LOMBARD, Ill. — An annual benchmark report released Thursday shows the continued impact of the economic slowdown on the U.S. logistics industry. The 21st Annual “State of Logistics Report” reveals that, continuing the decline reported in 2008, business logistics costs fell to 7.7 percent of U.S. Gross Domestic Product (GDP) in 2009, as compared to 9.3 percent the previous year.
The report, released by the Council of Supply Chain Management Professionals (CSCMP) and presented by Penske Logistics, also said that total U.S. logistics costs dropped again last year showing a significant decrease from 2008. Interest rates remained historically low, and this, combined with lower inventory levels, pushed the interest paid on inventories down over 89 percent from 2008 levels.
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.
In 2009, inventory-carrying costs continued to fall due to a 4.6 percent decline in inventory and a further plunge in interest rates. Pressure on rates and an inability to move goods resulted in warehousing costs falling 2 percent below those of 2008. Although early 2009 saw warehouses full of inventory, by mid-year goods had been drawn down or relocated, leaving facilities with empty space.
Transportation costs were 20.2 percent lower than 2008 levels, with all modes of transportation being negatively affected. Trucking, which comprises a large percentage of the transportation component, had a 9 percent drop in tonnage carried. Rail carload traffic was also down from the previous year. The ocean sector reported sharp declines, lowering rates to stimulate business, with some ocean carriers reporting losses for the first time in their company’s histories. After heavy losses early in the year, air cargo had a much stronger showing by the latter part of 2009.
Due to abundant capacity and decreased freight to move, the industry has experienced significant pressure to reduce costs. Although shippers have responded with reductions, customers have not necessarily noticed a decline in rates, the report noted.
Overall, indicators show improvements in the fourth quarter with a focus on future direction.
“The economy is beginning to recover, and although time will tell how the logistics sector deals with the recovery, those companies that use the statistics and industry insight contained in this report will be better prepared for the business activity ahead,” said Rick Blasgen, CSCMP President and CEO. “This research presents data for company leaders to be able capitalize to on the recovery as it occurs, such as restructuring their distribution networks to maximize efficiency and minimize miles, investing in technologies to facilitate ‘green’ transportation, and improving real-time data flows to increase visibility and enhance productivity.”
The report, authored by Rosalyn Wilson, a transportation consultant for Delcan Corp., was released at the National Press Club in Washington. A panel of senior supply chain executives and academics from BNSF Railway, Covidien, Delcan Corporation, Jones Lang LaSalle, Miami University of Ohio, Penske Logistics, Staples, and Sustainable SC Consulting discussed the implications of the report’s findings on their companies, on the industry, and on the economy as it recovers.
“Logistics providers were among the first to feel the effects of the economic downturn,” said Vince Hartnett, president, Penske Logistics. “Today, we are seeing some positive signs of recovery in the supply chain with increasing truck freight volumes and higher truck fleet utilization rates. If this continues, trucking and logistics firms will likely add capacity to take on additional loads and hire drivers to meet increasing demand.”
Hartnett also noted that, anecdotally, more Fortune 1000 level companies are evaluating logistics outsourcing compared with the previous 12-month period.
“This tells us that business leaders are looking to capture emerging growth opportunities while still staying focused on cash and capital — a good combination for our industry and a steady recovery,” he said.
With operations in North America, South America, Europe, and Asia, Penske Logistics provides supply chain management and logistics services to major industrial and consumer companies throughout the world.
Founded in 1963, the Council of Supply Chain Management Professionals has more than 9,000 members globally, representing business, government, and academia from 63 countries.
Kevin Jones of The Trucker staff can be reached for comment at firstname.lastname@example.org.
Find more news and analysis from The Trucker, and share your thoughts, on Facebook