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Strong Economy Checks Logistics Cost Rise

Reporting on total U.S. logistics costs for 2004, Rosalyn Wilson said that the strong consumer economy in the U.S. masked some dramatic increases in logistics costs. That total, $1.015 trillion, increased from a revised $944 billion in 2003, topping the $1 trillion mark for only the second time in the 16-year history of the State of Logistics Report.

Sponsored by the Council of Supply Chain Management Professionals (CSCMP), the State of Logistics Report showed interest costs on total business inventories of $1.493 trillion were at the 2002 level of $23 billion, up from $17 billion in 2003. Wilson said she did not expect dramatic rises in interest rates in the coming year, noting some of the increase witnessed in 2004 was due to higher inventory levels. That, too, is expected to moderate.

In compiling the report for 2004, the latest figures available, Wilson said she had reviewed some of the methodology and data sources in an effort to keep the sources current. This led to some revisions in the 2003 data released last June. Using those updated figures, Wilson reported a $20 billion increase in intercity motor carriage costs. The intercity total was $335 billion. Combined with local motor carriage costs of $174, trucking costs topped $500 billion, reaching just over half the total logistics cost.

Rail costs also took an uncharacteristic jump from $38 billion in 2003 to $42 billion in 2004. Wilson pointed to tight capacity and carriers’ ability to push rate increases as significant factors in the increases. Those costs also include fuel surcharges, unlike investment reporting which often strips out fuel surcharges to get a clear view of underlying earnings. Fuel surcharges, says Wilson, are part of the shipper’s cost, and are included in her calculations.

The State of Logistics Report is an annual review of U.S. logistics costs originally developed by Robert V. Delaney. The 16th Annual State of Logistics Report was sponsored by the Council of Supply Chain Management Professionals (CSCMP) and was also supported by a donation from the John Cook School of Business at Saint Louis University.
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