U.S. logistics costs held in check during 2003, study says

U.S. logistics costs held in check during 2003, study says

   U.S. companies spent $936 billion for their transportation and logistics needs in 2003, an increase of $26 billion from 2002, but in relative terms industry continues to do a good job squeezing logistics costs out of distribution operations, according to an annual study of macroeconomic logistics trends.

   Even as total logistics spending rose 2.9 percent, logistics costs as a percentage of gross domestic product declined to 8.5 percent, the lowest level ever recorded in the 15 years of the study. With deregulation of airlines, trucking and rail in the early 1980s, logistics costs compared to national productivity have plummeted from 16.2 percent to about 10 percent in the 1990s with improvements in technology, and then 9.5 percent in 2001 and 8.7 percent in 2002.

   For the first time, the 'State of Logistics' report was not authored by founder Robert Delaney, who died April 2. Rosalyn Wilson, an independent transportation consultant with ties to the Eno Transportation Foundation and Delaney's partner for the project for several years, compiled the report on short notice and without access to historical data in Delaney’s files, which apparently were discarded by his family before they could be preserved.

   The report attributes $16 billion of the total increase in logistics costs to transportation and $10 billion to inventory management. U.S. companies have nearly wrung out most savings from inventory controls. The inventory to sales ratio declined from 1.38 to 1.32 months, “the best inventory management performance in the history” of the study, the report said. Inventory carrying costs, which account for 32 percent of total logistics costs, continued to be held in check by record-low interest rates, which averaged 1.1 percent for short-term commercial paper in 2003. Low rates and the quickening economy prompted companies to invest $49 billion more in inventory during 2003 than in 2002.