1.
Accelerating into Uncertainty
10 Key Takeaways

2.
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With significant moves reshaping logistics
sectors and perhaps the entire industry, 2017
could turn out to be a pivotal year. Demand
patterns are shifting as technological advances
alter industry economics, creating opportunities
for new competitors to challenge old business
models. Here are the 10 Key Takeaways
from the 2017 State of Logistics Report.
2017 State of Logistics Report: Accelerating into Uncertainty

3.
1. Macroeconomics:
optimism in our minds
but uncertainty
in the books.
2017 State of Logistics Report: Accelerating into Uncertainty
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4.
The year started on an optimistic note,
with the International Monetary Fund
predicting 3.5% worldwide growth.
Positive signs include declining
unemployment, rising incomes,
and burgeoning consumer and
business confidence but economic
activity disappoints and prolonged
cognitive dissonance
vexes decision-makers.
2017 State of Logistics Report: Accelerating into Uncertainty
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5.
2. Motor carriers:
back in gear with rate recovery
and new equipment
2017 State of Logistics Report: Accelerating into Uncertainty
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6.
Carriers idled 14,000 trucks in 2016, but orders for
new Class 8 trucks doubled in the second half of the year,
which could indicate carriers believe the worst is over.
2017 State of Logistics Report: Accelerating into Uncertainty
Sources: FTR Associates, Monthly Class 8 Net Orders
Class 8 net orders
(thousand)
10
0
30
20
40
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Sep-16
Aug-16
Jul-16
Jun-16
May-16
Apr-16
Mar-16
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
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7.
2017 State of Logistics Report: Accelerating into Uncertainty
Semi-autonomous models
such as truck platooning will
soon take to the roads,
and electric truck engines
are in the works.
These innovations would
reduce the impact of fuel
prices and wages on carriers’
costs and shipping rates.
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8.
3. Parcel delivery:
demand for
e-commerce
reshaping
networks and
relationships
2017 State of Logistics Report: Accelerating into Uncertainty
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9.
2017 State of Logistics Report: Accelerating into Uncertainty
Three trends will reshape the sector over the next few years:
a shift to regional distribution networks, reconfiguring of
route systems, and an ongoing battle for last-mile dominance.
Source: A.T. Kearney analysis
US parcel market by customer segment:
size and growth ($ billion)
US parcel market by product type:
size and growth ($ billion)
2015 2019e 2015 2019e
36.9
48.8
35.3
6.3
78.4
93.1
36.4
7.9
62.3
75.7
9.6
6.5
78.4
93.1
10.2
7.2
6.0%
4.4%
CAGR
0.8%
7.3%
2.6%
4.4%
CAGR
1.6%
5.0%
B2C B2B C2C Ground Express Deferred
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10.
4. Rail:
another down year,
followed by an upturn
and a challenge
2017 State of Logistics Report: Accelerating into Uncertainty
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11.
2017 State of Logistics Report: Accelerating into Uncertainty
Source (if required): A.T. Kearney analysis
Note: YoY is year-on-year.
Sources: Association of American Railroads; A.T. Kearney analysis
US railroad traffic
(Thousand carloads)
240
270
300
310
280
290
250
260
220
230
2017
2016
2015
2014
Dec.Nov.Oct.Sep.Aug.Jul.Jun.MayApr.Mar.Feb.Jan.
+8%
Rail shipping volumes fell 5% in 2016, and revenues dropped 7%
with slack demand and soft pricing in key sectors.
Hope and challenge: shipping volumes grew in early 2017
and operating models are up for change.
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12.
5. Water:
a stormy year of
realignment and
expensive
investments
2017 State of Logistics Report: Accelerating into Uncertainty
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13.
2017 State of Logistics Report: Accelerating into Uncertainty
Shipping capacity growth has greatly outpaced demand
and continues to threaten livelihood of carriers.
Note: TEU is 20-foot equivalent unit. Numbers may not resolve due to rounding.
Sources: Alphaliner; A.T. Kearney analysis
Global container shipping capacity
(million TEU and TEU per ship)
33%
5,100 – 10,000
14%
10,000 – 13,300
14%
13,300 –
17,999
6%
18,000+
12%
0 – 1,999
26%
2,000 – 5,099
32%
5,100 – 10,000
23%
0 – 1,999
44%
2,000 – 5,099
2017:
21.9
2007:
8.8
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14.
6. Air freight:
rates remaining moderate with
prospects looking good
2017 State of Logistics Report: Accelerating into Uncertainty
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15.
2017 State of Logistics Report: Accelerating into Uncertainty
Volumes rose 9.8% in 2016, and ripple effects carried over
into 2017, lifting air shipping rates 20% in the first quarter,
but still 25% below 2015 levels.
Notes: Intel shows average of all-in air freight buy rates paid by forwarders to airlines for standard deferred airport-to-airport air freight services. YoY is year-on-year.
Source: Drewry’s Sea & Air Shipper Insight
Drewry Air Freight Index from Shanghai to Los Angeles
($ per kilo)
2.0
3.0
4.0
5.0
May-17Jan-17Sep-16May-16Jan-16Sep-15May-15Jan-15
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16.
7. Pipeline:
demand improving and
incentives to invest rising
2017 State of Logistics Report: Accelerating into Uncertainty
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17.
The pipeline industry retrenched
in 2016 as volumes and rates flattened
under pressure from low oil prices.
Pipeline companies conserved capital,
and the newfound fiscal discipline
positions operators to benefit from
improving demand.
2017 State of Logistics Report: Accelerating into Uncertainty
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18.
8. Freight forwarding:
disruption stalking a
slumping sector
2017 State of Logistics Report: Accelerating into Uncertainty
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19.
Forwarders face more service demands
as e-commerce adds complexity to
supply chains and shippers seek greater
transparency and reliability along with
advanced routing capabilities.
2017 State of Logistics Report: Accelerating into Uncertainty
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20.
9. Third-party logistics:
one-stop shops and
control towers—some
assembly required
2017 State of Logistics Report: Accelerating into Uncertainty
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21.
2017 State of Logistics Report: Accelerating into Uncertainty
The industry is shifting from a
transactional business model focused on
discrete services toward an integrated
model of one-stop shops for end-to-end
logistics services.
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22.
10. Warehousing:
growing pains at the
heart of the supply chain
2017 State of Logistics Report: Accelerating into Uncertainty
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23.
2017 State of Logistics Report: Accelerating into Uncertainty
Rates are up, space availability is at a record low of 8%;
yet profit margins, ranging from 3 to 6%, prevent investments
and inhibit a sustainable future.
Source: A.T. Kearney analysis
US warehouse availability
(%)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
8.9 8.7 8.4 8.2 8.0
–10%
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24.
Rapid technological change and new business
models are driving logistics toward a fully digital,
connected, and flexible supply chain optimized
to meet rising consumer expectations of
immediacy, personalization, and convenience.
Predictive analytics, the Internet of Things, on-demand
logistics, alternative energy, autonomous solutions,
and the sharing economy all have a role to play in the
next-generation supply chain.
2017 State of Logistics Report: Accelerating into Uncertainty
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25.
2017 State of Logistics Report: Accelerating into Uncertainty
For more insights and strategic implications
from the 2017 State of Logistics Report, as well as
the four potential scenarios or the future of logistics,
download the full report.
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