AASHTO Journal

Annual State of Logistics Report Highlights Need for Infrastructure Rethink

According to an annual analysis of the U.S. logistics industry, a "rethinking" of transportation infrastructure may be required sooner rather than later as the ongoing boom in e-commerce activity is starting to reshape supply chains.

"Much of the action in logistics last year revolved around e-commerce, which produced another year of double-digit volume growth," noted Sean Monahan, primary author of the 2018 State of Logistics and a partner at global consulting firm A.T. Kearney. "But as delivery windows shrink, covering the 'last mile' to customers' homes has become a critical and costly priority. There's no denying the need for significant investment in last-mile infrastructure. Before long, infrastructure costs may become a drag on e-commerce growth."

062218SOL3.jpgMonahan (at right) made his comments during a press event in Washington D.C. for the unveiling the annual State of Logistics report, which is sponsored by Penske Logistics and the Council for Supply Chain Management Professionals – a report now in its 29th year of publication.

According to the data analyzed by A.T. Kearney for the report, U.S. business logistics cost jumped 6.2% to more than $1.49 trillion in 2017 compared to 2016; a jump that reflected rising costs in "all 16 sectors" of the logistics industry, including trucking, rail, intermodal, water transport, air freight, and warehousing, among others.

Yet the firm's analysis also emphasized that poor transportation infrastructure could hamstring the logistics industry's ability to move goods efficiently, especially where e-commerce is concerned.

"Surging e-commerce shipments continue to fuel demand for parcel delivery and … highlighting the need for more efficient ways to cover the 'last mile' between shippers and customers," the report said. "As the industry works to solve the last-mile riddle, it's clear that major supply chain adjustments are needed. In any case, improving last-mile capabilities will take time, potentially creating headwinds for e-commerce growth."

Monahan added that with "political obstacles" in the way, large-scale infrastructure funding isn't likely to arrive until late 2019. "In the short term, logistics providers should not expect a sweeping modernization of U.S. infrastructure," he noted. "Modest upgrades in road, rail, and airport infrastructure are likely in the near to medium term."

Monahan also said that as improvement projects "move forward," logistics providers will face "delays on affected routes [but] once new infrastructure in online, travel time and costs related to wear and tear should decline. But without broad infrastructure investments, such expenses will burden logistics firms for the foreseeable future." 

Questions regarding this article may be directed to editor@aashtojournal.org.

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