2008 US Logistics Costs Drop First Time in Six Years

An annual benchmark released today by the Council of Supply Chain Management Professionals (CSCMP) shows the impact of the recession on the US logistics industry. CSCMP's 20th Annual State of Logistics Report® reveals that, after rising over 50% during the previous five years, business logistics costs fell to 9.4% of US Gross Domestic Product (GDP) in 2008. This number is down from 10.1% in 2007. For consumers, the new numbers indicate that the final, delivered cost of goods in the US may have declined slightly.

Total US logistics costs dropped to $1.3 trillion last year, a decrease of $49 billion from 2007. Interest rates plummeted to over 50% lower in 2008 than they were the prior year.

Since 1988, the report has tracked and measured all costs associated with moving goods through the US supply chain. The report benchmarks key metrics in US logistics such as transportation and inventory-carrying costs, freight volumes, and revenues, giving practitioners a big-picture view of the performance of the US supply chain process.

Other key findings
In 2008, inventory-carrying costs plunged 13%, and were the driving force behind the year's decline in logistics costs. The decrease in carrying costs was due to both a 2.2% drop in inventories and an 11.2% decrease in the inventory-carrying rate. Warehousing costs, however, rose 9.5% with warehouse managers reporting that inventory turns were down substantially from earlier years as stock spends more time in warehouses.

Transportation costs were only up 2% over 2007 levels, which was not enough to offset the steep decline in inventory-carrying costs. Trucking, which comprises 78% of the transportation component, increased 1.3% compared to 4.4% for rail, air, and ocean modes. Truckload industry capacity dropped at unprecedented rates, with freight volumes declining faster than capacity, offering little incentive to keep fleets.

"The economy will eventually recover, and when it does, those companies that use the statistics and industry insight contained in this report will be better prepared for the business boom ahead," said Rick Blasgen, CSCMP president and CEO. "This research details ways that company leaders can capitalize on the recovery when it occurs, such as restructuring their distribution networks to maximize efficiency and minimize miles, investing in technologies to facilitate 'green' transportation, and improving real-time data flows to increase visibility and enhance productivity."

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