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Business Logistics Costs Up Slightly for U.S. Firms

By Bisk on October 07, 2013
Business Logistics Costs Up Slightly for U.S. Firms

October 07, 2013

The cost of moving goods increased by 3.4% for U.S. businesses in 2012, although those logistics costs as a percentage of gross domestic product (GDP) held steady at 8.5%, according to the State of Logistics Report from the Council of Supply Chain Management Professionals.

Businesses spent $1.33 trillion on logistics last year. Among the other highlights of the 24th annual report:

  • Fluctuating and feeble shipment levels helped limit the year-over-year increase in transportation costs to 3%, with trucking costs bumping up by 2.9%.
  • With competition from the trucking industry keeping rates down, costs for railroad transportation increased by only 4.9% in 2012, significantly below the 15.3% increase of 2011.
  • Severe drought conditions led to lighter loads for inland waterway transportation systems, fueling rate increases of almost 25% for shippers of agricultural products.

Overall, the report’s findings indicate that the nation has moved out of economic recovery mode and entered “the ‘new normal’ for the economy and supply chain industry as a whole,” the council said in a June 2013 news release.

For example, the trucking industry is likely to face supply-and-demand challenges in the coming year as it adjusts to new U.S. Department of Transportation regulations limiting how long big rig drivers can stay behind the wheel. Federal regulators contend the restrictions will save lives and money by reducing crashes.

However, trucking companies have expressed concern that the new rules will reduce productivity and, ultimately, cut capacity. That is expected to push truck transportation costs beyond the 2.9% increase of 2012, according to the State of Logistics Report.

Meanwhile, on the nation’s inland waterways, weather conditions made 2012 a tough year for shippers. A lack of rain left rivers low, prompting closures and emergency dredgingm, and causing navigation obstacles, the report noted. Shippers could not fill their vessels to capacity because of these problems.

The report demonstrates how logistics and supply chain costs are impacting the national economy, according to Rick Blasgen, president of the Council of Supply Chain Management Professionals. The findings should assist professionals in supply chain management.

In an analysis of the annual report, the information technology research and consulting company Gartner Inc. noted that the growth of electronic commerce, or e-commerce, is leading to a contracting and consolidation of supply chains.

The State of Logistics Report was written by transportation consultant Rosalyn Wilson and sponsored by Penske Logistics.

“The supply chain is actually the backbone of the U.S. economy,” Wilson said. “You can’t imagine what goes on behind the scenes when you place that overnight order on Amazon.”

Category: Supply Chain Management