Explosive Growth For Logistics Costs

The $156 billion increase in logistics costs in 2005 is the largest increase in the history of the State of Logistics Report, says Rosalyn Wilson. She presented the numbers on June 19th, pointing out that despite this rise, the total fell short of her prediction last year that logistics costs would account for 10% of the Gross Domestic Product. The numbers were certainly headed in the predicted direction, rising from 8.8% of GDP in 2004 to 9.5% in 2005. Wilson again offered her prediction that U.S. logistics costs would achieve a double-digit portion of the GDP.

The U.S. economy continued rapid expansion, Wilson explained, which allowed the effects of rising interest rates and fuel costs to blend into the overall GDP.

“There is nothing to indicate that transportation costs are slowing,” cautioned Wilson, “but the economy is slowing.” This is particularly worrisome, according to Wilson, because inventories have been on the rise. Total business inventories rose $116 billion to $1.76 trillion in 2005.

Greater efficiency must be extracted from logistics networks to counter many of the effects of the rising costs and, says Wilson, which means the U.S. must do more to improve its transportation infrastructure. Ports must be modernized, private investment in rail infrastructure must be encouraged, and additional lane miles must be added to highways as well as establishing truck-only lanes to improve efficiency.



Transportation accounts for $744 billion of the $1,183 billion total logistics cost, according to the 2005 State of Logistics Report released by the Council of Supply Chain Management Professionals. The largest portion of the transportation cost is for motor carriage. Intercity trucking reached $394 billion in 2005, up from $335 billion a year earlier. Rail transportation costs rose $6 billion to $48 billion.

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