Costs rocket for logisticians

Costs rocket for logisticians
Source: Editorial Staff

Driven by the relentless rise in fuel costs, American businesses spent a record $1.4 trillion on logistics last year.
That was equal to 10.1 percent of the nation’s Gross Domestic Product, a percentage not matched since 2000.
That was the crux of the 19th annual State of Logistics Report by the Council of Supply Chain Management Professionals in Washington.
Inventory carrying costs outpaced transportation costs, rising 9 percent last year. Transportation costs rose 5.9 percent last year and now account for 6.2 percent of nominal GDP.
Fuel has been the killer cost, according to the report’s author Rosalyn Wilson. Despite the 5.9 percent increase in transport costs, most modes (except for railroads) reported significantly higher costs as well. Because freight volumes are lessening with the slowing U.S. economy, the ability for carriers to raise rates (except for fuel surcharges) is “very constrained,” Wilson noted.
Higher inventory carrying costs and transport costs combined to outpace the flagging U.S. economy, pushing logistics as a percentage of GDP into double digits for the first time since 2000. Still, logisticians deserve credit for productivity. In 1985, for example, logistics cost 12.3 percent of GDP, before enjoying a steady improvement through the early years of this century. The all-time low percentage was in 2003 when logistics costs a mere 8.6 percent of GDP.
Unless the cost of crude oil retreats back under $80 a barrel, those days may be gone forever.
The good news for shippers is multifold. First, there is plenty of capacity—at least for now. Secondly, heightened competition for fewer loads has severely constrained rates, particularly in trucking.
Total logistics costs have risen in each of the last five years and transportation accounted for 52 percent of the rise last year.
Trucking costs increased $36 billion last year, an increase of 6 percent of 2006 levels. The cost of rail transportation rose 7.4 percent as the rails posted their second-best year on record despite a 2.5 percent drop in carloadings.

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