absorbed “painful” rate hikes, managed to preserve service
levels and to keep disruptions at bay, the authors wrote.
LOGISTICS COSTS RISE
Overall, after declining in 2016 for the first time since 2009,
U.S. business logistics costs climbed 6. 2 percent in 2017.
Logistics costs as a percentage of gross domestic product
(GDP) rose to 7. 7 percent last year from 7. 6 percent the
prior year. The report’s three main components—
transportation, inventory-carrying costs, and so-called “other”
expenses, such as administration—rose substantially.
Transportation costs increased 7 percent, led by intermodal. That was followed by dedicated contract carriage,
which spiked by 9. 5 percent as more shippers demanded
capacity assurance, and parcel and express, which rose 7
percent. Truckload and less-than-truckload (LTL) costs
rose 6. 4 percent and 6. 6 percent year over year, respectively,
according to the report. Only waterborne freight, with an
increase of just 1. 1 percent, came in below the 3-percent
threshold for year-over-year gains.
Inventory-carrying costs climbed 4. 6 percent over prior-year figures, paced by a 5-percent gain in borrowing
costs as interest rates climbed, according to the report.
Physical storage costs rose 4. 2 percent as demand for facil-
ities to support e-commerce fulfillment and distribution
continued apace, the report said. The driver shortage has
forced many shippers to push goods closer to end custom-
ers in order to meet fulfillment and delivery commitments,
according to the report. This, in turn, has increased inven-
tory levels and reduced warehouse capacity, thus driving up
inventory and storage rates.
In a sober assessment of the long-running problems
between shippers and their 3PLs, the focus between the
two still remains on cost cutting rather than on building
mutually beneficial relationships, according to the report.
Blame can be found on both sides: Shippers expect 3PLs
to meet unrealistic implementation milestones and perfor-
mance standards, while 3PLs avoid the risk of developing
premium-priced and customized solutions for fear of los-
ing price-sensitive customers, and then wonder why ship-
pers dissatisfied with 3PL cookie-cutter solutions regularly
rethink the idea of bringing logistics activities in-house.
In a climate of ever-increasing end user demands, shipper
and 3PL executives can’t afford to give up on collaboration,
the report said. For their part, shipper and 3PL executives at
the June 19 event said the problem isn’t grounded in mutual
distrust but in the failure to have the right conversations. As
Joe Carlier, Penske Logistics’ senior vice president of global
sales, put it, the dialogue shouldn’t focus on “here is the rate
for this,” but on “here’s what I can do” for your spending.
