Logistics report reflects U.S. economic pain

If you really needed more proof of the severity of the U.S. economic contraction last year, you can find it in the 21st Annual "State of Logistics Report," appropriately titled "The Great Freight Recession." According to the report, U.S. business logistics costs plummeted to $1.1 trillion in 2009, a decrease of $244 billion from 2008.

The benchmark industry ratio—U.S. logistics costs as a percentage of Gross Domestic Product (GDP)—hit a record low of 7.7 percent, the lowest point ever recorded in the 30 years that data has been collected. In the past, a low ratio signified that American logistics managers were doing a good job controlling costs and efficiently moving and storing goods. But last year, that number slipped for a different reason. As the volume of goods produced in the United States declined, so did the amount of tonnage to be shipped, thus dragging down logistics spending.

The State of Logistics Report presents the findings of the only long-term study that attempts to quantify the size of the transportation market and the impact of logistics on the U.S. economy. The report breaks expenditures into three key segments: inventory-carrying costs, transportation, and administration.

This year's report pegged inventory-carrying costs at $357 billion in 2009—a notable 14.1-percent drop from 2008. The decline stemmed from both a 4.6-percent decline in inventory holdings and a 10-percent cut in the inventory-carrying rate, which reflected a near-zero cost for credit.

Transportation costs totaled $542 billion for trucking and $146 billion for air, water, and railroad transportation combined. Other costs included $9 billion in shipper-related expenditures and $42 billion for logistics administration expenses.

Rosalyn Wilson authored the report on behalf of the Council of Supply Chain Management Professionals under sponsorship from Penske Logistics.