newswor thy
logistics expenditures
hit record lows in ’09
ONE WORD COULD BEST SUM
up the state of the U.S. logistics
industry last year.
Ugly.
The cost of operating the
nation’s business logistics system
declined in 2009 to $1.1 trillion,
an 18.2-percent drop from 2008
levels and the steepest year-over-year fall since record keeping
began in 1981, according to the
annual State of Logistics Report released June 8 in Washington, D.C.
In all, business logistics costs last year declined by $244 billion over
2008 levels, the report said. In the past two years, logistics costs fell by
almost $300 billion, with most of 2008’s slide occurring after the
financial crisis hit in September, sending U.S. and world economies
into virtual free-falls.
The 2009 numbers mark a sharp turnabout from the 2003–2008
period, when logistics costs rose in aggregate by 50 percent as the
nation recovered from the relatively brief and modest recession of
2000–2001.
Logistics costs measured as a percentage of U.S. gross domestic
product (GDP), a closely watched metric of the supply chain’s relevance to the nation’s output of goods and services, dropped last year
to 7. 7 percent. That key ratio also hit a level not seen since data has
been kept.
In prior years, a figure below 10 percent would have been hailed as
a positive trend, an indication the supply chain was operating in a
productive, efficient, and cost-effective manner. In the early 1990s, for
example, the logistics community celebrated when the level dipped
into the single digits for the first time.
Last year’s decline was a different story, however. As the recession
forced businesses to cut orders, shipment levels declined and freight
rates plunged. Transportation costs fell a staggering 20. 2 percent year
over year, according to the report. Trucking, which constitutes 78 percent of the report’s transportation component, posted a decline of
20. 3 percent, according to the data. The other transportation modes
checked in with an even worse 20.5-percent drop, the report said.
Silver lining?
The one glimmer of good news was that historically low interest rates
kept down the costs of holding inventory. Inventory carrying costs fell
14. 1 percent last year, paced by a nearly 10-percent drop in the level of
interest rates charged to carry the goods, the report said. The level of
physical inventory dropped 4. 6 percent year over year, the p. 14
Senate bill takes aim at
alleged broker fraud
Legislation was introduced in the Senate on
June 15 to crack down on allegedly fraudulent behavior by truck brokers and other
intermediaries against smaller trucking concerns, notably one-person owner-operators.
The bill, the Motor Carrier Protection Act of
2010, was introduced by Sens. Olympia J.
Snowe (R-Maine) and Amy Klobuchar (
D-Minn.). The legislation would make it more
expensive for brokers, freight forwarders, and
other intermediaries to operate, and would
deal harshly with third parties engaging in
illegal practices.
The bill increases the bond placed by brokers
to $100,000 from $10,000 and for the first time,
imposes bonding requirements on freight forwarders. The legislation also sets stricter government requirements for entities seeking broker and forwarder authority, and levies tough
penalties—such as unlimited liability for freight
charges—for such violations as conducting brokerage activities without a bond or license.
In addition, brokers and forwarders would
be required to renew their operating authority
on an annual basis and would lose their
authority if they failed to do so. The bill also
sets strict regulations on bond companies and
the way bonds are administered. It requires
truckers to have a brokers or forwarders
license or bond before they can tender freight
to another carrier for compensation.
In a statement, the senators said the bill
provides smaller trucking firms with the tools
to retaliate against corrupt practices by brokers. Currently, these companies have little or
no legal recourse to fraudulent actions by
intermediaries, the lawmakers said.
Perhaps the biggest problem for smaller
truckers is not getting paid in a timely manner
for freight they receive from brokers, or in
some cases not being paid at all. Over the last
five years, about one-quarter of all owner-operators have had trouble collecting payments from brokers or other intermediaries,
according to a survey by the Owner-Operator
Independent Drivers Association (OOIDA), the
trade group representing owner-operators.
—M.S.
