Logistics is the art and science of designing transport systems to support the forward and reverse flow of goods and materials through the economy. It includes retail and industrial shippers of all sizes. It includes warehouse operators and trucking companies. It’s also among the most misunderstood and underappreciated parts of the global economy. Here is how the logistics industry has such an outsized impact on global economic performance.
Creating Jobs and Driving Growth
At a basic level, the logistics industry affects the global economy through its direct contributions. One of those contributions is employment. As of 2023, somewhere between 5% and 10% of all employees within developed economies were logistics workers. All of those workers support an industry worth billions of dollars. The third-party logistics industry in the US alone generates over $400 billion annually. The trucking industry in the US adds a further $987 billion to that total.
Keeping Shelves Stocked
The logistics industry also keeps goods on the shelves for consumers to purchase. The importance of that function cannot be overstated. Consumer spending makes up an average of 59.35% of the GDP of major developed economies. If that spending comes to a halt, so do those economies. Nowhere was that more obvious than during the COVID-19 pandemic. Then, interruptions to global logistics led to product shortages and a spike in inflation that many countries are still trying to contain.
Keeping Factories Operating
The logistics industry also plays a pivotal role in keeping factories worldwide running at peak efficiency. That begins with transporting raw materials from production sites to the factories themselves. When materials deliveries get delayed, factories must slow down to compensate. When deliveries exceed production capacities, factories see added overhead related to materials storage.
A similar relationship also exists at the other end of the manufacturing process. Factories depend on the logistics industry to bring finished products to market as cheaply as possible. That means arriving to collect those products at an ideal time to minimize wait times and maximize carriage capacity. Any disruptions to that mean higher prices for consumers and, consequently, less revenue for manufacturers.
Supporting E-commerce
Finally, the logistics industry is the linchpin of the modern digital economy. Without it, e-commerce giants like Amazon, eBay, and Alibaba couldn’t exist. Logistics is so crucial, in fact, that Amazon created its own 3rd-party logistics operation to support its business. In short order, that operation became the largest of its kind in the US. Additionally, it took over the top spot as the largest international freight carrier in the world in 2023. In other words, logistics is the central engine driving growth at the world’s largest digital retailer. If that doesn’t illustrate the primacy of logistics within the global economy, nothing does.
Logistics Is the Economy
The bottom line is that, in many ways, logistics is synonymous with the economy. Virtually every part of the economic system depends on it. Plus, it shapes prices and availability at every level of the modern global supply chain. Therefore, it’s more than fair to state that as the logistics industry goes, so goes the global economy.