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- June 17, 2014 -

 
       
   

Supply Chain Graphic of the Week: 2014 Logistics Cost Components

 

Transportation Costs Represent 61.5% of the Total of $1.39 Trillion

 
       
   

By SCDigest Editorial Staff

 
   

 

The State of Logistics 2014 report is out today from Rosalyn Wilson and CSCMP, with the headline news being logistics costs as a percent of GDP fell to 8.2% in 2013, from 8.5% in 2014.

Strange, but true, as they say. You can see SCDigest editor Dan Gilmore's full review and comment here: State of the Logistics Union 2014.

 

In that piece, Gilmore describes at a high level the components that go in to calculating total logistics costs, which is then divided by nominal GPD - it has to be nominal (unadjusted for inflation) not real GDP, because the costs are measured in nominal terms.

 

He also references the graphic below, which show the categories and their values for 2013.

 

 

Source: State of Logistics Report/CSCMP

 

As can be seen, the total cost of US logistics was estimated at $1.39 trillion for 2013, up $31 billion from 2012. A lot of elements go into that number, from warehouses to trucking to pipelines, but the three main categories are inventory carrying costs, including the costs of warehousing (33.9% of the total logistics spend in 2013), transportation costs (61.5%), and administrative costs, mostly related to logistics IT spend not otherwise captured in the other two categories (just 4.6% of the total).

 

One of many interesting observations from this chart is that interest rates were so low in 2013 - just .9% for commercial paper (short term corporate bonds) - that apparently it only cost US companies $2 billion to finance that inventory, if you use the State of Logistics' methodology.

 

As Wilson noted in the report, if the 2007 interest rate of 5.07% was substituted, total logistics costs would have increase by $128 billion. This, in turn, would have changed logistics cost as a percent of GDP from 8.2 to 9.0%.

 

 

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