25 th Annual State of Logistics Report UPDATE Ready for a New Route? Stifel Nicolaus November 10, 2014 Rosalyn Wilson Rosalyn.Wilson@Parsons.com 703-587-6213
U.S. Business Logistics Costs 1.04 1.20 1.34 1.42 1.36 1.12 1.24 1.31 1.35 1.39 $ Trillions 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Note: Revised to reflect updates in BEA Private Inventories series. 1
Logistics Cost As A Percent of GDP Percent 8.4 9.1 9.7 9.8 9.3 7.8 8.3 8.4 8.3 8.2 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2
Total U.S. Business Inventories 3,000 Billions of Dollars 2,500 US Recessions 2,000 1,500 1,000 500 Great Recession Dec 2007 June 2009 0 Source: U.S. Department of Commerce, Census Bureau 3
Millions of Dollars Inventories Continue to Climb 800 Private Inventories 700 600 500 400 300 Retail trade Wholesale trade Manufacturing Source: U.S. Department of Commerce, Census Bureau 4
The Inventory to Sales Ratio Is On the Rise 1.50 1.45 1.40 1.35 1.30 1.25 1.20 Source: U.S. Department of Commerce, Census Bureau 5
Inventory Carrying Costs 2.0 Interest Rate 1.5 1.0 0.5 0.0 2011 2012 2013 2014 Source: Board of Governors of the Federal Reserve System 6
The U.S. Business Logistics System Cost is the Equivalent of 8.2 Percent of Current GDP in 2013 Carrying Costs - $2.459 Trillion All Business Inventory Interest Taxes, Obsolescence, Depreciation, Insurance Warehousing Transportation Costs Motor Carriers Truck Intercity Truck Local Other Carriers Railroads Water (International 30, Domestic 7) Oil Pipelines Air (International 13, Domestic 20) Forwarders $ Billions 2 330 137 Subtotal 469 453 204 Subtotal 657 74 37 13 33 38 Subtotal 195 Shipper Related Costs 10 Logistics Administration 53 TOTAL LOGISTICS COST 1385 May not sum to total due to rounding Up 2.8% Up 2.0% Up 2.3% 7
$ Billions U.S. Third Party Logistics Market 160 140 120 100 89.4 103.7 113.6 119.0 127.0 107.1 127.3 133.8 141.8 146.4 80 60 40 20 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Armstrong and Associates 8
U.S. 3PL Market Segments 2013 Net Revenue Freight forwarder revenue rose 4.2 percent in 2013 Slow growth globally, but strong domestic growth Concerns about capacity issues and service issues have pushed shippers to turn to third party providers to ensure the capacity they need when they need it U.S. 3PL Market Segments 2013 Net Revenue Total $64.6 B 1.7% Domestic Transportation Management $7.1 B 7.2% International Transportation Management $18.0 B 0.6% Dedicated Contract Carriage (DCC) $11.8 B 3.6% Value-Added Warehousing and Distribution (VAWD) $27.7 B 0.3% 9
$ Billions $ Billions What does the economy look like in 2014? 2.5 GDP Growth Rate 2.8 1.8 1.9 2.8 11 10 9 8 7 6 5 4 Unemployment Rate Labor Participation Rate 67 66 65 64 63 62 2010 2011 2012 2013 2014 205 Imports 140 Exports 200 195 135 190 130 185 180 125 175 2012 2013 2014 120 2012 2013 2014 Source: Federal Reserve Bank of St. Louis 10
How has the logistics industry performed in 2014? Cass Monthly Freight Indexes Index 2.90 Index of Dollars Spent for Freight 1.30 Index Index of Freight Shipments 2.80 1.25 2.70 1.20 2.60 1.15 1.10 2.50 1.05 2.40 1.00 2.30 0.95 2.20 0.90 2012 2013 2014 2012 2013 2014 Source: Cass Logistics, Cass Freight Index, January 1990 = 1.0 11
How has the logistics industry performed in 2014? Cass/INTTRA Monthly Ocean Container Indexes 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 Ocean Container Freight Index U.S. Exports Index Index 1.8 1.7 1.6 1.5 1.4 1.3 1.2 1.1 1.0 0.9 0.8 0.7 Ocean Container Freight Index U.S. Imports 2012 2013 2014 2012 2013 2014 Source: Cass Logistics, Cass/INTTRA Ocean Container Index, January 2010 = 1.0 12
The U.S. Business Logistics System Cost in 2014 Carrying Costs - $2.459 Trillion All Business Inventory Interest Taxes, Obsolescence, Depreciation, Insurance Warehousing Transportation Costs Motor Carriers Truck Intercity Truck Local Other Carriers Railroads Water (International 30, Domestic 7) Oil Pipelines Air (International 13, Domestic 20) Forwarders $ Billions 2 330 137 Subtotal 469 453 204 Subtotal 657 74 37 13 33 38 Subtotal 195 Shipper Related Costs 10 Logistics Administration 53 TOTAL LOGISTICS COST 1385 May not sum to total due to rounding First half of 2014 Interest is down, but inventory is up, TODI & warehousing up Volume is up, and rates are climbing RR volume and rates are up, Container shipments are up, inland water is holding its own, air is flat, 3PLs are up 13
Summing Up 2014 will be the best year we have experienced in the last 8 years The first ten months of 2014 have had the strongest freight performance since the end of the Great Recession Freight shipments are up 11.2 percent Freight payments are up 11.8 percent The economy itself is climbing out its doldrums rising GDP, improving production, new orders and backlogs My expectations for the rest of 2014 are continued freight improvement no precipitous drop in 4 th quarter more capacity problems both truck and rail, and especially portside Looking ahead to 2015 higher rates (8 to 10% range!) no later than second quarter truck drivers, or the lack of, will rise to the top problem for the entire economy Continued problems at ports handling larger TEU ships 14
Questions? Contact me at: rosalyn.wilson@parsons.com 703-587-6213 Copies of the State of Logistics Report are available from CSCMP at cscmp.org