Logistic Costs Way Up In U.S. In 2006

June 8, 2007
Transportation rose 9.4%; inventory costs increased 13.5%.

Fueled by rising energy costs, interest rates, and inventory carrying costs, the Council of Supply Chain Management Professionals' 18th Annual State of Logistics Report shows logistics costs increased $130 billion over 2005 to $1.305 trillion for 2006.

"In 2006, U.S. business logistics costs accounted for 9.9% of our GDP," said Rick Blasgen, CEO of CSCMP. "It's the third year in a row that logistics costs have accounted for an increasing share of GDP."

Transportation costs, spurred by rising fuel costs, rose 9.4 % in 2006 and represent the largest component of logistics costs. Inventory-carrying costs increased even faster: 13.5%. "Inventory costs have risen dramatically because of rising interest rates and because there is more inventory in the system," said Rosalyn Wilson, author of the CSCMP research report. "While large retailers are keeping lean stocks on hand they are foisting inventory back on their suppliers, requiring them to stock and re-supply stores more frequently."

Looking at infrastructure issues, Wilson comments: "The nation's inland waterway system needs to be revitalized. A single barge can move the same amount of cargo as 58 semi-trucks at one-tenth the cost. Yet, of the 257 locks on the more than 12,000 miles of inland waterways, nearly 50% are functionally obsolete due to a lack of funding."

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