Executive Briefings

Analysis of the 23rd Annual State of Logistics Report

The logistics sector in 2011 was characterized by flat freight volume and higher rates, says Rosalyn Wilson, senior business analyst at Delcan, who researches and writes the annual State of Logistics report. The report is underwritten by the Council of Supply Chain Management Professionals and Penske Logistics.

Logistics costs in 2011 were up 6.6 percent on very little growth in volume, which means almost all of the increase was attributable to rate hikes, Wilson says. "For most in the transportation industry, volume increases in 2011 were around 2 percent, but we did see rate hikes."

Trucking companies and railroads were able to raise rates early in 2011 and those rates stuck and have continued to stick through the first part of 2012, Wilson reports. This was essential for the trucking industry, "which has been hurting and not able to meet expenses," she says. And it was a real boon for railroads, whose revenue was up 15.3 percent. "That has everything to do with their rate increases," Wilson says.

The 3PL and freight forwarder sector also did well in 2011, with an increase in revenue of around 9 percent, Wilson says. Ocean carriers, however, "had tremendous problems with over capacity and low volumes that led to canceled schedules or stretched out shipping. Rates bounced around a lot, resulting in a lot of losses in the industry."

Inventory levels were up in 2011, but because of low interest rates inventory carrying costs were flat. "After being at .13 percent for 2010, I didn't think the interest rate had anywhere to go, but it actually fell to .09 percent," Wilson says. "We did a calculation that showed that if interest rates had been at the 2005 level, logistics as a percentage of GDP would have been 8.9 percent in 2011, as opposed to the 8.5 percent that it actually was, so the low interest rates clearly are responsible for inventory carrying costs being held down."

One of the storm clouds that companies face today is a looming truck capacity shortage, Wilson says. "We had a certain level of capacity as we went into the recession and in the intervening three years, we have dramatically reduced capacity." Even though 2011 was a banner year for truck registrations, "this year we are not even approaching normal replacement levels for trucks," she says. Moreover, out of 1.25 million truck registrations in 2011, 791,000 were used vehicles and "in the fourth quarter of last year the market simply ran out of used trucks," says Wilson. Consequently, the price of a used truck went from around $26,000 dollars in 2010 to $46,000 last year and up to $58,000 at the beginning of this year. "This also means that now we have companies getting out of the business because they can sell their trucks for a small profit," she says.

Wilson describes today's situation "as a tenuous capacity equilibrium, because we are experiencing some shortages in some markets. If you have a dedicated fleet you are in good shape; if you don't, prepare for the day when you won't be able to get a truck," she says.

To view video in its entirely, click here


Keywords: 3PL, third party logistics, global logistics, logistics management, logistics & supply chain, logistics services, Rosalyn Wilson, State of Logistics Report

Logistics costs in 2011 were up 6.6 percent on very little growth in volume, which means almost all of the increase was attributable to rate hikes, Wilson says. "For most in the transportation industry, volume increases in 2011 were around 2 percent, but we did see rate hikes."

Trucking companies and railroads were able to raise rates early in 2011 and those rates stuck and have continued to stick through the first part of 2012, Wilson reports. This was essential for the trucking industry, "which has been hurting and not able to meet expenses," she says. And it was a real boon for railroads, whose revenue was up 15.3 percent. "That has everything to do with their rate increases," Wilson says.

The 3PL and freight forwarder sector also did well in 2011, with an increase in revenue of around 9 percent, Wilson says. Ocean carriers, however, "had tremendous problems with over capacity and low volumes that led to canceled schedules or stretched out shipping. Rates bounced around a lot, resulting in a lot of losses in the industry."

Inventory levels were up in 2011, but because of low interest rates inventory carrying costs were flat. "After being at .13 percent for 2010, I didn't think the interest rate had anywhere to go, but it actually fell to .09 percent," Wilson says. "We did a calculation that showed that if interest rates had been at the 2005 level, logistics as a percentage of GDP would have been 8.9 percent in 2011, as opposed to the 8.5 percent that it actually was, so the low interest rates clearly are responsible for inventory carrying costs being held down."

One of the storm clouds that companies face today is a looming truck capacity shortage, Wilson says. "We had a certain level of capacity as we went into the recession and in the intervening three years, we have dramatically reduced capacity." Even though 2011 was a banner year for truck registrations, "this year we are not even approaching normal replacement levels for trucks," she says. Moreover, out of 1.25 million truck registrations in 2011, 791,000 were used vehicles and "in the fourth quarter of last year the market simply ran out of used trucks," says Wilson. Consequently, the price of a used truck went from around $26,000 dollars in 2010 to $46,000 last year and up to $58,000 at the beginning of this year. "This also means that now we have companies getting out of the business because they can sell their trucks for a small profit," she says.

Wilson describes today's situation "as a tenuous capacity equilibrium, because we are experiencing some shortages in some markets. If you have a dedicated fleet you are in good shape; if you don't, prepare for the day when you won't be able to get a truck," she says.

To view video in its entirely, click here


Keywords: 3PL, third party logistics, global logistics, logistics management, logistics & supply chain, logistics services, Rosalyn Wilson, State of Logistics Report