U.S. logistics system improved only modestly in 2011

State of Logistics Report shows “unremarkable” year for industry as logistics costs reach $1.28 trillion.

By Mark B. Solomon
Senior Editor DC Velocity
mark@dcvelocity.com

In 2011, the nation’s business logistics system had one of those years that people won’t feel the need to forget—but they won’t feel the urge to remember either.

The 23rd annual “State of Logistics Report,” which chronicled the nation’s logistics output for the year, showed a modest change over 2010 totals. U.S. logistics costs reached $1.28 trillion, a 6.6-percent increase over 2010 levels and a 17 percent increase over the trough in 2009 as the U.S. grappled with the financial crisis and subsequent recession. (Total logistics costs are calculated by adding together business inventory costs, transportation costs, shipper-related costs, and logistics administration costs.)

Logistics costs as a percentage of nominal gross domestic product (GDP), a ratio often cited to measure the supply chain’s efficiency in moving the nation’s output, rose to 8.5 percent in 2011, up slightly from 8.3 percent in 2010. In 2009, the figure dropped to 7.8 percent.

In the 1990s, as the nation’s supply chain was shaking off the yokes of rail and truck regulation and bringing free-market processes to bear on the marketplace, a ratio in the single digits was hailed as a breakthrough in logistics productivity.

Over the past three years, however, a low ratio has come to underscore a significant decline in shipping expenditures and transportation costs as shippers and carriers downshifted in response to a severe decline in economic activity from the levels of five or six years ago.

The findings of the 2011 report, which were released June 13 in Washington, D.C., paralleled what turned out to be a static year for the nation’s economy. After a year of peaks and valleys, U.S. economic activity ended 2011 relatively flat over 2010 levels, with GDP growth rising by an anemic 1.7 percent.

Correspondingly, the freight transport industry started the year with strong gains in volumes and significantly higher freight payments through its first half, according to the report. However, the economy began to slow down in July, with the only sign of strength being an earlier-than-normal buildup of inventories ahead of the July 4 holiday, the report said.

Overall, Rosalyn Wilson, the report’s author, called 2011 a “rather unremarkable year” for logistics statistics. Still, her 25-page analysis was sprinkled with more optimistic comments than were found in the last two distinctly downbeat reports.

“Things have not been especially robust in the first half of 2012,” she wrote. “However, there are enough signs of improvement that [the] economy really does seem to be on the way up.”

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