009 numbers mark a sharp turnabout from the 2003-2008 period, when logistics costs rose in aggregate by 50 percent as the nation recovered from the relatively brief and modest recession of 2000-01.
Logistics costs measured as a percentage of U.S. gross domestic product (GDP), a closely watched metric of the supply chain's relevance to the nation's output of goods and services, dropped last year to 7.7 percent. That key ratio also hit a level not seen since data has been kept.
In prior years, a level below 10 percent would have been hailed as a positive trend, an indication the supply chain was operating in a productive, efficient, and cost-effective manner. In the early 1990s, for example, the logistics community celebrated when the level fell into the single digits for the first time.
Last year's decline was a different story, however. As the recession forced virtually every company in the supply chain to slash expenses, shipment levels declined and freight rates plunged.
Transportation costs fell a staggering 20.2 percent year over year, according to the report. Trucking, which constitutes 78 percent of the report's transportation component, posted a decline of 20.3 percent, according to the data. The other transportation modes checked in with an even worse 20.5 percent drop, the report said.
Silver lining?
The one glimmer of good news was that historically low interest rates held down the costs of carrying inventory. Inventory carrying costs fell 14.1 percent last year, paced by a nearly 10-percent drop in the level of interest rates charged to carry the goods, the report said. The level of physical inventory dropped 4.6 percent year over year, the report said.
Unlike the 2000-2001 recession when businesses began shedding inventories almost immediately, inventory levels during the recent downturn continued to climb until the recession's mid-point in mid-2008, only to begin falling in the second half of the year and through the first three quarters of 2009, the report said. From mid-2008 through September 2009, inventory levels dropped 12.6 percent, according to the data.
U.S. businesses liquidated $305 billion of inventories in the second and third quarters of 2009 alone as the financial crisis led to a sharp plunge in orders and as businesses unable to obtain short-term financing due to a freeze in credit markets began dumping their existing stock. To make matters worse, orders placed months before the downturn took hold were not fulfilled and delivered until well into the recession and after market conditions had dramatically changed, the report said.
Rosalyn Wilson, the report's author, said a modest improvement in 2009's fourth quarter could not offset "very bad" economic conditions especially in the first half of the year. Wilson said most of U.S. transport, notably trucking, had already been suffering through a freight recession before the downturn overtook the entire economy.
While activity so far in 2010 has picked up substantially, Wilson said in an interview before the report's release that the good current results are "only helping us regain ground lost, not grow."
The report, the 21st edition, was sponsored by Penske Logistics and by the Council of Supply Chain Management Professionals.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including 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 British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.