Heavy weather
Michael A. Levans, Group Editorial Director -- Logistics Management, 7/1/2008
I’ll give you fair warning before you continue reading: You’re about to hit some heavy weather. This issue is dominated by two “state-of-the-industry” reports that, as this month’s cover clearly illustrates, just may give you a low-pressure system headache—if you don’t have one already. So grab a raincoat and slip on your Wellies if you’re brave enough to solider on.
Executive Editor Patrick Burnson offers his dissection of the Council of Supply Chain Management Professionals’ 19th Annual State of Logistics Report (SoL). As it has been for nearly two decades, the SoL is the industry’s ultimate “annual report,” offering a tidy snapshot of total logistics costs for the previous calendar year, including inventory holding and total transportation and logistics services expenses.
So, what’s the underlying theme coming out of 2007? “It’s not all doom, gloom, and disaster…but most of it is,” SoL author Rosalyn Wilson tells Burnson across the table. Over the course of 2007, Wilson reports that total logistics costs rang in at nearly $1.4 trillion, up 7 percent over 2006—and she’s forecasting still harder times to come.
“Because the economy was stalled, total logistics costs went up to over 10.1 percent of GDP in 2007. The last time it was that high was in 2001, and we were hardly surprised back then.” Burnson and Wilson dig into all the elements that drove these costs to record levels—fuel costs, the economy, healthcare, insurance, inventory volumes—in an effort to put 2007 spending into perspective and offer shippers some practical advice as we roll through 2008.
What’s the bottom line? “Pricing power has shifted from carriers to shippers,” Wilson says. “It’s true that shippers will pay for extra fuel charges, but they are not willing to take a rate hike. And forget about relationships. That tag line is dead. Business is more provisional now, and it’s all about cutting cost out of the system.”
The second storm front that moves through this month’ issue is Contributing Editor John Paul Quinn’s 2008 Mid-year Rate Outlook, a follow up to our popular January rate forecast geared to help shippers better estimate where transportation rates are heading. Quinn re-connects with the top analysts he interviewed in January to see how they’d like to adjust their forecasts given the current economic conditions.
As Quinn writes, “it’s the cataclysmic 'fuel-pump shock’ syndrome that everyone starts with and then comes back to in this discussion.” During his reporting, he says that nearly every one of his contacts mentioned that it’s nearly impossible to escape the huge spike in fuel, whether it’s passed on in a surcharge or some other way—and shippers need to simply accept it.
If you have any questions for our panel of analysts, you can join them live on Tuesday, July 22, at 2:00 p.m. EDT. Register at logisticsmgmt.com/midyear08 and we’ll see you online.
Comments? E-mail me at michael.levans@reedbusiness.com
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