U.S. shippers saved $49 billion on logistics in ’08

In 2007, logistics costs rose to 10.1 percent of GDP, capping a five-year period in which spending on freight transportation, warehousing, and supply chain management rose 50 percent. 2008 is the first time in six years that total logistics costs decreased.
  

Previous decreases in logistics spending compared to economic growth during the past quarter-century typically indicated efficiency gains achieved by the logistics sector. But the substantial decline in logistics costs in 2008 is primarily attributed to the economic crash and the reduced amount of freight being moved and stored, according to the report authored by analyst Rosalyn Wilson.

Another major factor holding down logistics costs was a 13 percent reduction in inventory carrying costs, as interest rates dropped to half of the 2007 rate, she said. A 2.2 percent drop in inventories as businesses replenished fewer goods also contributed to the lower carrying costs. But a reflection of the poor economy is that the inventory-to-sales ratio jumped up at the end of 2008 as a slump in sales prevented companies from drawing down their inventories to meet new demand levels.
  

Transportation costs were relatively flat (up 2 percent) over 2007 levels, propped up in the first half of the year by high fuel prices. Trucking costs were only up 1.3 percent, while rail transport costs were 10.5 percent more last year. Cost of warehousing rose 9.5 percent in 2008 as goods stayed on warehouse shelves longer, Wilson said. Trucking and rail rates were down substantially as carriers tried to retain customers in a time of falling demand for service.
  

The transportation analyst and statistician forecast that the United States would experience a slow, U-shaped recovery, which means, “we will not return to pre-recession levels until probably late 2010. Freight volumes will begin to rise consistently in the fourth quarter of 2010, but carriers will still find it difficult to raise rates,’ she wrote.

(Source: American Shipper)