Businesses Spent Record Amount on Transportation & Logistics Last Year

As demands increase right alongside the associated costs of shipping, transportation and logistics, American businesses are spending record-setting amounts to ensure that customer goods are delivered accurately and on schedule.

In fact, according to a report from the Council of Supply Chain Management Professionals, last year saw a more than 6 percent increase overall in logistics spending.

How much did businesses spend?

The Wall Street Journal, citing the Council's annual State of Logistics report, noted that U.S. companies spent a staggering $1.5 trillion on transportation and logistics costs in 2017, the highest amount ever seen in this category. This represents a more than $250 billion increase compared to 2008 shipping and logistics spending.

"U.S. companies spent a staggering $1.5 trillion on transportation and logistics costs in 2017."

What's driving the increase?

A number of factors contributed to the record-breaking spending taking place in this market, including:

Increasing customer demands: It goes without saying that the rise of e-commerce, as well as of the logistics needs of B2B organizations, have driven up transportation, warehousing and logistics requirements across the board. This is the case on both the national and international scale.

Rising service costs: In addition to shipping more goods than ever before, businesses are now paying more to support these services. According to the State of Logistics report, shipping and logistics organizations are having to charge more not only to keep up with increasing demands, but also due to rising interest rates and fuel costs. Other cost increases stem from logistics firms' desire to offset rising tariffs on specific imports.

What's more, as The Wall Street Journal's Erica E. Phillips pointed out, shipping and logistics providers were also heavily impacted by natural disasters, causing prices to increase even more.

"Freight rates [jumped] late last year, during and after the hurricanes in the U.S. Gulf Coast states and Puerto Rico," Phillips wrote.

Prices continue to rise

In addition, a federal mandate requiring electronic devices for monitoring and limiting drivers' time behind the wheel has made resources and capacity especially tight. Under these conditions, average mile rates have risen between 20 and 30 percent, according to industry expert David Broering. And with the global logistics market on track to surpass a value of $15.5 trillion by 2023, businesses will need to keep a close eye on their spending. 

Logistics costs are on the rise, and companies need a better way to maintain control over their freight spending.

Lisa Harrington, president of supply chain consultant firm The Lharrington Group LLC, noted that having broad relationships with carriers will be the key to navigating this marketplace and controlling spending.

"If I don't have those relationships in place, it's going to be fire drills to get my freight to market," Harrington said.

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Supporting carrier relationships with a robust TMS

One of the best ways to enable carrier partnerships and control shipping and logistics costs is with a robust transportation management solution (TMS), like FreightPOP.

FreightPOP enables companies to add and work with their preferred carriers, even within multi-carrier shipments. Combined with efficient rate-shopping capabilities, this means businesses can compare all their options to get the best price, while having granular visibility and control over their shipping and logistics activity. 

With shipping and logistics costs on the rise, organizations need a way to keep their spending in check. To find out more, connect with the experts at FreightPOP about our industry-leading TMS software today.