Transcript No Slide Title

15th Annual
State of Logistics Report
®
Sponsored by the Council of Logistics Management
Globalization
June 7, 2004
National Press Club n Washington, DC
Presenter
Rosalyn Wilson
1
Bob Delaney
2
The U.S. Business Logistics System Cost is the
Equivalent of 8.5 Percent of Current GDP in 2003
$ Billions
Carrying Costs - $ 1.493 Trillion All Business Inventory
Interest
Taxes, Obsolescence, Depreciation, Insurance
Warehousing
Subtotal
Transportation Costs
Motor Carriers:
Truck - Intercity
Truck - Local
17
205
78
300
315
167
Subtotal 482
Other Carriers:
Railroads
Water
Oil Pipelines
Air
Forwarders
38
26
9
28
10
(International 21 Domestic 5)
(International 8 Domestic 20)
Subtotal 111
Shipper Related Costs
Logistics Administration
7
36
TOTAL LOGISTICS COST
9363
Figure 1
Logistics Costs as a Percent of GDP
10.4
10.2
10.2
10.1
10.0
10.2
9.5
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
8.7
8.5
20
03
10.1
4
Figure 2
Real Growth in Global GDP and
World Merchandise Exports
12
Percent Change
10
8
Average Export
Growth
Average GDP
Growth
6
4
2
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
-2
Year
GDP
World Merchandise Exports
Source: World Trade Organization
5
Figure 3
Council of Logistics Management is the New
Sponsor of the State of Logistics Report
®
• Earlier this year the Council of Logistics
Management agreed to begin sponsorship
of the report beginning with this 15th
edition.
• CLM is also sponsoring the development of
a quarterly index measuring the cost of U.S.
logistics that will debut later this year at the
2004 CLM Annual Conference in Philadelphia.
It will be based on methodology similar to
that used to prepare the annual report.
6
Figure 4
Agenda
1. The cost of the U.S. business logistics
system in 2003
2. The trends in U.S. business logistics cost
between 1982 and 2003
3. The implications of globalization for the
logistics industry
4. The expenditures managed by Third Party
Logistics Services Providers in 2003
5. Summary, questions and clarifications
7
Figure 5
The U.S. Business Logistics System Cost is the
Equivalent of 8.5 Percent of Current GDP in 2003
$ Billions
Carrying Costs - $ 1.493 Trillion All Business Inventory
17
Interest
205
Taxes, Obsolescence, Depreciation, Insurance
78
Warehousing
Subtotal 300
Transportation Costs
Motor Carriers:
315
Truck - Intercity
Truck - Local
167
Subtotal 482
Other Carriers:
Railroads
Water
Oil Pipelines
Air
Forwarders
38
26
9
28
10
(International 21 Domestic 5)
(International 8 Domestic 20)
Subtotal 111
Shipper Related Costs
Logistics Administration
7
36
TOTAL LOGISTICS COST
936
8
Figure 6
Total Business Inventories Are On the Rise Again
1,210,000
Millions of Dollars,
end of period
1,200,000
1,190,000
1,180,000
1,170,000
1,160,000
1,150,000
1,140,000
1,130,000
1,120,000
2000
2001
2002
2003
2004
Source: U.S. Department of Commerce, Census Bureau
9
Figure 7
Commercial Paper Rates Continue to
Plummet Holding Down Carrying Costs
7
6
Percent
5
4
3
2
1
0
1999
2000
2001
2002
2003
2004
Source: Board of Governors of the Federal Reserve
System
10
Figure 8
Index of Logistics Costs as a
Percent of GDP 1982 - 2003
110
Transportation
Total
70
Inventory
50
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
30
1982
1982= 100
90
11
Figure 9
“The question before us today is how
efficient are we and what actions can
be taken to improve our world
competitiveness?”
First Annual State of Logistics Report , 1990
®
12
Figure 10
The U.S. Business Logistics System Cost
in 1989 and 2003
Percent
Change
$ Billions
2003
1989
Carrying Costs
300
228
31.6%
Transportation Costs
593
327
74.6%
7
4
75.0%
36
22
63.6%
$936
$581
61.1%
Shipper Related Costs
Logistics Administration
TOTAL LOGISTICS COST
13
Figure 11
3PL/Contract Logistics Market
Turnover Growth ($ Billions)
$76.9
$71.1
$65.3
$56.6
$45.3
$39.6
$30.8
$34.2
1996 1997
1998
1999 2000
2001
Source: Armstrong & Associates Inc.
