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- June 24, 2015 -

 
       
   

Supply Chain Graphic of the Week: A Breakdown of 2014 US Logistics Costs

 

Transportation Costs Represent 62.6% of the Total of $1.449 Trillion

 
       
   

By SCDigest Editorial Staff

 
   

 

The State of Logistics 2015 report is out this week from Rosalyn Wilson and CSCMP, with the headline news that overall relative US logistics costs were modestly down in 2014, to 8.3% of GDP, versus 8.4% in 2013.

SCDigest editor Dan Gilmore will have his full review and commenton the report in Thursday's flagship newsletter.

 

In that piece, Gilmore will in part describe at a high level the components that go in to calculating total logistics costs, a figure which is then divided by nominal GPD to calculate logistics spend relative to GDP. We will note it has to be nominal (unadjusted for inflation) not real GDP, because all the costs are measured in nominal terms.

 

Gilmore will also reference the graphic below, which show the categories that go into the total cost calculation and their values for 2014.

 

 

Source: State of Logistics Report 2015/CSCMP

 

As can be seen, the total cost of US logistics was estimated at $1.449 trillion for 2014, up $43.4 billion from
2013.

 

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 (32.8% of the total logistics spend in 2014), transportation costs (62.6%), 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 2014 - just .09% for commercial paper (short term corporate bonds) - that apparently it only cost US companies $2 billion to finance about $2.5 trillion in inventory, if you use the State of Logistics' methodology.

 

We couldn't find it in this year's report,  but in the 2014 Wilson noted that if the 2007 interest rate of 5.07% was in play, interest on carrying the inventory and thus total logistics costs in 2013 would have increase by $128 billion. That, in turn, would have changed logistics cost as a percent of GDP from 8.4% to over 9.0% - a sizable difference.

 

The impact would have been similar in 2014 -  but of course if interest rates were that high, companies likely would have pared back on inventory levels.

 

Any Feedback on our Supply Chain Graphic of the Week? Let us know your thoughts at the Feedback section below.

 
   
 
   
 

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