26 th Annual State of Logistics Report

Transcription

1 26 th Annual State of Logistics Report Commodity Trends 2016 Outlook October 6, 2015 Grand Rapids, MI Rosalyn Wilson

2 US Business Logistics Costs $ Trillions

3 Logistics Cost As A Percent of GDP Percent

4 The US Business Logistics System Cost Is the Equivalent of 8.3% of Current GDP in 2014 Carrying Costs - $2.495 Trillion All Business Inventory Interest Taxes, Obsolescence, Depreciation, Insurance Warehousing Transportation Costs Motor Carriers Truck Intercity Truck Local Other Carriers Railroads Water (International 31, Domestic 9) Oil Pipelines Air (International 12, Domestic 16) Forwarders $ Billions Subtotal Subtotal Subtotal 205 Shipper Related Costs 10 Logistics Administration 56 TOTAL LOGISTICS COSTS 1,449 May not sum to total due to rounding Up 2.1% Up 3.6% Up 3.1% 3

5 Inventory Carrying Costs Inventory carrying costs affect all business and comprise the cost of capital to hold the inventory the interest component in the SOL model; warehousing costs; and depreciation, obsolescence, taxes and insurance. Inventories built up above the high point during the Great Recession; and the Federal Reserve has held down interest rates for the last five years. Vacancy rates dropped substantially, while inventories. and rents increased pushing up warehouse costs. Taxes and insurance increases were modest. Depreciation and obsolescence costs increased in line with inventory size. 4

6 Interest Rates Still Well Below One Percent Source: Board of Governors of the Federal Reserve System 5

7 Total US Business Inventories 3,000 Billions of Dollars 2,500 US Recessions 2,000 1,500 1, Great Recession Dec 2007 June Source: US Department of Commerce, Census Bureau 6

8 Private Inventories Growth Inventory Growth Picked Up in Up 3.0 % 700 Millions of Dollars Up 2.3 % Up 2.9 % Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 Retail trade Wholesale trade Manufacturing Source: US Department of Commerce, Census Bureau 7

9 The Inventory to Sales Ratio Rising Rapidly Source: US Department of Commerce, Census Bureau 8

10 The US Business Logistics System Cost Is the Equivalent of 8.3% of Current GDP in 2014 Carrying Costs - $2.495 Trillion All Business Inventory Interest Taxes, Obsolescence, Depreciation, Insurance Warehousing Transportation Costs Motor Carriers Truck Intercity Truck Local Other Carriers Railroads Water (International 31, Domestic 9) Oil Pipelines Air (International 12, Domestic 16) Forwarders $ Billions Subtotal Subtotal Subtotal 205 Shipper Related Costs 10 Logistics Administration 56 TOTAL LOGISTICS COSTS 1,449 May not sum to total due to rounding Up 2.1% Up 3.6% Up 3.1% 9

11 Transportation Costs Transportation costs are measured in the SOL model using carrier freight revenues. Truck carrier revenues increased 3.0% in 2014, but tonnage was up 3.5%, meaning rates were very close to flat again. Truck utilization rates remain high and were close to 100% at times. Driver shortage remains the top issue for carriers Class 8 truck registrations were the highest in eight years. Rail freight revenue increased 6.5% in Revenue per ton-mile rose.01% to per mile. Carloads originated were up 4.8% and tons originated grew 4.7%. Intermodal volume increased 5.2%. Ton-miles rose 6.4% and topped 1.8 trillion in Average price of diesel fuel was down 5.7% in 2014, dropping fuel as a percent of operating expenses 1.3% to 21.2% of expenses. 10

12 Truck Tonnage Slowly Climbing Source: American Trucking Associations 11

13 Total Rail Carloads and Intermodal Loads Source: Association of American Railroads 12

14 Total Rail Carload Traffic Source: Association of American Railroads 13

15 Total Rail Intermodal Traffic Source: Association of American Railroads 14

16 Maritime Industry Recap Ocean carriers continue to concentrate and form beneficial alliances to cut costs and improve efficiency. The move to larger TEU ships may reducing operating costs during the sailing, but the lack of adequate infrastructure and support equipment, such as chassis and drayage operators, and port management strategies and software that were not designed for mega ships, is reducing some of the benefits. Volumes on the inland waterway system increased despite problems with locks and water levels. Farm products shipments for export accounted for much of the increase on the Mississippi River headed to the Gulf. Higher demands for electricity pushed up coal shipments to power plants. Petroleum shipments by water increased again in 2014, but a drop off in oil fracking will cut back on shipments in

17 US Container Shipments Recover in 2014 Port 2014 TEUs 2013 TEUs Percent Change Los Angeles 8,340,065 7,868, % Long Beach 6,820,806 6,730, % New York 5,772,303 5,467, % Seaport Alliance* 3,427,561 3,456, % Savannah 3,346,024 3,034, % Oakland 2,394,069 2,346, % Norfolk 2,393,038 2,223, % Houston 1,958,251 1,952, % Charleston 1,791,978 1,601, % *Ports of Seattle and Tacoma Source: Individual port reports 16

18 17 US Imports First Half 2015

19 US 3PL Market Segments The overall 3PL market rose 7.4% in 2014 and is forecasted to grow 5.7% in Domestic transportation management and dedicated contract carriage grew 20.5 and 10.4% respectively in response to tightening carrier capacity and economic uncertainty. US 3PL Market Segments 2014 Net Revenue Total $68.4 B 5.8% Domestic Transportation Management $8.5 B 20.5% International Transportation Management $18.4 B 2.2% Dedicated Contract Carriage (DCC) $13.1 B 10.4% Value-Added Warehousing and Distribution (VAWD) $28.4 B 2.5% Source: Armstrong & Associates, Inc. 18

20 Cass Monthly Freight Index 2.90 Index Index of Dollars Spent for Freight 1.30 Index Index of Freight Shipments Source: Cass Logistics, Cass Freight Index, January 1990 =

21 Industrial Production Has Weakened in Industrial Production Index 2007= Source: Federal Reserve Bank of St. Louis 20

22 Value of U.S. exports to China from 2004 to Billion U.S. dollars months Source: Statista, U.S. Census Bureau 21

23 Strength of US Dollar Affecting Exports and Imports Trade Weighted U.S. Dollar Index: Major Currencies Percent Change in Imports % 3.8% -0.4% Percent Change in Exports Dec 2013 June 2014 Dec 2014 Sept % 0.6% 0.1% Index March 1973=100 Dec 2013 June 2014 Dec 2014 Sources: Federal Reserve Bank of St. Louis and Bureau of Economic Analysis 22

24 Marine Cargo Forecast $10,000 Revenue in million U.S. dollars $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $5,444 $5,643 $6,127 $6,677 $7,498 $7,803 $8,338 $8,564 $8,577 $8,918 $8,986 $8,884 $1,000 $ * 2014* 2015* 2016* 2017* 2018* 2019* 2020* Source: Statista, U.S. Census Bureau 23

25 Looking Ahead The US economy will continue to strengthen and grow Second quarter 2015 GDP growth is estimated at 3.9 percent, with a revised first quarter of 0.6 percent Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.9 percent rate Third quarter GDP is likely to be much lower because of inventory drawdown and flagging exports Imports are increasing, but exports are lagging because of weak global economic growth and the high value of the dollar relative to other currencies Production is down, new orders are way down, but backlog remains strong what does this mean? What is the greatest threat to freight logistics? Capacity, capacity, capacity! 24

26 Questions? Contact me at: Copies of the State of Logistics Report are available from CSCMP at cscmp.org.