October 14, 2008

Logistics costs and services 2008

By DC Velocity Staff

The total cost of logistics remained about the same this year as last, as gains made from reduced inventory, costs savings, and greater efficiencies in the warehouse were negated by increases in fuel costs. That's according to the Logistics Cost and Services 2008 study conducted by Establish Inc. The results of the annual study were shared during the CSCMP conference by Conrad Ross, Steve McDonald, and Jason Pankowski of Establish.

Logistics costs as a percentage of sales has been declining over the past five years as companies have improved their warehousing efficiencies and reduced their inventories, according to the presenters. But with increasing fuel costs and an uncertain economy, logistics costs as a percentage of sales is expected to increase in 2009.

Total logistics costs as a percentage of sales now stand at 9.28 percent. That's down a mere 0.1 percent from 2007's report, recording basically a flat year. Breaking those costs down, transportation is 4.68 percent of sales, warehousing is 1.9 percent, and inventory is 1.8 percent. Put another way, transportation accounts for half of total logistics costs and may get higher depending on the volatile fuel market. Warehousing is 20 percent of logistics costs, inventory is also 20 percent, customer service and order entry total 7 percent, and administration is the remaining 3 percent. In 2008, transportation costs increased 18.3 percent, while warehousing costs decreased 8.5 percent. (By way of contrast, CSCMP's own annual State of Logistics Report, issued in June, said that total logistics costs had crept above 10 percent of the United States' gross domestic product for the first time since 2000.)