Rosalyn Wilson presented the CSCMP’s annual State of Logistics Report at the National Press Club in Washington, DC on June 15. Each year this very valuable publication outlines the major economic forces shaping the world of logistics and highlights the results of these impacts. Here are some of the findings that struck me as significant.
The year 2010 was clearly better than 2009 but not on par with the economic rebound we have seen after previous recessions. “Consumers are not leading the charge as they have in other recoveries because of the fragile state of the economy and their personal wealth.” Persistent unemployment, substandard job creation, declining home prices, rising food and fuel costs all adversely affected the net worth of consumers, dampening their spending patterns. While industrial production was up by 5.3 percent in 2010, consumer production was almost flat.
After declines in 2008 and 2009, logistics costs increased by 10.4 percent in 2010. Even in a relatively soft year, transportation costs rose by 10 percent, driven by higher volumes, rate increases and rising fuel surcharges. Logistics as a percent of GDP increased to 8.3 percent, lower than any year but 2009 in the past decade.
While freight volumes ebbed and flowed in 2010, capacity was tight due to the large exodus of equipment and drivers during the Great Recession. The report indicated that industry capacity is lower than it was in 2007.
Consumers changed their behaviour. They became more “disciplined” and focused more on sales and discounted products. Manufacturers have responded by reducing packaging sizes while holding the line on price.
The recovery in the transportation sector varied by mode. Railroads experienced a 21.8 percent surge in revenues. Trucking, the largest component of transportation costs was hit the hardest. Trucking costs were up 9.3 percent in 2010. Truck tonnage rose by only 5.3 percent. This did not offset the declines in the previous years. A big part of the revenue increase was the upswing in fuel surcharges, even if most truckers were not able to recover their additional fuel costs. Achieving rate increases was a challenge due to excess capacity.
The workforce of truck fleets has declined by 13.4 percent over the past four years. Driver recruitment remains a challenge. The report highlights that truck freight volumes are rising faster than the pace of new driver hires. One in six drivers is over 55 years of age while less than 25% of drivers are under 35 years of age and the percentage is shrinking.
Ms. Wilson summed up her report by stating that “the recovery from the Great Recession has proved to be more elusive and prolonged than any in our history.” She went on to say that “there are signs that the economy is slowing and predictions for a strong showing in 2011 may fall short.”
