The logistics and transportation industry in the United States is one of the most competitive and diverse industries around, especially because of the relatively low costs and regulatory stipulations associated with the industry. The logistics industry consists of logisticians that analyze and coordinate a company’s supply chain; due to the complexities associated with the logistics industry, logisticians median pay is around $74,000 per year. Overall, the logistics industry has remained steady with slow growth of around 2 percent in the past few years. In 2015, the United States logistics and transportation industry reached $1.48 trillion in revenue, accounting for 8 percent of the annual gross domestic product (GDP). These overwhelming numbers have continued in 2016, with expectations of 2017 looking positive.
But what does the logistics industry really do? Typically, most logistic companies deal with a variety of supply chain necessities for companies in a variety of industries such as: inbound and outbound transportation management, fleet management, warehousing, materials, order fulfillment, logistic networks, inventory and inventory management, supply and demand planning, third party logistics management (3PL’s), and any other logistic service that is needed in the planning and execution of transporting goods for a business. The logistics and transportation industry is a major player in the United States economy today, however there are major subsectors of the logistics industry that contribute to the positive growth. These subsectors include:
- Air and Express Delivery Services (EDS): Through air and express delivery services, logistic companies can offer expedited and time sensitive transportation for a variety of items. Air and express delivery services are an $82 billion industry that tends to benefit small and medium sized businesses that cannot afford to handle their supply chain needs alone.
- Freight Rail: Through the United States rail network, many logistic businesses are able to move high volumes of heavy cargo and products throughout the United States. This method of transportation for goods averages around 5 million tons of goods for almost every single industrial, retail, and resource based industry.
- Maritime: The maritime subsector for the logistics industry accounts for most of the international goods transportation. Maritime shipment includes carriers, seaports, terminals, and labor involved for movement of goods and cargo.
- Trucking: This is one of the most common and well known subsectors of the logistics industry, accounting for over 10.5 billion tons of freight being moved via this subsector. This allows cargo to be transferred over short and medium distances throughout the United States.
The logistics industry is incredibly vital to the world today – without the logistics industry, distribution of valuable resources, such as agriculture, coal, and so forth, would lead to emergencies across the world. The entire industry has seen some set backs from the 2008 recession, but has been quick to recover, especially by adapting to vital trends that are reshaping the logistics industry today.
Logistics Industry Trends
- Employee Shortage: The logistics industry is bracing itself for the highly anticipated continuation of labor shortages. Unfortunately, finding enough qualified applicants to work in this diverse and complex industry has been difficult since the recession. Some of the key strategies logistic companies are already starting to implement to combat this unavoidable issue consist of: developing built in succession and talent pipeline programs, creating structured paths for advancement for high potential workers, creating a variety of training programs, and offering better incentives to potential new employees. Another major area logistic companies are starting to look at are the untapped alternative labor pools – women and veterans.
- Sustainability Movement: Increasing government regulations surrounding sustainability and green friendly practices around the world are shifting the way business is done in every industry. Unfortunately, this will be an expensive and tedious venture for many logistic companies, but with a growing concern for climate change, it is simply inevitable. There are a variety of natural gas powered vehicles being produced today, and even major transportation companies like Penske are staying ahead of the industry by implementing these vital eco-friendly practices early. The time for paying fines and penalties for not transitioning with government regulations is nearing, so starting this transition now can only benefit a logistic company.
- Technology: Technology is one of the most vital, revolutionary components to every industry today, however most industries have been slow to adopt many of these unavoidable transitions. For the logistics and transportation industry in particular, the evolution of technology will continue to greatly impact every way of doing business in supply chain management. Here are some of the biggest technological advancements impacting the logistics and transportation industry today:
- Internet: Through the constantly growing Internet of Things, the logistics industry will see new smart devices revolutionizing the way work is done in supply chain management. RFID sensors, large scale employee monitoring systems, and augmented reality products are already being created and implemented into many logistic businesses. The result? Reduced time for shipping processes, more efficient inventory managing and tracking, and increasing consumer satisfaction (which in turn can lead to more business).
- Data-Driven Solutions and Omnichannel: Ecommerce is revolutionizing the logistics industry today, creating a heavy reliance on omnichannel logistic services and data driven solutions. More and more logistic companies will be focusing their attention on implementing more tools to obtain big data that will create a more successful supply chain while increasing consumer satisfaction. There is a variety of innovation in this particular area that will continue to change the way logistic companies handle day to day operations.
- Automation: While this concept has not been fully created today, the idea of a fully automated truck or car is definitely in the works. This will be a slow transition: it started with a simple cruise control option, it is starting to evolve into a truck that can stay centered in the lane and stay far enough away from surrounding cars, and will eventually turn into a truck that does not need a driver at all. How long all of this will take is unknown at this point, but there are hopes from many in the logistics industry that it will be sooner rather than later to help with the major labor shortages in the industry. Automation combined with the Internet of Things will also impact warehouse operations in the logistics industry. Many startups and tech companies are starting to develop more automation and control options to help streamline effective warehouse management and requirements – some say this means robots in the workplace someday, but for now, we will just have to wait and see what automation has in store for logistic company’s warehouses.
Comparing Logistics Loans
|Bank||6-10%||3-7 years||14-30 days|
|SBA||6-10%||3-7 years||10-30 days|
|Line of Credit||5-15%||1 – 3 years||7-30 days|
|Factoring||1-20%||1 years||7 days|
|Alternative||6-25%||1-5 years||5-7 days|
|Cash Advance||1.16-1.55||3-24 months||1-3 days|
Logistics Bank Loans
Term loans and lines of credit offered by small banks, large banks, credit unions and community lenders. Financing can be used for a wide range of uses including acquisitions, refinancing, purchases, working capital, making payroll, helping to you expand your company and just about any business use.
- Rates: 5-10%
- Terms: 1-25 years
Logistics SBA Loans
Quite similar to a traditional bank loan, a SBA loans offer terms up to 25 years depending on use, and have rates very similar to conventional loans. In fact, SBA loans are simply loans provided by banks in which the government agrees to backstop their losses if the logistics company fails to repay the lender.
- Rates: 6-8%
- Terms: 7-25 years
Alternative Logistics Company Loans
Alternative loans have some similarities to conventional loans, in that they both calculate rates based on APR and not on factoring rates. Other than that the similarities end, because alternative loans are much faster than bank loans, and require much less documentation, cash-flow and credit history. Loans can be approved within minutes and funding can take place in less than a week.
- Rates: 9-25%
- Terms: 1-5 years
Logistics Company Cash Advances
Cash advances are the sale of future logistics company revenue (at a discount to the factoring company) in return for immediate financing. While much more expensive than bank loans and alternative lender, the process takes only a day or two with minimal documentation needed.
- Terms: 4 months – 2 years