July 2010 Logistics Magazine

By now, most readers have already digested the top line data from the 21st Annual State of Logistics Report (SoL) that was officially released back on June 9. And if for some reason you missed the news, I’ll cut to the chase.

By ·

By now, most readers have already digested the top line data from the 21st Annual State of Logistics Report (SoL) that was officially released back on June 9. And if for some reason you missed the news, I’ll cut to the chase.

According to the findings gleaned by author and economist Roz Wilson, the cost of the U.S. business logistics system declined 18.2 percent in 2009, the single largest year-over-year drop in the history of the report. And while the market was more than prepared for a drop in that number due to the long-running and savagely-ruthless recession, I can’t help but think that most of us were a little surprised when we actually saw all the figures in black and white.

Without giving away too much of the data from Patrick Burnson’s excellent analysis of the report, here are some of the telling takeaways: Business logistics costs fell to $1.1 trillion in 2009, a decrease of $244 billion from 2008. In fact, logistics costs as a percentage of our nominal GDP—an annual SoL measure that analysts believe gives us the best historical snapshot of the market—fell to 7.7 percent, the lowest level since that measure has been recorded.

Just how brutal was the recession’s blow to the U.S. logistics system? If you combine the $244 billion drop in 2009 with the drop recorded in 2008 ($49 billion) you’ll find that total logistics costs have declined nearly $300 billion since the recession started. In 2009 alone, money spent on overall freight transportation dropped 20.2 percent.

I think you’re getting the picture.

In our annual analysis of the report, Burnson sits down with Wilson to put some perspective behind this data in an effort to help shippers navigate the current and upcoming freight environment. And as Wilson points out in the conversation, it’s important to keep these figures in perspective since they do paint a historical portrait.

Indeed, transportation analysts and the vast majority of our sources are in firm agreement that all trends are pointing to an improving economy; which in turn is leading to increasing volumes and better times ahead for beleaguered carriers across all the modes. In fact, many shippers may be surprised to read in our mode-by-mode breakdowns and John Paul Quinn’s mid-year rate outlook just how quickly volumes are increasing, capacity is tightening, and rates are shooting skyward.

“Shippers were shell shocked last year due to low volumes and extreme rate pressures, and very soon became risk adverse,” says Wilson. “This year, they would be wise to be first at the table negotiating rates and capacity…guaranteeing a minimum level of business in return for guaranteed carriage and limited rate hikes two or three years out.”

And while the worst of times may be behind us, adds Wilson, shippers will be faced with a brand new set of tactical challenges as the economy inches forward on its slow recovery path. It’s time for shippers to heed Wilson’s advice and make their move.

About the Author

Michael Levans, Group Editorial Director
Michael Levans is Group Editorial Director of Peerless Media’s Supply Chain Group of publications and websites including Logistics Management, Supply Chain Management Review, Modern Materials Handling, and Material Handling Product News. He’s a 23-year publishing veteran who started out at the Pittsburgh Press as a business reporter and has spent the last 17 years in the business-to-business press. He’s been covering the logistics and supply chain markets for the past seven years. You can reach him at [email protected]

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!

Article Topics

All Topics
Latest Whitepaper
Case Study: New Transportation Procurement Approach Lowers Costs, Improves Service
Shaw Industries Group, the world's largest carpet manufacturer, needed a TMS to improve transportation planning.
Download Today!
From the October 2016 Issue
Over the past decade we’ve seen a major trend in regards to safety regulations for freight transport within the United States as well as for import and export shippers—that trend is the “international­ization” of rules and regulations.
European Logistics Update: Post-Brexit U.K. moving ahead, but in which direction?
Badcock Home Furniture &more: Out with paper, in with Cloud TMS
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
How API Technology Connects the Transportation Economy
Dynamic decision making is made possible through accurate, actionable data. When combined with progress in data science and the Internet of Things, technology companies that add value to direct-to-carrier APIs and combine them with high-power data analytics will create new concepts for the information economy.
Register Today!
Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...

2016 Quest for Quality: Winners Take the Spotlight
Which carriers, third-party logistics providers and U.S. ports have crossed the service-excellence...
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...