U.S. logistics costs up 3.1 % in 2014 to $1.45 trillion in 2014 as truck driver shortage remains key concern

Total US business logistics costs rose to $1.45 trillion in 2014, a 3.1% increase from the previous year according to the Council of Supply Chain Management Professionals (CSCMP) 26th Annual “State of Logistics Report®.”

However, the growth rate for logistics costs was lower than the US gross domestic product (GDP), resulting in a slight decline in logistics as a percent of GDP from 8.4% to 8.3%.

The report has tracked and measured all costs associated with moving freight through the US supply chain since 1988. This year’s report presents an overview of the economy during the past year, the logistics industry’s key trends, and the total US logistics costs for 2014. According to the report, in 2014 the supply chain industry experienced its best year since the Great Recession.

Key Observations

–The truck driver shortage remains a key concern for the logistics sector with the American Trucking Associations estimating the current shortage ranges from 35,000 to 40,000 drivers. A key indicator of this was a driver turnover rate, which was more than 95% on an annualized basis.

–The transportation sector grew by 3.6% in 2014 due to stronger shipment volumes rather than higher rates. The US economy was on solid ground. New job creation was consistent, real net income and household net worth inched up, inflation was low-to-moderate and gas prices tumbled, providing consumers with additional buying power.

–As consumer spending increased, freight levels climbed as retailers replenished inventories. Consumers had been the missing component in the recovery from the Great Recession, but in 2014, they began returning to the marketplace.

–Railroad sector costs grew 6.5% as rail traffic reached its highest annual total on record. The 4.5% increase in traffic volume brought the rail industry close to its prerecession volumes. Total carloads increased 3.9%, hitting their highest total since 2006 due to increased shipments of grain and coal. Intermodal volume also increased 5.2%, surpassing 2013’s record total.

–Costs for the water sector rose 8.9%, the second highest growth sector in 2014. Inland waterway traffic rebounded due to successful agricultural harvests, higher demand for coal, and an expansion of petroleum transportation by barge. Shipments through the nation’s ports increased, with East Coast ports seeing the largest percentage gains due to congestion and delays at West Coast ports caused by protracted labor issues.

–Air cargo sector costs declined 1.2% as competition from other modes kept rates down; however, in 2014, a record $968 billion of high value merchandise was moved by air—$443.8 billion in exports and $543.3 in imports.

–Freight forwarder costs rose 5.4% in 2014, mainly due to an increase of 7.4% in the 3PL sector. The level of uncertainty in the supply chain has supported a 20.5% growth in the domestic transportation services segment.

–Inventory-carrying costs rose 2.1% as inventories continued to climb. Interest rates remain well below prerecession levels, but have been rising in recent months. The other components of carrying costs—taxes, depreciation, insurance, and obsolescence—were up 1.2% due to inventory growth.

–The cost of warehousing rose 4.4% because of shrinking capacity, which lowered the national vacancy rate to 7%. In addition, warehousing costs are on the rise as companies respond to the shortage of workers by offering better pay and benefits.

The “State of Logistics Report” is available to CSCMP members free of charge as part of their member benefits. The price for non-members is $295 US.