My Thesis on FOMO for Logistics and Supply Chain Technology Has Stood The Test of Time

Paraphrase:  "We reduce the logistics' cost as % of GDP which results in lower costs for goods and services, which lifts the standard of living for all Americans" - Don Schneider

 

Don Schneider

That phrase, while I many not be getting it word for word, has stuck with me from the day I met him almost 30 years ago. 

First, I apologize as it has been a long time since I put thoughts on the blog about what is going on in the supply chain world.  I should have kept up with it better.  I just went back and looked at my last posting which was on January 19, 2022 and it addressed the issue of supply chain technology. 

Two quotes from that post really stand out:

"The "free money" aspect of the pandemic has also driven an explosion in supply chain / logistics technology. Again, some have driven huge value but by far the vast majority have not.  They have just been the recipients of a lot of money sloshing around in the economy looking for a place to land."

and:

"They [Supply Chain Practitioners] layer technology on top of technology and it still does not get them very far.  This is FOMO.  This is "I am going to try anything and everything because I am afraid I am going to miss out on the latest greatest thing". 

We are starting to see the realization that this technology, without good processes and without assets, is not helping very much. The aggregate outcome metric I like to use is the US Business Logistics Costs as a percent of the nation's GDP. After all the technology improvements we have made, in 2021, this cost was 8% of GDP which, according to the 2022 State of Logistics report issued by CSCMP, has not been this high since 2008.   

Source: CSCMP 2022 SOL Report

Ultimately, we as an industry have to be measured on whether we are delivering value (higher service at lower costs) or not.  This table and information would say we are not doing that.  From the same report, we can trace these costs back to 2012:

Source CSCMP 2022 SOL Report and 10xLogistics Analysis

The graph is up 2bps since 2012 (coming out of a deep recession) and has, more importantly, changed the game significantly since 2018.  Some may say is only 2bps so what does it matter and my point is you would think we could get improvement with all the technology spend we have incurred. 

Do not get me wrong as there is a lot of good in our newest supply chain technology and there are certain aspects of running a supply chain I could not live without however, in the aggregate, logistics has become more costly for less service. 

My question for the supply chain industry is: "Would Don be Happy with this result"?  I will leave you to answer that on your own.  

This is something the supply chain industry has to address and hopefully people will talk about this at CSCMP EDGE conference this year.  Engage on Twitter with the hashtag #logtech