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Life

Oh, Ship! The Massive Business of Shipping and Logistics

December 04, 2018

Logistics: The companies that ship and haul anything and everything all over the world.

3 min read

Shipping and logistics keep the world spinning.

No matter who you are or where you live, you likely rely on logistics—the coordinated and often complex art of moving things from one place to another. If you buy products online, you rely on shipping and logistics companies to get your package. If you shop at a grocery store, you also rely on those same companies to get the food to the store.

Shipping and logistics are absolutely essential to modern life, especially as the world moves into the digital age. And it’s a massive business, too. In 2017, logistics spending for U.S. businesses topped $1.5 trillion.

Delivery is everything

Online retailer Amazon has taken over the retail industry—it currently reigns over roughly half of the entire U.S. e-commerce market. Last year, the company shipped more than 5 billion items through its Prime service alone—a gargantuan amount of packages by any measure.

eBay, an online platform used by retailers, likewise facilitates an enormous number of orders. At any given time, there are roughly 1.1 billion items listed in the eBay marketplace, and when those products are sold, most, if not all of them, need to be delivered to their new owners.

And these are just two companies—these days, most major retailers have an e-commerce component that requires shipping. Add that to all of the other vitally important things that we need shipped—from oil and natural gas to new cars and consumer goods—and it becomes clear that the logistics industry is critical to the world’s economy.

It’s not just critical—the freight, shipping, and transportation industry may, in fact, may be one of the most critical parts of the U.S. economy. Aside from getting us the things we need, the industry also employs more than 5 million people in some capacity (roughly one in five American workers) according to the Bureau of Labor Statistics and accounts for nearly 9% of U.S. GDP.

Neither snow nor rain nor heat…

Shipping companies operate in most parts of the world, in some capacity. They often use the largest, most powerful machines and vehicles ever produced. And they never stop—ships carrying oil, big-rigs carrying pallets of produce, and couriers carrying packages are constantly and furiously chugging toward their destinations.

For most Americans, face-to-face interaction with the industry at large is minimal, but regular. The United States Postal Service delivers your mail every day, of course, and UPS, DHL, and FedEx likely drop off packages to your home or workplace on a daily or monthly basis.

But that’s just the tip of the iceberg—to make it to your doorstep or mailbox, goods are often transported from warehouses, across vast highway networks, in the air, and across oceans.

Planes, trains, and automobiles…and ships

Logistics companies move everything everywhere. Even the items you buy in person at a physical store likely had to be shipped there. But it’s more than just shipping; Logistics also includes storing and stowing goods in warehouses, and the operations involving moving those goods at a moment’s notice.

And they do it over land, in the air, and via the sea. The world’s largest publicly traded transportation companies, according to the 2018 Forbes Global 2000, are United Parcel Service (UPS), FedEx, and railroad company Union Pacific.

0M
UPS - packages delivered (2017)
0M
FedEx - shipments per day (2017)
0k
Union Pacific - freight cars nationwide

UPS—delivered 20 million packages/documents per day in 2017
FedEx—delivered 14 million shipments per day in 2017
Union Pacific—operates more than 64,000 freight cars nationwide

But those are just a few companies that are currently blitzing the globe with their fleets. There are many other large, international companies in the industry. They include maritime movers like Maersk and Cosco, railroad companies like BNSF and CSX, and air cargo operators like Emirates SkyCargo and Cathay Pacific Cargo.

The shipping blues

Worldwide, businesses depend on the logistics industry, and without it, supply chains would likely collapse. And that’s a real possibility, considering some of the risks facing the industry.

Even though companies have gotten bigger and better at moving things around the world, there is still the underlying infrastructure on which they rely to get the job done—roads, bridges, ports, satellite and communications systems, and more. And in many parts of the world (and in the U.S., especially), that infrastructure is in disrepair.

Also, natural disasters or man-made problems—trade disputes, climate change, wars, and even cyber attacks—can interrupt the industry for long periods of time.

Investing in the shipping and transportation industry

The world is big, and though the shipping and transportation industry is vast, most of us only experience or interact with a tiny part of it. That doesn’t mean you can’t get in on the action.

You can invest in shipping and transportation companies on Stash.

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By Sam Becker
Sam Becker is Stash's financial writer.

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