Tensions help spur nosedive in logistics costs
Jun 6, 2003 12:00 PM, from staff and wire reportsUnited States logistics costs are falling rapidly—but that may not be an entirely good thing.
According to consultants Rosalyn Wilson and Robert Delaney, authors of the 14th annual State of Logistics Report, total logistics costs in the United States dropped to $910 billion in 2002—$47 billion less than in 2001, and $97 billion less than in 2000.
“Declining interest rates have largely driven the reduction in logistics costs,” said Delaney, vice-president of St Louis MO-based Cass Information Systems and a consultant for third-party logistics firm ProLogis. “But competition, overcapacity, and technology have forced much of the industry to reconfigure their operations and to lower their costs.”
Trucking's share of that total logistics market remains high at $462 billion—more than 80% of the market, according to Delaney. By contrast, railroad services account for $37 billion of logistics spending, with air cargo carriers close behind at $27 billion.
However, Delaney said several sectors within the logistics industry are suffering. The cost of warehousing has remained flat for the past three years, while LTL revenues have declined over the last year. While truckload revenues were up in 2002, much of that came from freight being diverted from bankrupt carriers, including Consolidated Freightways, and not from any true market growth, he said.
Other trucking markets showed mixed results. Refrigerated revenues were down, and local dry van trucking revenues were flat. But flatbed revenues were up slightly.
“During the past three years, the state of the US business logistics system has become extremely tense,” Delaney said. “Competition, overcapacity, terrorism, security, and technology have created an operating climate that can best be described as volatile.”