US sees logistics costs dropping

Los Angeles: A woeful economy and the popped bubble of consumer spending have combined to take much of the steam out of higher logistics costs in the US. Total logistics costs dropped to $1.3 trillion last year, a decrease of $49 billion from 2007, while interest rates plunged 50% as the Federal Reserve tried to heat up the economy, according to the Council of Supply Chain Management Professionals. After rising by over 50% during the previous five years, business logistics costs dropped to 9.4% of Gross Domestic Product in 2008. However, warehousing costs rose by 9.5% as unsold stock spent more time in warehouses. In 2008, inventory-carrying costs dropped 13%, and were the driving force behind the year's decline in logistics costs. The decrease in carrying costs was due to both a 2% drop in inventories and an 11% decrease in the inventorycarrying rate. Transport costs were only up 2% over 2007. Trucking, which accounts for 78% of transportation, increased 1.3% compared to 4.4% for rail, air, and ocean modes. Truckload industry capacity dropped at unprecedented rates, with freight volumes declining faster than capacity, offering little incentive to keep fleets.