Business Logistics Costs Dropped in 2008

Inventory-carrying costs led decline as warehousing, transportation rose

 

After rising by over 50 percent during the previous five years, business logistics costs dropped to 9.4 percent of U.S. Gross Domestic Product in 2008, according to an authoritative industry report.

 

The 20th Annual "State of Logistics Report," released June 17 by the Council of Supply Chain Management Professionals, revealed the decline and pointed out that in 2007 logistics costs were 10.1 percent of the country’s GDP. Final delivered cost of consumer goods may have declined slightly, the report notes.

 

Driven by a decline in inventory-carrying costs, total U.S. logistics costs dropped to $1.3 trillion in 2008, the report said, a decline of $49 billion from 2007. Interest rates plummeted by over 50 percent in 2008 compared with 2007. Inventory-carrying costs last year plunged 13 percent, due to a 2.2 percent drop in inventories and an 11.2 percent drop in the inventory-carrying rate.

 

However, warehousing costs rose by 9.5 percent as warehouse managers reported that inventory turns were down substantially from earlier years as stock spent more time in warehouses.

 

Transportation costs in 2008 increased by 2 percent over 2007 levels, not enough to offset the steep decline in inventory-carrying costs. Trucking costs, which comprise 78 percent of the transportation component, increased 1.3 percent, compared with an overall increase of 4.4 percent for rail, air, and ocean modes. Truckload industry capacity dropped at unprecedented rates, as freight volumes declined faster than capacity.

 

"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."

(Source:The Journal of Commerce)