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Logistics Report Predicts ‘Banner Year’

June 17, 2014

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This is going to be a banner year for the logistics industry, says Rosalyn Wilson in the 25th Annual State of Logistics Report.

The economy last year was not stellar and business inventories plummeted in the first period this year as a consequence of bad weather, but freight is gaining now, Wilson says in a Tuesday presentation at the National Press Club.

Wilson prepared the report for the Council of Supply Chain Management Professionals. It is presented by Penske.

The tough first period this year is not a harbinger of what’s to come, she says. The Consumer Confidence Index is rising, as are retail sales and home construction. More jobs are being created and unemployment claims are falling.

“The health of the freight market is a solid indicator of the direction the economy is moving,” she says in her report. “All indications are that freight will grow moderately for the rest of the year and the economy should follow suit.”

The driver shortage remains trucking’s number one issue, she says: utilization rates are close to 100% and capacity is falling.

While rates were flat last year, tonnage was up 6.1%, Class 8 registrations dropped 4.5% and bankruptcies rose.

Driver wages are in line with similar industries, with bonuses for fuel efficiency, safety and experience. But regulations such as the new hours of service rule are reducing productivity and may contribute to high turnover rates.

Overall logistics costs as a percentage of Gross Domestic Product increased slightly in 2013 but still grew more slowly than GDP.

2013 was a complicated year, Wilson says. It started slowly, grew strongly in the middle and ended in a deep dive.

“Freight shipment volume experienced five three-year lows during 2013, while freight payments hit three-year highs in eight of the 12 months.”

The effect of this turbulence, combined with rising costs for drivers, equipment and maintenance, was the increase in bankruptcies, she says.

Real GDP growth declined in 2013 compared to 2012 – 1.9% from 2.8% – a deceleration that continued into the first period of this year. A variety of factors contributed to this decline, including the shutdown of the federal government due to fighting over the budget.

But before the fourth period of last year growth was strong, due to rising household net worth driven by gains among the most affluent and modest gains in manufacturing.

Wilson forecasts that freight will continue to gain this year and accelerate in the second period.

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