Logistics costs as a percentage of U.S. gross domestic product dropped to their lowest level on record in 2009, representing only 7.7 percent of GDP, according to the 21st Annual State of Logistics Report. The report, compiled by consultant Rosalyn Wilson for the Council of Supply Chain Management Professionals, under sponsorship of Penske Logistics, was released June 9.
In real terms, costs dropped from $1.34tr in 2008 to $1.10tr in 2009. The dramatic drop was due almost entirely to the recession, Wilson says. Both major components of logistics costs - inventory carrying costs and transportation costs - were negatively impacted by the economy. Low interest rates helped push inventory carrying costs down 14.1 percent and as companies worked through bloated safety stock, inventory on hand dropped 4.6 percent. Lower volumes and increased price pressure caused transportation costs to plummet 20.2 percent from 2008 levels. Trucking, which comprises 78 percent of the transportation component, declined 20.3 percent. All other modes combined declined 20.5 percent.
While the situation is improving, Wilson says it will probably be 2011 before the industry again sees pre-recession freight levels. Nonetheless, capacity shortages may crop up in some areas by year's end, she says. Transportation capacity was reduced significantly during the recession and "the tenuous business climate and tightened credit controls will make it difficult to rapidly expand capacity for the remainder of 2010," Wilson notes.
Driver shortages in the trucking industry also are likely to re-emerge. Since 2007, about 142,660 drivers have exited the field, Wilson says. A key issue here is age. Less than a quarter of current drivers are under 35 and about one in six is 55 or older. The lack of drivers will be a constraint on motor carriers' ability to return truck capacity to the market, she says.
Other key findings:
• The cost for rail transportation was down 20.6 percent in 2009, with every major commodity group experiencing a decline.
• Water sector costs fell 21.6 percent and all of the nation's top 10 ports, except Oakland, registered a decline in TEUs moved. Rates in this sector were pushed down below costs early in 2009 but have risen significantly in recent months.
• Air cargo carriers lost 12 percent of cargo capacity in 2009 and that sector is experiencing spiraling rates and a shipment backlog. In the last quarter of 2009 rates doubled and ended almost five times higher than the start of the year.
Overall, the logistics industry "is on its way up, but far from breaking the surface," Wilson says. "We need to continue to mind the bottom line and keep costs in check."
Since 1988, the "State of Logistics Report" has tracked and measured all costs associated with moving goods through the U.S. supply chain. The report benchmarks key metrics in U.S. logistics such as transportation and inventory-carrying costs, freight volumes, and revenues, giving practitioners a big-picture view of the performance of the U.S. supply chain process.
