The 23rd Annual State of Logistics Report: What You Need to Know

The Council of Supply Chain Management Professionals (@CSCMP) released its 23rd Annual "State of Logistics Report®" (#SOfL2012) on June 13, 2012. The "State of Logistics Report®" is widely regarded as the benchmark for US logistics activity and used as reference throughout the supply chain industry. According to the numbers, 2011 could be summarized as follows:

  • U.S. logistics spend was up 6.6% to an estimated $1.28 trillion and equivalent to 8.5% of the U.S. GDP
  • Logistics Spend Breakdown
    • Inventory Carrying: $417.3B (32.6% of the total)
    • Administrative: $58.9B (4.6% of the total)
    • Transportation: $803.8B (62.8% of the total)
  • Transportation spend was up 6.2%
    • Rail spend was up 15.3%
    • Warehousing spend was up 7.6%
    • Trucking represents 78% of the transportation total (and 49% of overall logistics spend)

The report was delivered at the National Press Club in Washington D.C. by author Rosalyn Wilson (You Tube), who also shared the following:

  • Trucking rates were up 5-15% as capacity tightened and carriers improved control over rates
  • Higher rates, not volumes, were the driving force behind increase in transportation spend
  • Trucking capacity is fragile although true shortages are still rare
  • Railroad capital expenditures are up 91% as Class Is add 12K freight cars and 473 locomotives
  • Rail carloads rose slightly but rates jumped up 15.3%
  • Ocean shipping costs down 3% while container volumes up (overcapacity expected to continue)
  • Industrial production is up only 3.9% compared to 6.3% in 2010
  • Retail inventories finally stabilized while wholesale and manufacturing inventories increased (Retail inventories to sales ratio had jumped to 1.48 in 2009 from 1.26 in 2007)
  • GDP growth rate slowed to 1.7% and is expected to stay below 3% in 2012

Following Ms. Wilson’s presentation, a distinguished panel of industry leaders was invited to offer a brief interpretation of the report from their point of view and answer questions from members of the press. Panelists included:

Managing Director, Americas Leader, Supply Chain & Logistics Solutions, Jones Lang LaSalle

Vice President of Origin Cargo Management, Yusen Logistics (Americas), Inc.

Senior Vice President of Sales, Penske Logistics

Executive Vice President, Mast Global Logistics (i.e. Limited Brands)

Executive Vice President and Chief Marketing Officer, BNSF Rail

Vice President of Customer Supply Chain NA, Kimberly Clark

Valuable dialogue between the panelists and press transpired for over an hour. A sampling of key discussion points are offered below:

Q: Please expand on this year’s theme of “The Long and Winding Recovery”.

A: There are lots of changes in the underlying economy. Thus far we have experienced an eight-year peak to peak recovery, the longest since Great Depression. Because 70% of GDP is consumer spending, good indicators are auto (rebounding), retail (rebounding), and housing (still down 40-50%).

Q: What are the implications of inventory shifts within the supply chain?

A: Shifting inventory further upstream began with Walmart and can make inventory more fluid and the supply chain more flexible. We have seen inventory management processes improve since burning through excess leftover from the recession. We have also improved end-to-end collaboration to connect the supply chain from shelf to suppliers.

Q: How should we prepare for the day we can’t get a truck?

A: 75% of inventory moves on truck today and we are already experiencing significant tightening in the South East and North East with on-time failures increasing. We need to stop treating transportation as a transactional relationship and improve our partner management practices. We also need to improve information sharing to identify and eliminate empty miles.

Q: How are you preparing for the East Coast port labor situation?

A: It is still pretty early but we are approaching with caution. We have begun to move up shipments for seasonal and promotional items to get the product in-country before a strike. Providers are also adding infrastructure out west to support the shift activity away from these ports.

Q: What are your thoughts on the Europe Crisis and slower Asia growth?

A: Naturally we need to make decisions that are risk averse. The slowing of growth in Asia is more directly connected to the slowing E.U. than the U.S. market. We cannot chase low cost country sourcing and need to improve agility. End-to-end cycle time and speed to market are the most important measures.

Q: How are technology solutions supporting throughput?

A: Improvements in the maintenance of and access to data across the globe allow us to take action earlier. Improved data also means improved analytics which means we can make changes in route such as adding backhauls and changing stops. We can also route carriers through different distribution points and improve scheduling to reduce lines at DCs and protect HOS. Technology is also improving the cash to order cycle time.

The panel members will continue their commentary at the CSCMP Annual Global Conference in Atlanta on Tuesday, October 2 at 9:45 am. The report in its entirety is available for purchase through CSCMP’s on-line bookstore.

Written by Erika Kauffeld, Director of Sales and Marketing at LeanCor and Roundtable Chair on the Global Board of Directors for CSCMP

Posted by LeanCor Supply Chain Group

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LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.

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