Question

The percentage of total logistics costs represented by transportation has been steadily increasing in the U.S. economy since deregulation began in 1980, yet logistics costs have been decreasing as a percent of overall GDP during the same timeframe. Explain the relationship between these two trends and the significance to logistics management.

Answer 1

The cost of logistics as a percentage of gross domestic product was once once the perfect measure of logistics efficiency. At present, not a lot.

For two decades, supply chain managers labored to carry that percent down from bigger than sixteen percentage within the early Nineteen Eighties to eight.5 percentage in 2003.

That discount reflected a dramatic drop in logistics and transportation expenses pushed by way of deregulation, new technology and the growth of the logistics enterprise.

In 2011, the figure used to be 8.5 percent once again, after rising and falling for the period of the 2003-2006 growth and the 2007-2009 recession.

The late Bob Delaney tracked the GDP percentage intently within the annual State of Logistics record. He saw it as comparable to a batting common in baseball.

However the ballpark transformed within the final decade or perhaps it was once the sport itself. Opening in 2004, the logistics GDP percent started to climb again.

It was if the subject in the ballpark had been abruptly tilted so batters had to run uphill to circular the bases. By way of 2007, the percent used to be again up to 9.9 percent.

That wasn't welcomed as excellent information on the time. Many observers requested if each final drop of effectivity had already been wrung from supply chains.

That wasn't the case. The develop within the fee of logistics as a percentage of GDP had extra to do with the rising cost of both domestic and international transportation.

Managing logistics in today problematic global environment costs more,Rosalyn Wilson, who took cost of the report after Delaney died, mentioned in 2005.

In other phrases, the fee of logistics is rising together with different charges in the world economic system. Logistics isn't less effective today its simply more highly-priced.

When the recession started out to dampen demand, the logistics GDP percent dropped, bottoming at 7.9 percent in 2009 as transport demand sank.

Now the determine is heading back towards 10 percentage, mountaineering 2.6 percentage in 2011, Wilson mentioned Wednesday at the launch of the 23rd annual State of Logistics document.

Thats the extent she expected logistics expenditures as a percent of GDP to arrive in the mid-2000s, earlier than the satisfactory Recession shattered fiscal forecasts.

Shippers are trying to restrain those expenses, but that job is getting harder. Regardless of how efficient you become, as costs upward thrust you ought to come to be extra effective.

That increasingly way greater collaboration, or cooperation, amongst shops, providers, transport operators and 0.33-celebration logistics vendors.

the new world is forcing us to collaborate considering that we ought to, Rick Sather, vice chairman of client give chain at Kimberly-Clark, stated at the launch.

Look for even bigger efficiencies in managing mobile inventory across the provide chain, from supply to store cabinets, as cell technologies spread in coming years.

Then possibly we can hold these logistics charges to 10 percent of GDP.