Report: Logistics sector shrank hard in Æ09
U.S. companies spent $244 billion less to transport and store their goods in 2009 than the previous year. But the 18 percent decrease was directly related to the recession rather than new innovations that made the logistics sector more productive, according to the annual State of Logistics report released Wednesday by the Council of Supply Chain Management Professionals.
Logistics costs as a percentage of the overall economy plunged to a historic low of 7.7 percent last year from 9.3 percent in 2008, as transportation and inventory carrying costs fell 20.2 percent and 14.1 percent, respectively. Combined with the $50 billion drop in 2008, total logistics costs declined $294 billion during the recession to $1.1 trillion.
Shippers saved money on transportation last year, at the expense of carriers, because demand for shipments plummeted and rates were lowered to attract customers.
Low freight volumes were especially pronounced in the domestic trucking sector where tonnage dropped 8.7 percent compared to already low 2008 levels.
Meanwhile, inventory investments decreased $89 billion due to a 4.6 percent drop in inventories and a 10 percent drop in the inventory carrying costs, such as warehousing expense. Extremely low interest rates for commercial paper resulted in an 89 percent drop in the interest component of inventory costs.
Rosalyn Wilson, the report's author, predicted during a presentation at the National Press Club in Washington that logistics costs would tick upward in 2010 mostly due to inventory replenishment and a rise in interest rates. The inventory-to-sales ratio, benefiting from an inventory draw down and a sales rebound in recent months, is at a relatively balanced 1.23 after jumping to 1.48 in early 2009 when consumer sharply reined in purchases.
Weak demand will continue to keep warehousing costs in check (down 2 percent last year) through most of 2010 as high vacancy rates are reflected in lower rents, she said in the report.
As the economy improves, Wilson said, shippers will experience difficulty finding sufficient truck capacity in the face of widespread failure of smaller motor carriers, fleet rationalization by other trucking companies and shortage of qualified drivers.
'The capacity in the trucking industry is now much more in line with demand, but as demand grows, there is not sufficient parked capacity to quickly respond. There is a large inventory of used trucks which could be picked up, but tight credit is going to hamper large investments in new trucks,' she wrote. ' Eric Kulisch