new jersey industries.CHICAGO— Manufacturer and Distributors spent a record low on logistics last year. Annual cost of logstics spent a record low of just under 5% of GDP in 2009, compared to just over 9% in 2008., according to annual report issued last week.new jersey industries.
The Council of Supply Chain Management Professionals (CSCMP) and Penske Logistics at the National Press Club reported Logistics Spending by Manufacturers and Distributors has fallen to 7.65%, from a Record high of 16.2% in 1981. The report outlines the impacts the 24+ month recession has taken on the transportation and freight industry.
Beginning in 2008 Shippers and Carriers had felt the pinch from excess capacity, higher fuel costs, and increased external threats introduced into the industry regarding tighter regulation on a multitude of platitudes.
Over the Road Carriers, Logistics Professionals, Truckload Carriers, Owner Operators, and LTL Carriers have taken steps to reduce capacity, but Rosalyn Wilson (Authori of the CSCMP Report) warns Shippers, Manufacturers, and Distributors that the current business climate and increase restrictions on consumer credit may cause difficulty in rapidly expanding capacity in the foreseeable future. "It is likely that we will have capacity problems in some areas by year’s end," Wilson reported.
The Freight, Trucking, Intermodal and Air Freight Industries have been under considerable pressure since the beginning of the recession more than two years ago. Transportation costs tumbled an additional 20 percent in 2009 after surging more than 50 percent during a five year period preceding the recession which began in the fall of 2008.
After rising over 50 percent in the five years leading up to the recession, total logistics costs have fallen the past two years. Transportation costs were down more than 20 percent last year. All transportation modes have been effected, with trucking (both Truckload and LTL combined) falling more than 20 percent. Intermodal and rail prices nearly mirrored trucking rate reductions with substantial declines averaging just under 20 percent.
THE CHANGING FREIGHT INDUSTRY
Shippers cannot get too accustomed to these cheap shipping and cheap freight rates. Capacity constraints, carrier bankruptcies, and Owner Operator financial struggles have impacted the Transportation Industry which will result in large reductions of capacity Wilson warned. Wilson went on to advise caution as freight rates have already risen in some modes and higher rates will continue to be introduced to the market place before the end of 2010.
The Trucking section (truckload carriers, less than truckload carriers, and specialty carriers) have felt the economic struggles. Experts are forecasting an additional 2,000 trucking companies will close their doors because the financial pressures places on them will be too much to survive.
Third Party Logistics Firms have also played an important role in the ever changing transportation industry. Many Shippers have abandoned their long-standing Logistics (freight brokers, 3PL, Third Party Logistics Firms) and have elected to utilize the spot marketplace. This shift has significantly pressured freight companies to reduce prices further to win business.