Bill Stankiewicz Copy State Of Logistics Study For Web 3 Pl
- 1. 22nd Annual ―State of Logistics Report®‖ Navigating Through the Recovery EyeforTransport 3PL Summit Atlanta, GA June 23, 2011 Rosalyn Wilson [email protected] 703-587-6213
- 2. US Business Logistics Costs 1.39 1.34 1.31 1.18 1.21 1.10 1.03 0.97 0.92 0.95 $ Trillions 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1
- 3. The US Business Logistics System Cost is the Equivalent of 8.3 Percent of Current GDP in 2010 $ Billions Carrying Costs - $2.064 Trillion All Business Inventory Interest 4 Taxes, Obsolescence, Depreciation, Insurance 280 Warehousing 112 Up 10.3% Subtotal 396 Transportation Costs Motor Carriers Truck – Intercity 403 Truck – Local 189 Subtotal 592 Other Carriers Railroads 60 Up 10.5% Water (International 28, Domestic 5) 33 Oil Pipelines 10 Air (International 17, Domestic 16) 33 Forwarders 32 Subtotal 168 Shipper Related Costs 9 Logistics Administration 47 TOTAL LOGISTICS COST 1,211 Up 10.4% 2
- 4. Logistics Cost As A Percent of GDP 9.7 9.9 9.4 9.4 9.4 8.6 8.5 8.7 8.3 7.8 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3
- 5. Total US Business Inventories Billions of Dollars 2,300 US Recessions 2,100 1,900 1,700 1,500 1,300 Recession Dates: 3/1/2001 to 11/1/2001 and 12/1/07 to 7/1/09 Source: US Department of Commerce, Census Bureau 4
- 6. The Inventory to Sales Ratio Has Remained Near Pre-Recession Levels 1.50 1.45 1.40 1.35 1.30 1.25 1.20 Source: US Department of Commerce, Census Bureau 5
- 7. US Average Commercial Paper Rates Remained Low in 2010 7 6 5 4 Percent 3 2 1 0 Source: Board of Governors of the Federal Reserve System 6 5
- 8. The US Business Logistics System Cost is the Equivalent of 8.3 Percent of Current GDP in 2010 $ Billions Carrying Costs - $2.064 Trillion All Business Inventory Interest 4 Taxes, Obsolescence, Depreciation, Insurance 280 Warehousing 112 Subtotal 396 Transportation Costs Motor Carriers Truck – Intercity 403 Truck – Local 189 Subtotal 592 Other Carriers Railroads 60 Water (International 28, Domestic 5) 33 Oil Pipelines 10 Air (International 17, Domestic 16) 33 Forwarders 32 Subtotal 168 Shipper Related Costs 9 Logistics Administration 47 TOTAL LOGISTICS COST 1,211 7
- 9. Trucking Sector Continues to Face Pressures ● Shipment volumes were volatile and there is still more capacity than needed, especially in LTL, TL has tightened up ● Rates were still stubbornly flat for most trucking companies ● Rising operating costs have been brutal, especially fuel and driver pay ● Impact of CSA, new HOS rules, and environmental regulations ● Higher fuel prices and fuel surcharges – up almost 20 percent over 2009. Industry recovering only 70 percent of increase 2010 Truck Tonnage Truck Tractor Fleet 4 31 3 2.6 1.9 1.8 30 2 1.5 0.9 0.9 Percent Change 1 0.3 0.4 29 Thousands 0 -1 -0.1 28 -0.6 -2 -1.6 27 -3 -2.8 -4 26 J F M A M J J A S O N D Source: ATA Truck Tonnage Index, SA Source: The Journal of Commerce 8
- 10. Number of Truck Drivers vs Freight Carried 115 110 Index 2000 = 100 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Drivers Freight Source: Bureau of Labor Statistics, Bureau of Transportation Statistics, and author estimates 9
- 11. Some Issues Never Seem To Change ―Practically every truck manufacturer and nearly all employers complain of the great difficulty of securing drivers who are competent and who will work handling freight aside from those who drive horses.‖ — Traffic World, Dec. 12, 1914 10
- 12. Railroads Perform Well in 2010 ● Shipments were strong in the first half of the year, weaker to end the year ● Some rail equipment is still parked ● Rail car and locomotive orders larger than previous years ● Railroads are hiring Carloadings Intermodal Trailers and Containers 360 260 Thousands Thousands 340 240 320 220 300 200 280 260 180 240 160 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 11
- 13. US Ports Lose Ground Again in 2010 Ports 2010 2009 2008 2007 2006 Los Angeles 5,553,108 5,028,998 5,670,897 5,740,261 5,743,400 Long Beach 4,462,232 3,765,560 4,611,671 4,994,949 4,798,617 New York 4,088,361 3,587,740 3,992,258 3,935,262 3,678,247 Savannah 2,169,497 1,914,751 2,115,986 2,041,521 1,609,131 Oakland 1,526,066 1,398,420 1,394,684 1,451,326 1,414,782 Norfolk 1,439,176 1,375,632 1,591,566 1,573,273 1,424,993 Seattle 1,414,490 1,072,838 1,082,573 1,289,364 1,222,596 TEUs U.S. Ports 2006 - 2010 Houston 1,373,372 1,256,049 1,370,759 1,415,657 1,295,366 Charleston 1,068,742 954,836 1,330,919 1,408,434 1,517,311 Tacoma 834,957 873,708 1,129,301 1,150,590 1,095,896 All U.S. Ports 28,334,106 28,380,903 29,282,675 30,133,253 28,641,171 Source: Journal of Commerce PIERS Database, measured in TEUs 12
- 14. Monthly Tonnage Indicator for Internal Waterways 55 50 45 40 35 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2006 2007 2008 2009 2010 Source: US Army Corps of Engineers, Navigation Data Center 13
- 15. Index of Logistics Costs as a Percent of GDP 1990 - 2010 110 US Recessions 90 Index 1985 = 1000 70 50 30 1990 1995 2000 2005 2010 Inventory Transportation Total Recession Dates: 3/1/2001 to 11/1/2001 and 12/1/07 to 7/1/09 14 9
