Efficiency gains offset by rising fuel prices

The total cost of logistics remained about the same this year as last, as gains made from reduced inventory, costs savings, and greater efficiencies in the warehouse were negated by increases in fuel costs. That's according to the "Logistics Cost and Services 2008" study conducted by Establish Inc., a supply chain consulting firm. The results of the annual study were shared during the CSCMP Annual Global Conference by Establish Inc.'s Conrad Ross, Steve McDonald, and Jason Pankowski.

Logistics costs as a percentage of sales have been declining over the past five years as companies have improved warehousing efficiencies and reduced inventories, according to the presenters. But with increasing fuel costs and an uncertain economy, logistics costs as a percentage of sales are expected to increase in 2009.

Total logistics costs as a percentage of sales now stand at 9.28 percent. That's down a mere 0.1 percent from 2007. In Establish Inc.'s report, transportation represents 4.68 percent of sales, warehousing is 1.9 percent, and inventory is 1.8 percent. Warehousing and inventory are each 20 percent of logistics costs, customer service and order entry total 7 percent, and administration is the remaining 3 percent.

Transportation accounts for half of total logistics costs and may get higher depending on the volatile fuel market. In 2008, transportation costs increased 18.3 percent, while warehousing costs decreased 8.5 percent.

[Click here to view presentation slides on cscmp.org.]