Canadian Packaging

US supply chain costs fell in 2009: study


June 15, 2010
by Purchasingb2b Staff

In 2009, business logistics costs comprised 7.7 percent of the US Gross Domestic Product (GDP). This represents a 18.2 percent decline from 9.3 percent in 2008.

This is one of the key takeaways from the 21st annual State of Logistics Report prepared by the Council of Supply Chain Management Professionals (CSCMP).

The annual benchmark report tracks and measures all costs associated with moving goods through the US supply chain. It weighs metrics such as transportation costs, inventory carrying costs, freight volumes and revenues.

This year, the report was authored by Rosalyn Wilson, a transportation consultant for Delcan Corporation.

In presenting the findings at the National Press Club in Washington, DC on June 9, Wilson said the year-over-year decline in costs is the largest drop ever.

“Business logistics costs fell to US$1.1 trillion, a decrease of US$244 billion from 2008. Combined with the drop in 2008, total logistics costs have declined almost US$300 billion during the recession,” she said.

“The logistics industry felt the negative effects of the recession more than most other industries because the downturn in each individual sector translated into a loss in shipment volume.”

Costs drop, rates don’t

Transportation costs changed dramatically in 2009, falling 20.2 percent below 2008 levels. All modes of transportation were hit; trucking had a nine-percent drop in tonnage, and rail carload traffic was also off. Some ocean carriers reported losses for the first time in their histories. Air cargo carriers rebounded slightly towards the end of the year after registering deep losses in the first part of 2009.

In 2009, inventory carrying costs fell 14.1 percent as inventories dropped 4.6 percent and interest rates plummeted. According to the CSCMP, pressure on rates and slackened product velocity pushed warehouse costs down to two percent below 2008 levels. While warehouses across the country were full at the start of 2009, by the middle of the year many facilities had empty space.

Despite the steep drop, shippers aren’t necessarily seeing their freight and warehousing bills decline. While shippers have by and large reduced costs in their own operations, they have not seen a broad reduction in rates from service providers, which are struggling to cope with abundant capacity and less volume.

Vince Hartnett, president of Penske Logistics, the report’s sponsor, said the situation is changing in 2010.

“Logistics providers were among the first to feel the effects of the economic downturn,” he said. “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.”
 
For more on the State of Logistics Report, click here.