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26th Annual “State of Logistics Report®”
Commodity Trends 2016 Outlook
October 6, 2015Grand Rapids, MI
Rosalyn Wilson
+1 703.587.6213
1
US Business Logistics Costs
1.20
1.34 1.42
1.36
1.12 1.23
1.31 1.36
1.41 1.45
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
$ T
rill
ion
s
2
Logistics Cost As A Percent of GDP
9.1 9.7 9.8
9.3
7.8 8.2 8.4 8.4 8.4 8.3
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Percent
The US Business Logistics System Cost Is theEquivalent of 8.3% of Current GDP in 2014
Up 2.1%
Up 3.6%
Up 3.1%
3
$ Billions
Carrying Costs - $2.495 Trillion All Business Inventory
Interest
Taxes, Obsolescence, Depreciation, Insurance
Warehousing
2
331
143
Subtotal 476
Transportation Costs
Motor Carriers
Truck – Intercity
Truck – Local
486
216
Subtotal 702
Other Carriers
Railroads
Water (International 31, Domestic 9)
Oil Pipelines
Air (International 12, Domestic 16)
Forwarders
80
40
17
28
40
Subtotal 205
Shipper Related Costs 10
Logistics Administration 56
TOTAL LOGISTICS COSTS 1,449
May not sum to total due to rounding
� 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.
4
Inventory Carrying Costs
� .
� Taxes and insurance
increases were modest.
� Depreciation and
obsolescence costs increased
in line with inventory size.
5
Interest Rates Still Well Below One Percent
Source: Board of Governors of the Federal Reserve System
6
Total US Business Inventories
Source: US Department of Commerce, Census Bureau
US Recessions
0
500
1,000
1,500
2,000
2,500
3,000Billions of Dollars
Great RecessionDec 2007 –June 2009
7
Private Inventories Growth
Source: US Department of Commerce, Census Bureau
350
400
450
500
550
600
650
700
750
800
1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15
Millio
ns o
f D
ollars
Inventory Growth Picked Up in 2015
Retail trade Wholesale trade Manufacturing
Up 2.9 %
Up 3.0 %
Up 2.3 %
8
The Inventory to Sales Ratio Rising Rapidly
Source: US Department of Commerce, Census Bureau
The US Business Logistics System Cost Is theEquivalent of 8.3% of Current GDP in 2014
Up 2.1%
Up 3.6%
Up 3.1%
9
$ Billions
Carrying Costs - $2.495 Trillion All Business Inventory
Interest
Taxes, Obsolescence, Depreciation, Insurance
Warehousing
2
331
143
Subtotal 476
Transportation Costs
Motor Carriers
Truck – Intercity
Truck – Local
486
216
Subtotal 702
Other Carriers
Railroads
Water (International 31, Domestic 9)
Oil Pipelines
Air (International 12, Domestic 16)
Forwarders
80
40
17
28
40
Subtotal 205
Shipper Related Costs 10
Logistics Administration 56
TOTAL LOGISTICS COSTS 1,449
May not sum to total due to rounding
� 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 2014. Revenue per
ton-mile rose .01% to 4.054¢ 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 2014. 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
Transportation Costs
11
Truck Tonnage Slowly Climbing
Source: American Trucking Associations
12
Total Rail Carloads and Intermodal Loads
Source: Association of American Railroads
13
Total Rail Carload Traffic
Source: Association of American Railroads
14
Total Rail Intermodal Traffic
Source: Association of American Railroads
15
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 2015.
Source: Individual port reports
US Container Shipments Recover in 2014
16
Port 2014 TEUs 2013 TEUsPercent
Change
Los Angeles 8,340,065 7,868,582 6.0%
Long Beach 6,820,806 6,730,573 1.3%
New York 5,772,303 5,467,347 5.6%
Seaport
Alliance*3,427,561 3,456,161 -0.8%
Savannah 3,346,024 3,034,014 10.3%
Oakland 2,394,069 2,346,528 2.0%
Norfolk 2,393,038 2,223,532 7.6%
Houston 1,958,251 1,952,122 0.3%
Charleston 1,791,978 1,601,367 11.9%
*Ports of Seattle and Tacoma
17
US Imports First Half 2015
18
US 3PL Market Segments
� The overall 3PL market rose 7.4% in 2014 and is forecasted to grow 5.7% in 2015.
� Domestic transportation management and dedicated contract carriage grew 20.5 and 10.4% respectively in response to tightening carrier capacity and economic uncertainty.
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%
US 3PL Market Segments 2014 Net Revenue
Source: Armstrong & Associates, Inc.
Total $68.4 B ���� 5.8%
19
Cass Monthly Freight Index
Source: Cass Logistics, Cass Freight Index, January 1990 = 1.0
2.20
2.30
2.40
2.50
2.60
2.70
2.80
2.90
Index of
Dollars Spent for Freight
2013 2014 2015
Index
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1.25
1.30
Index of
Freight Shipments
2013 2014 2015
Index
20
Industrial Production Has Weakened in 2015
Source: Federal Reserve Bank of St. Louis
96
98
100
102
104
106
108
2013 2014 2015
Industrial ProductionIndex 2007=100
21
Value of U.S. exports to China from 2004 to 2015
34.741.8
55.2
65.271.5 69.6
91.9
103.9110.6
122 124
56
0
20
40
60
80
100
120
140
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Bil
lio
n U
.S. d
oll
ars
6 months
Source: Statista, U.S. Census Bureau
22
Strength of US Dollar Affecting Exports and Imports
Sources: Federal Reserve Bank of St. Louis and Bureau of Economic Analysis
Trade Weighted U.S. Dollar Index: Major Currencies
76.2 76.7
85.1
Dec 2013
June 2014 Dec
2014
Index March 1973=100
Percent Change in Imports
Percent Change in Exports
Dec 2013
June 2014
Dec 2014
3.1%
0.6%0.1%
0.7%
3.8%
-0.4%
Sept 2015
91.5
23
Marine Cargo Forecast
$5,444$5,643
$6,127
$6,677
$7,498$7,803
$8,338$8,564 $8,577
$8,918 $8,986 $8,884
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017* 2018* 2019* 2020*
Reven
ue i
n m
illi
on
U.S
. d
oll
ars
Source: Statista, U.S. Census Bureau
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
Questions? Contact me at: Questions? Contact me at: Questions? Contact me at: Questions? Contact me at:
[email protected]@[email protected]@parsons.com
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Copies of the Copies of the Copies of the Copies of the
State State State State of of of of Logistics Report Logistics Report Logistics Report Logistics Report
are are are are available from available from available from available from CSCMP CSCMP CSCMP CSCMP at at at at
cscmp.org.cscmp.org.cscmp.org.cscmp.org.
