Supply Chain Management:  State of Logistics report says economy “has hit the wall”

Business logistics costs rose 10.4 percent last year, totaling $1.21 trillion, which is about what American businesses paid for freight transport in 2010, according to the authoritative 22nd annual State of Logistics report released Wednesday.

Logistics costs as a percentage of Gross Domestic Product (GDP) climbed to 8.3 percent last year, up from 7.8 percent in 2009 but still below the 9.9 percent registered in 2007 and 9.4 percent in 2008.?

?Transportation costs rose 10.3 percent from 2009 levels. Interestingly, trucking (which accounts for 78 percent of all freight transport on a revenue basis) continued to lag behind the other modes. Trucking costs rose 9.3 percent last year, compared to an average of 15.4 percent for the other freight modes combined.?
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“The recovery from the Great Recession has proven to be more elusive and prolonged than any other in our history,” said Rosalyn Wilson, the author of the SoL report sponsored by the Council of Supply Chain Management Professionals. “The slow growth presented another year of challenges for the logistics industry.”?

Transportation costs ticked over the 10 percent last year after tumbling the previous two years. That’s because of higher freight volumes, fuel surcharges and what Wilson called “genuine rate hikes.”?
“Freight volumes grew year over year, but unsteadily,” Wilson explained. “There were frequent spikes and valleys in the monthly tonnage, carload, intermodal and container data.” ?

In a warning to shippers worried about capacity, Wilson said that volumes have recovered only about half of their recession losses. But industry capacity, especially in the trucking and air freight modes, “is close to being fully engaged,” she said.?

“The recession had a devastating effect on total industry capacity, which is much lower than it was in 2007,” Wilson said.? ?

Looking ahead, Wilson said it appears the U.S. economy is “stalling.” She said the economy has been “in a fragile state for close to four years now and the highly touted recovery in some sectors” has not transferred to less robust areas.?

“We may have hit a wall,” she said. “It’s been close to two years since the recession was pronounced over (but) for many Americans, things have not improved.”

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