Subscribe to our free, weekly email newsletter!


2010 State of Logistics: Make your move

The cost of the U.S. business logistics system declined 18.2 percent in 2009—the largest drop in the history of the State of Logistics Report. But as the economy slowly improves, shippers will need to be more cautious and tactical as they face increasing volumes, tight capacity, and higher rates.
By Patrick Burnson, Executive Editor
July 15, 2010

During World War II, the U.S. Navy enlisted world champion chess player Reuben Fine to calculate—on the basis of positional probability—where enemy submarines were most likely to surface. Years later, Fine was asked about the project’s outcome, and modestly replied: “It worked out all right.”

While logistics managers may not be consulting with chess masters these days, they are posing one big question to economic theorists willing to take it on: Is “The Great Freight Recession” finally coming to an end? Analysts and industry insiders are telling us that things are indeed getting better for shipper organizations, but that the tenuous business climate and tightened credit controls will make it difficult for carriers to rapidly expand capacity for the remainder of 2010. The shipper imperative, then, will be to collaborate with carriers like never before. With capacity tightening, a new urgency should be placed on mitigating risk and controlling cost.

The 21st Annual State of Logistics Report (SoL), released by the Council of Supply Chain Management Professionals (CSCMP) and presented by Penske Logistics at the National Press Club last month, confirmed what many shippers had been suspecting. The worst may be over, but as the economy continues its slow recovery, shippers are going to be faced with an entirely new set of tactical challenges. “We are definitely seeing a recovery,” says Rosalyn Wilson, the report’s author, “but not the kind that will generate a lot of new business this year. Granted, shippers have already made a great many sacrifices—that shouldn’t change suddenly in the short term.”

Indeed, according to Wilson’s research, the cost of the U.S. business logistics system declined 18.2 percent in 2009—the biggest drop in the history of the report.

Meanwhile, business logistics costs fell to $1.1 trillion, a decrease of $244 billion from 2008. Combined with the drop in 2008, total logistics costs have declined almost $300 billion during the recession. In fact, 2009 logistics costs as a percent of the nominal Gross Domestic Product (GDP) hit a historic low at 7.7 percent.

“Both major components of the cost models declined in 2009,” explains Wilson. “Inventory carrying costs fell 14.1 percent in 2009, and this decrease in carrying costs was due to both a 4.6 percent drop in inventories and a 10 percent drop in the inventory carrying rate.” Transportation costs, she adds, plummeted 20.2 percent from 2008 levels. Trucking, which comprises 78 percent of the transportation component, declined 20.3 percent while all other modes combined declined 20.5 percent.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

It’s said that innovation will lead the economy out of its current funk. But how does an organization become a perpetually innovative company? That’s one of the questions Kai Engel and his co-authors at A.T. Kearney set out to answer in their new book Masters Of Innovation.

At $2.843, the average price per gallon was down 1.6 cents, following last week’s 1.1 cent drop and a cumulative 7.1 cent cumulative drop over the last five weeks.

LM Group News Editor Jeff Berman caught up with UPS Freight President Jack Holmes at the National Shippers Strategic Transportation Council’s (NASSTRAC) Annual Conference and Exhibition. Berman and Holmes spoke about various aspects of the less-than-truckload sector (LTL), as well as related freight transportation news and trends.

In the third-party logistics (3PL) sector, the ongoing trend of merger and acquisition (M&A) activity never seems to take a break. That is apparent in recent weeks alone, with XPO Logistics recent acquisition of Norbert Dentressangle for $3.53 billion, Echo Global Logistics scooping up Command Transportation for $420 million, and Kuehne+Nagel buying ReTrans for an undisclosed sum.

During this webcast attendees will learn about technology that is delivering real-time tracking on freight and putting an end to the all too common question of “Where’s My Brokered Load?”. Whether you’re a broker, 3PL, shipper, or carrier, find out how you can gain automated, TMS-integrated visibility on all your shipments.

Article Topics

· Logistics · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA