Inside Logistics

US warehousing costs up

CSCMP reports on the industry in its Annual State of Logistics Report


Rosalyn Wilson presents the CSCMP Annual State of Logistics Report (Photo: CSCMP)

June 20, 2013
by MM&D staff

WASHINGTON, DC—It cost businesses in the US significantly more to store their inventory last year than it has in the recent past.

According to the Council of Supply Chain Management Professionals’ (CSCMP) Annual State of Logistics Report, warehousing costs rose 7.6 percent in 2012. This was amongst the biggest percentage increase in any of the logistics categories.

Taken as an overall industry, the cost of US business logistics systems increased 3.4 percent last year. In dollar figures that means an increase of US$43 billion from 2011 numbers to a total of US$1.33 trillion. Businesses spent businesses $2.269 trillion on inventory carrying costs (which include interest, taxes, obsolescence, depreciation, insurance and warehousing), an increase of four percent from 2011. Total transportation costs were up three percent to $836 billion, with truck transportation costs accounting for $647 billion and other modes totalling $189 billion. Administration and shipper-related costs came in at $61 billion.

The author or the report, Rosalyn Wilson, offered an explanation as to why warehousing costs rose more sharply than other costs.

“Growing inventory levels filled all available capacity. Lease rates were higher, indicating more of a recovery for this sector. New construction increased the available inventory, but occupancy rates are climbing.”

The report also found that “shipper related costs rose 1.8 percent and logistics administration increased 3.4 percent.”

While businesses were, in general, paying more for logistics services, that worked to the advantage of some supply chain service companies.

“Freight forwarder revenue rose 5.4 percent. The forwarders category represents non-asset based freight services providers and the 3PL segment is the largest. Revenues for the 3PL sector rose 5.9 percent in 2012, according to Armstrong and Associates. The 3PL sector can be sliced into four segments, each representing a subset of the industry. The domestic transportation management segment was the fastest growing with gross revenues up 9.2 percent. The cost of purchasing transportation has risen modestly and competition in the marketplace has held rates down.”

In the report, which is subtitled, “Is this the new normal?” Wilson presents a case that the pre-recession economy and industry are gone, and aren’t likely to be back any time soon.

“Now that we are four years out and the economy is still experiencing low to slow growth; unemployment levels remain high; job creation is weak and focused on lower quality jobs; freight volumes and rates have been inconsistent and the trends rarely move in the same direction for more than a couple of months’ and the global economy has ratcheted down considerably—is this the time to ask, ‘is this the new normal?'”

She adds that “Given the world economic picture and the economic dependency we have on our global trading partners, there are no indicators that we can expect any dramatic shifts. I do believe the economy and the logistics sector will slowly regain sustainable momentum, but that we will still experience unevenness in growth rates.”

Other key figures from the report

  • trucking costs were up 2.9 percent (with intercity up 3.2 percent and local delivery up 2.1 percent)
  • truck tonnage was up 2.3 percent
  • rail costs were up 4.9 percent (which is a drop from the 16 percent increase in 2011)
  • Class 1 freight revenue per tonne-mile increased 5.3 percent from 3.760 cents to 3.961 cents
  • total rail carloads dropped 3.1 percent
  • intermodal volumes were up and the average length of a haul rose from 917.2 miles in 2011 to 947.9 miles in 2012
  • water sector costs declined 0.9 percent
  • total air tonnage dropped 2.2 percent