U.S. business spending on purchased freight transportation and logistics services increased 6.6 percent, or $79 billion, in 2011 to $1.28 trillion as companies held more inventory and paid higher rates for trucking and rail transportation, according to the 23rd annual “State of Logistics Report.”
Logistics costs are still well below the peak of $1.39 trillion in 2007, before the global financial crisis, and in relation to the overall economy are near an all-time low. Logistics costs as a percentage of Gross Domestic Product – an indicator of the industry’s relative efficiency — was 8.5 percent, the same level as in 2003 and up from 8.3 in 2010. Logistics costs accounted for 9.9 percent of economic activity in 2007 and plummeted to 7.9 percent in 2009.
Railroads enjoyed the biggest revenue jump among the freight transport modes, tallying overall sales 15.3 percent above the previous year, according to the report by analyst Rosalyn Wilson and published by the Council for Supply Chain Management Professionals.
Trucking companies were able to increase rates 5 percent to 15 percent, despite a modest downward tick in volumes.
Inventory levels have returned to pre-recession levels, with extra inventory now held by manufacturers and wholesalers instead of retailers. Average inventory investment for all industry sectors grew 8 percent, to more than $2.1 trillion, resulting in a 7.6 percent increase in inventory carrying costs, Wilson said.
Ongoing economic uncertainty and slow growth suggest the freight sector will remain relatively flat in 2012, but even incremental growth is starting to result in tightened truck capacity in some parts of the country, according to the report. Motor carriers have pared back fleets in recent years in response to weak demand and are having trouble finding enough qualified drivers, in part due to tighter safety regulations. – Eric Kulisch
U.S. logistics costs grew 6.6 percent in 2011
