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2010 State of Logistics

2010 State of Logistics

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Published by EconMatters
2010 State of Logistics by Logistics Management, July 2010
2010 State of Logistics by Logistics Management, July 2010

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Published by: EconMatters on Jul 20, 2010
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By PATRICK BURNSON, exeCUTIve edITOR
d
uring Worl War II, th U.S. Na nlistworl champion chss plar Rubn Finto calculat—on th basis o positionalprobabilit—whr nm submarinswr most likl to surac. yars latr, Finwas ask about th projct’s outcom, anmostl rpli: “It work out all right.Whil logistics managrs ma not b consulting withchss mastrs ths as, th ar posing on big qustion toconomic thorists willing to tak it on: Is “Th Grat FrightRcssion” nall coming to an n? Analsts an inustrinsirs ar tlling us that things ar in gtting bttr orshippr organizations, but that th tnuous businss climatan tightn crit controls will mak it icult or carrirsto rapil pan capacit or th rmainr o 2010. Th shippr imprati, thn, will b to collaborat withcarrirs lik nr bor. With capacit tightning, a nwurgnc shoul b plac on mitigating risk an controllingcost. Th 21st Annual Stat o Logistics Rport (SoL), rlasb th Council o Suppl Chain Managmnt Prossionals(CSCMP) an prsnt b Pnsk Logistics at th NationalPrss Club last month, conrm what man shipprs habn suspcting. Th worst ma b or, but as th conomcontinus its slow rcor, shipprs ar going to b acwith an ntirl nw st o tactical challngs.“W ar nitl sing a rcor,” sas Rosaln Wilson,th rport’s author, “but not th kin that will gnrat a loto nw businss this ar. Grant, shipprs ha alrama a grat man sacrics—that shouln’t chang su-nl in th short trm.In, accoring to Wilson’s rsarch, th cost o th U.S.businss logistics sstm clin 18.2 prcnt in 2009—thbiggst rop in th histor o th rport. Manwhil, businsslogistics costs ll to $1.1 trillion, a cras o $244 billionrom 2008. Combin with th rop in 2008, total logisticscosts ha clin almost $300 billion uring th rcssion.In act, 2009 logistics costs as a prcnt o th nominal Grossdomstic Prouct (GdP) hit a historic low at 7.7 prcnt.“Both major componnts o th cost mols clin in2009,” plains Wilson. “Inntor carring costs ll 14.1prcnt in 2009, an this cras in carring costs was uto both a 4.6 prcnt rop in inntoris an a 10 prcntrop in th inntor carring rat.Transportation costs, shas, plummt 20.2 prcnt rom 2008 lls. Trucking,which compriss 78 prcnt o th transportation compo-nnt, clin 20.3 prcnt whil all othr mos combinclin 20.5 prcnt.
22 LOGISTICS MANAGeMeNT
WWW.LOGISTICSMGMT.COM
| Jul 2010
2010|ANNUAL RePORT
2010 STATe OF LOGISTICS:
Mak our
mo
 Th cost o th U.S. businss logistics sstm clin 18.2prcnt in 2009—th largst rop in th histor o th
State of Logistics 
 
Report 
. But as th conom slowl impros,shipprs will n to b mor cautious an tactical as thac incrasing olums, tight capacit, an highr rats.
 
CAPACITy GAMBIT Th rcssion—which bgan in dcmbr o 2007an continu through mor than hal o 2009—haa ngati impact on all sgmnts o th logistics ss-tm. Th ntir inustr lt th ngati cts o thownturn mor than most othr inustris sinc thslump in ach iniiual sctor translat into a lossin shipmnt olum. Accoring to Wilson, innto-ris continu to climb or th rst hal o 2008 ll-
Jul 2010 |
WWW.LOGISTICSMGMT.COM
LOGISTICS MANAGeMeNT 23
R
apheal
R
icoy
Snapshot of the U.S. Logistics Market 2009
$ billions
Taxes, Obsolescence, Depreciation, Insurance
 233
Interest
 5357Logistics Administration42697
Truck - Intercity
 368
Warehousing
 119ShipperRelated Costs5429
Truck - Local
 174
Railroads
 50
Water
29
Oil Pipelines
 10
Air
29
Forwarders
 28
Total logistics cost
$1,095 billion
Carrying Costs - $1.851 Trillion All Business InventoryDown
14.1%
from 2008Motor CarriersTransportation CostsDown
20.2%
from 2008Other CarriersDown
18.2%
from 2008Logistics Administration146
Source: CSCMP’s 21st Annual
 
State of Logistics
 
Report
 
ing warhouss an rtail shls. Inmi-2008, bloat inntoris bgan tob rawn own until th rach pr-rcssion lls in lat 2009.“Throughout th prio, orrs ornw goos ropp o substantiallan carrirs compt or a win-ling olum o shipmnts,” Wilsonsas. “Spot rats or som mos llblow costs, urthr aing to nancialclin. ecss capacit in th sstmwas rationaliz—or ruc—particu-larl in th trucking an air cargo inus-tris. Som was th natural rsult o carrirs that wnt out o businss, butmuch o th ruction was th rsult o businss cisions.”An with th conom showingstrongr signs o nw li as w mointo th scon hal o 2010, Wilsonan othrs maintain that it’s likl thatw’ll ha capacit problms in manaras b ar’s n.As in morn chss, th tpicalrspons to a moratl soun gambitis to accpt th matrial (b it mab bishop, knight, or rook) an gith matrial back at an aantagoustim. vincnt Hartntt, Jr., Pnsk’sprsint, suggsts that this boar placan work or logistics managrs as wll,taking what carrirs will or now anngotiating or balanc rats latr.“Shipprs ar striking up stratgicalliancs with logistics srics proi-rs that can rspon quickl to marktchangs an ar capabl o rucingcosts rapil,” Harntt sas. “At thsam tim, proirs ar looking outor bst practics an shipprs with thmost agil suppl chains.”KeeP PUSHING PAWNSBut it wasn’t as i shipprs han’tbn tring this all along. In an intr-iw with LM, Wilson tlls us thatatr rising mor than 50 prcnt in
24 LOGISTICS MANAGeMeNT
WWW.LOGISTICSMGMT.COM
| Jul 2010
2010|ANNUAL RePORT
Shipprs wr shllshock last aru to low olumsan trm ratprssurs, an rsoon bcam risk ars.”
—Rosaln Wilson, author o th Stat o Logistics Rport

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