One of the fascinating takeaways in the 32nd Annual State of Logistics Report is that the growth in right-shoring strategies will bring about more complex logistics networks. And if that prediction proves correct, the report sees an increased demand for real-time, multi-modal visibility to manage those complex networks.
A Picture of US Logistics Activity
The State of Logistics Report is done each year under the auspices of the Council of Supply Chain Management Professional (CSCMP). The report gives a picture of US logistics activity in relation to the overall US economy as well as commentary on trends impacting supply chains.
The report provides a compendium of statistics and information on logistics, transportation, and warehousing in the United States. This year’s 32nd annual report said that US business logistics costs totaled $1.56 trillion or 7.4 percent of $20.94 US Gross Domestic Product (GDP). Business logistics costs represent the sum of business inventory, transportation, shipper-related, and logistics administration costs.
Given the impact of the COVID-19 pandemic on the economy, it’s no surprise that business logistics costs for 2020 fell 4 percent from 2019 levels. That decline was driven by a 15 percent decrease in inventory carrying costs as a result of drops in demand stemming from the impact of the pandemic. (Go here to get the full report. https://cscmp.org/CSCMP/Educat…)
Multi-Shoring on the Rise
This year’s report authors, Kearney Consulting, make the observation that US companies in a bid to develop more resilient supply chains will engage in more multi-shoring as result of their experiences with supply chain disruptions during the COVID-19 Pandemic.
Due to demand surges and supply shortages, managing global supply chains during the pandemic was extremely difficult. . Companies had trouble finding suppliers and getting shipments delivered on time. In particular, importers bringing in products from China suffered shipping delays from reduced ocean shipping capacity and port congestion, resulting in unpredictable lead times for the door-to-door movements of goods.
As result of those problems, the report contends that companies will engage in more right-shoring or multi-shoring. Right-shoring refers to locating a business manufacturing operation or obtaining goods from suppliers in localities that provide the best combination of cost and efficiency. Instead of simply sourcing from China, as has been the practice, companies will look to other countries such as Vietnam, Thailand, or Mexico for manufacturing or a supply base to create “diverse and resilient supply networks.”
Multi-Shoring Adds to Logistics Complexity
In the view of the report’s authors, the move towards right-shoring also means that supply chains will become more multi-modal and multi-node. That means companies will need to expand their freight monitoring to track multiple shipments traveling on multiple modes from multiple destinations. As the report notes, “The outcome is greater complexity to be managed, and a higher-profile role for logistics in helping shippers achieving resilience.”
Visibility Required to Manage Complexity
With this added complexity comes the need for enhanced visibility over transportation movements to coordinate shipments. As the report states, right-shoring and multi-shoring efforts “will also increase demand for visibility across logistics segments, and for the technology that can provide such visibility.”
At project44, we couldn’t agree more.