BLOOMFIELD HILLS — The Council of Supply Chain Management released its 24th annual “State of Logistics Report” today, revealing that total U.S. business logistics costs rose in 2012 to $1.33 trillion, a 3.4 percent increase from the previous year, remaining at 8.5 percent of the U.S. gross domestic product.
The report, authored by transportation consultant Rosalyn Wilson of R. Wilson Inc. has tracked and measured all costs associated with moving freight through the U.S. supply chain since 1988. This year’s report presents an overview of the economy during the past year, the logistics industry’s key trends and total U.S. logistics costs for 2012. It also suggests that the U.S. is no longer in recovery mode, but rather in the “new normal” for the economy and supply chain industry as a whole. The research concludes with a brief overview of industry indicators for the remainder of 2013. The annual “State of Logistics Report” is now available for distribution.
This year’s report discloses that transportation costs were up only 3.0 percent in 2012 due to weak and inconsistent shipment volumes and pressure to hold rates. The trucking industry is maintaining a tenuous balance between supply and demand, a balance that will likely be disturbed when the U.S. Department of Transportation’s new Federal Motor Carrier Safety Administration hours of service regulations go into effect July 1. The impact of these regulations will be to reduce existing drivers’ productivity, leading to a capacity contraction. Truck transportation costs rose only 2.9 percent in 2012; however, expected capacity pressures will push rates up quickly.
Railroad transportation costs rose 4.9 percent, increasing rail revenue per ton-mile 5.3 percent to 3.961 cents. Competitive pressure from trucks in the intermodal market held rates down for this service. Intermodal volume was the second highest on record, while carload traffic declined 3.1 percent.
The inland waterway transportation system was disrupted frequently last year, with river flow problems affecting navigation. The severe drought reduced river levels, which resulted in temporary closures for emergency dredging. An 11-mile stretch of the Mississippi River was closed intermittently in August 2012, causing queues of up to 100 tows at $10,000 per tow per lost day. The shallow draft also resulted in light loading; every inch of lost draft results in thousands of tons of product not being moved. As a result, agricultural shippers reported rate increases of nearly 25 percent.
Historically low interest rates reduced costs for the record levels of inventory that has accumulated throughout the system. Warehousing costs increased 7.6 percent, but were still dwarfed by the 2.6 percent rise in expenses directly related to inventory levels, such as taxes, obsolescence, depreciation and insurance.
“CSCMP’s annual ‘State of Logistics Report,’ which we present with support from Penske Logistics, contains the information and industry perspectives that will not only enable supply chain leaders to prepare for the business challenges ahead,” said Rick Blasgen, the Council of Supply Chain Management Professionals president and chief executive officer, “but capitalize on opportunities that exist. This report identifies important trends that are impacting the U.S. logistics system, and reveals how logistics and supply chain costs are affecting the greater economy to help executives proactively manage their businesses and their supply chains.”
“We are pleased to be supporting CSCMP’s important work again,” said Penske Logistics President Marc Althen. “This year’s report really underscores the competitive advantage a well-managed supply chain can provide shippers. In spite of the ‘new normal’ business environment, we remain optimistic and see upside growth potential from this economic uncertainty especially for our core dedicated transportation, distribution center management and transportation management solutions. We see more shippers continuing to outsource various elements of their supply chains to logistics providers to further reduce warehousing, trucking and shipping costs while improving service levels.”