- 16. GDP Growth and Logistics Cost Growth GDP Logistics Cost 2006 2007 2008 2009 2010 15
- 17. Can 2011 Deliver on Its Promising Start? 1Q 2011 was much stronger than 4Q 2010 for transportation Freight volumes were up in the first quarter, but have been trailing down in recent months Manufacturing has been leading the economy 22 months into the recovery and it is still 6.5 percent below pre- recession levels The Manufacturing sector laid off 5,000 workers in May GDP growth rates have not met expectations and the estimate was lowered to 1.8 percent for the 1Q Unemployment was edging downward and jobs creation was growing, although some sectors were still experiencing problems Unemployment rose in May Jobs creation is not even keeping pace with population growth 16
- 18. 2011 Recap - Trucking ● Truck capacity is tightening and pricing control is shifting – by late 2011 we may start to see some very significant rate hikes, unless freight volumes continue to soften ● Carriers are recruiting aggressively for drivers ● Sales of medium and heavy duty trucks are gaining strength, but still have not reached replacement levels; used truck prices have soared and the supply is dwindling ● Diesel prices are on the rise once again with fuel surcharges growing – still not recovering 100 percent of costs ● New HOS rules in play ● Mandatory EOBRs on the horizon ● New NAFTA pilot allowing Mexican carriers into the US ● CSA having impacts 17 17
- 19. CSA is Still Causing Uncertainty ● CSA BASICs – Unsafe Driving – Fatigued Driving (Hours-of-Service) – Driver – Controlled Substances/Alcohol – Vehicle Maintenance – Cargo-Related – Crash Indicator ● A carrier’s measurement for each BASIC depends on: – The number of adverse safety events (violations related to that BASIC or crashes) – The severity of violations or crashes – When the adverse safety events occurred (more recent events are weighted more heavily) 18
- 20. CSA – The Stakes are High ● Carriers In March 2009 an Illinois – Inspections jury awarded a $23.7 million judgment against – Managing your score - erroneous information freight broker C.H. – Higher fleet costs Robinson Worldwide for an – Attracting and Retaining Good Drivers interstate collision that – Driving marginal carriers out of business killed two people and injured five others. Despite ● Drivers an admission of – Training negligence on the part of – Managing your score - erroneous information the carrier and driver, the – Maximizing pay, benefits, working conditions plaintiffs argued the driver was C.H. Robinson's ● Shippers agent, and the broker – Potential liability issues involving due diligence should have exercised due in the event of an accident diligence that would have – Monitoring carriers’ CSA scores uncovered the driver’s suspended license and – Using CSA scores in carrier selection process falsified log book. 19
- 21. 2011 Recap - Railroads ● Rail carloadings got off to a slow start because of the bad weather, but posted good growth in 1Q 2011 ● 2Q 2011 has seen some very mixed results with carloadings declining in some weeks ● Expect more growth in intermodal as railroads increasing become the mode of choice for long hauls; favorite mode now because fuel surcharges are about 50 percent of those for trucks; rates are often 10 to 20 percent lower than truckload rates ● The railroads are ready for expansion, but it will come gradually; they could handle a 10 to 15 percent increase in volume before there are any worries about capacity issues ● New container chassis distribution model is underway 20 17
- 22. 2011 Recap – Air and Water Carriers ● The air cargo industry was still going strong in 1Q 2011, but shipments have slowed in recent weeks – Retailers have indicated a willingness to use air freight to put off buying decisions, rather than risk high inventories – Carriers have no plans to add capacity because they do not expect to maintain the market share ● Ocean carriers have tremendous excess capacity and are still adding new ships to their fleets. – Rates rose dramatically, well over 100 percent for some shipments, during 2010, but carriers are now sacrificing rates for market share and the ensuing competition is driving rates down again 21
- 23. Household Net Worth 70 65 60 Loss of $16.4 trillion from peak in 2Q07 55 50 45 Source: Federal Reserve 22
- 24. Cass Monthly Freight Indexes Index of Index of Dollars Spent for Freight Freight Shipments 2.4 1.2 2.2 1.1 2.0 1.1 1.8 1.0 1.6 1.0 1.4 0.9 1.2 0.9 1.0 0.8 2009 2010 2011 2009 2010 2011 Source: Cass Logistics, Cass Freight Indexes 23
- 25. Summary • 2010 Logistics Costs increased to $1,211 billion • Logistics cost were equivalent to 8.3 percent of GDP in 2010 • Transportation costs rose 10.4 percent and now account for 5.2 percent of nominal GDP – all modes dropped substantially • Inventory carrying costs rose 10.3 percent and now account for 2.7 percent of nominal GDP –inventories were up and interest rates dipped still lower • After a good start, 2011 has slowed considerably and estimates of growth are being revised downward 24 17