US logistics industrypoised for rebound

An annual benchmark report shows the continued impact of the economic slowdown on the US logistics industry. The 21st annual State of Logistics Report, released by the Council of Supply Chain Management Professionals (CSCMP) and presented by Penske Logistics, reveals that, continuing the decline reported in 2008, business logistics costs fell to 7.7% of US Gross Domestic Product (GDP) in 2009, compared with 9.3% the previous year.

Total US logistics costs dropped again in 2009, 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 more than 89% from 2008 levels.

In 2009, inventory-carrying costs continued to fall due to a 4.6% 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% 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% 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% 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.

Overall, indicators show improvements in the fourth quarter with a focus on future direction.

The report, written by Rosalyn Wilson, a transportation consultant for Delcan Corporation, was released at the National Press Club in Washington DC recently. 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.

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