DC Velocity - July 2013

newsworthy

Report says U.S. logistics system has entered a “new order”

BY NATURE, ROSALYN WILSON is a cheerful person. So it’s been with a fair share of angst that Wilson, who writes the much-ballyhooed annual “State of Logistics Report,” has been forced to deliver sobering findings in each of the post-recession years.

The 24th and latest version had more of the same. The economy and the industry were ham-strung in 2012 by sluggish retail sales from May onward. Inventory levels ballooned as retailers found themselves stuck with bloated and unwanted stocks. International markets began or continued to decelerate. Logistics service providers were faced with elevated operating costs virtually across the spectrum. The current year finds the economy and the logistics sector dealing with an increase in payroll taxes, a persistent global economic slowdown, the impact of a 10- percent federal budget cut as a result of sequestration, and new federal rules governing a truck driver’s hours of service that could reduce fleet productivity by between 3 and 5 percent.

The result is the same middling pace of economic growth that could last at least three more years. As she gathered the data to prepare her June 19 presentation, Wilson realized “there was not a truly new story to tell.” The economy and, by extension, logistics, is in a “new order” marked by a gradual pickup in momentum and uneven growth rates, she said.

However, there was a different tone to the 2012 edition. Sectors like housing and automotive, both critical to the logistics industry’s fortunes, picked up steam last year and are experiencing solid, seemingly sustainable growth, Wilson said. The industry continues to excel at driving productivity, asset utilization, and inventory management improvements. Logistics costs as a percentage of nominal gross domestic product (GDP)—a ratio often cited to measure the supply chain’s efficiency in moving the nation’s output—came in at 8. 5 percent, the same as in 2011. U.S. logistics costs increased 3. 4 percent to $1.33 trillion, less than half of the year-on-year percentage increase from 2010 to 2011. Transportation costs borne by users of the logistics system rose 3 percent, also about half the rate of increase reported from 2010 to 2011.

While the year-on-year declines reflect the impact of slow eco- p. 20

Lift truck production is expected to grow by 2 to 3 percent in 2013 and another 1 to 2 percent in 2014, a sign of market stability after several difficult years, the Industrial Truck Association (ITA) said in mid-June.

In a quarterly survey of members conducted in April, 89 percent of those surveyed said they planned to increase 2013 production over their 2012 levels. Respondents also estimated that the forklift market stood at between 179,000 and 184,000 units, compared with 178,904 units in 2012.

In addition, about half of the companies surveyed said they planned to increase employment over 2012 levels, ITA said.

Jim Moran, a board member of manufacturer Crown Equipment Corp. and chairman of ITA, said the market is showing signs of a sustainable recovery after the 2008–09 recession caused a significant dropoff in demand. “This steady growth shows some stability returning to our marketplace,” Moran said in a statement.

Moran said the industry is seeing strong demand from the automotive and warehousing sectors, a sign that manufacturing levels remain solid. “Our industry’s growth is a strong indicator of growth in the manufacturing sector, and we’re selling a lot of products into the automotive and warehousing industries,” he said. “Our rebound is symbolic of the economy’s rebound.” ;