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Logistics Costs Are at 9.9% of GDP

In announcing how the US economy fared relative to its logistics spending, Rosalyn Wilson pointed out business logistics costs rose by over 11%, adding $130 billion to the 2005 record level of $1,174 billion.

The 18th Annual State of Logistics Report, sponsored by the Council of Supply Chain Management Professionals (CSCMP) included specific breakouts for each mode and category of logistics spending. Transportation-related spending dominates the numbers with over $800 billion in total. Three-fourths of that figure comes from motor carriage.

“The volume of freight being moved is meeting and even exceeding estimates,” said Wilson. U.S. ports handled an additional 2.1 million twenty-foot-equivalent-units (TEUs) for an 8% increase in 2006. Over the last three years, she added, container volumes have gone up 30%.

Rails handled a record 9.4 million containers, and air freight services to and from Asia helped push freight-ton-miles up by 4.6%.

Despite large volume increases, revenues for carriers weren’t as strong. Weakening demand and greater capacity in the motor carrier segment led to intense competition for available freight and held down rates. High fuel prices did push up fuel surcharges, which, in many cases, accounted for the rise in revenues. But smaller carriers, struggling for freight, often didn’t have the leverage to hold fuel surcharges.

Inventories have been rising, though the inventory-sales ratio indicates they are moving, not accumulating. There’s just more going through the system and it’s being held at different places in the supply chain, indicates Wilson.

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