DELANEY REPORT: LOGISTICS COSTS DECLINE

DELANEY REPORT: LOGISTICS COSTS DECLINE    Logistics costs continued to fall in 2000, despite the slowing national economy, according to the 12th annual “State of Logistics” report by Robert V. Delaney, vice president of Cass and a consultant with ProLogis, and his partner Rosalyn Wilson, given at the National Press Club in Washington, D.C.
   Last year, logistics costs totaled $1.006 trillion, or 10 percent of nominal gross domestic product (GDP), essentially the same percentage as in 1999. In 1981, logistics costs were 16 percent of the GDP.
   Delaney noted figures from Richard Armstrong & Associates, showing that third-party logistics revenues grew to $56.4 billion in 2000, an increase of 24 percent.
   “Last year, we observed that we would not really know how efficient our supply chains have become, until we had to manage our logistics systems during a period of declining sales,” Delaney said. “We did not have long to wait.”
   “The problem in 2000 was not excessive inventories,” Wilson said. “There was a bit of involuntary build-up of inventory during the third quarter of last year, but changes in inventory as a contribution to real GDP were negative in the second half of the year.
   “Our problem was rapidly declining sales, due to sudden reductions in capital expenditures,” Wilson said.
   Despite such pressures, “logistics managers in the third and fourth quarters of 2000 were controlling inventories more effectively than they did in the last economic soft landing, in 1995-96,” Delaney said.
   One lesson from 2000 was that in terms of the Internet, “physical factors overpowered the virtual,” Delaney said, referring to the carnage among transportation dot-coms.
   The report indicated that core carrier programs will thrive in 2001, without an increase in spot-market transactions at the expense of contracts. It predicted that shippers will continue to be confused by claims made by surviving dot-coms, many of which talk the talk of 3PLs but lack their ability to follow through with services.