2002 2003
14
Figure 12
The 3PL/Contract Logistics Market
Grew by 8.2 Percent in 2003
2003
Gross
Revenue
$ Billion
Third Party Service Providers
Domestic Transportation Management – Asset Based
1
9.0
Domestic Transportation Management – Non Asset Based
21.4
Value-Added Warehouse/Distribution
19.8
International Transportation Management
23.5
3PL Software
3.0
Total Contract Logistics Market
1
76.9
Primarily dedicated contract carriage
Source: Armstrong & Associates Inc.15
Figure 13
“We conclude this Fifth Annual State of
Logistics Report by recommending that your
planning horizon assume a fast changing timezero world…Our transportation systems are
moving products and materials rapidly,
economically, world-wide…It will be done even
faster because it is all about time.”
Fifth Annual State of Logistics Report, 1994
IT IS STILL ALL ABOUT TIME!!
16
Figure 14
Outsourcing Pieces of the Supply Chain
Equals Lower Costs for Some Companies
Move Production to
Lower Cost
Geography
Outsource
Distribution and
LogisticsFunctions
Close Production
Facilitiesto Shed
ExcessCapacity
Outsource
Manufacturing
Functions
0
20
40
60
80
Percent
Source: Deloitte Touche Tohmatsu
17
Figure 15
World Merchandise Exports and
Gross Domestic Product Rebounded in 2003
12
Percent Change
10
8
6
4
2
0
-2
1998
1999
2000
2001
2002
Year
GDP
Exports
Source: World Trade Organization
18
Figure 16
Share of China in Exports and Imports
of Major Traders, 2000 and 2002
(Percentage shares imports or exports)
Imports
Exports
U.S.
2000 8.6
2002 11.1
U.S.
2000
2002
2.1
3.2
EU
2000
2002
EU
2000
2002
2.7
3.4
Japan
2000 14.5
2002 18.3
Japan
2000
2002
6.3
9.6
Developing 2000
Asia
2002
7.0
9.8
6.8
8.3
Developing 2000 7.2
Asia
2002 10.0
19
Figure 17
Benefits of Information Sharing
• Strengthens vendor-customer relations
• Facilitates planning at all levels
• Allows all partners in the supply chain to
monitor shipment progress
• Minimizes bottlenecks created by waiting for
proper documents
• Enables all parties to participate in process
improvements
• Eliminates duplicate efforts
• Enhances supply chain security
20
Figure 18
“Wal-Mart is a tough customer, but they will
share a tremendous amount of information to
suppliers as part of their effort to reduce
costs to the consumer, increase service
levels, i.e. stock in stores, and to shorten the
overall supply chain.”
Scott Elliff
Capital Consulting and Management, Inc.
As reported in The Journal of Commerce, January 2004
21
Figure 19
Information Flows are Often
Bottlenecks in the Global Supply Chain
“A typical cross-border transaction involves
filing 35 documents, interfacing with 25
parties and complying with more than 600
laws and 500 trade agreements.”
Adrian Gonzalez, ARC Advisory Group
As quoted in Traffic World, May 26, 2003
22
Figure 20
Security Requirements Add an Additional Level
of Complexity to Information Requirements
• Security Assistance Act of 2002
• Customs-Trade Partnership Against
Transportation Terrorism
• Food and Drug Administration’s Bioterrorism
Act of 2002
• 24-Hour Advanced Manifest Rule
• Enables all parties to participate in process
improvements
• Eliminates duplicate efforts
• Enhances supply chain security
23
Figure 21
Radio-Frequency Identification Tags
(RFIDs) – The Wave of the Future?
Benefits
• Could supplant the use of bar codes to carry
information used in supply chain
• Can carry more information than a bar code
• RFID readers can read multiple tags, unlike
bar code readers
Drawbacks
• Lack of standardization
• High cost of tags and readers
24
Figure 22
Wal-Mart and the Department of Defense
Are Requiring the Use of RFIDs by 2005
• Wal-Mart announced that its top 100
suppliers must comply with RFID use by
January 2005
• Every pallet and case for Wal-Mart must have
a RFID – some suppliers are having trouble
complying
• Wal-Mart views the move as another step in
their management of items at the store level
• Department of Defense requirements are
somewhat different – the Pentagon wants
encrypted tags
• To prevent the radio frequency from
disclosing locations, would rather use
passive tags that are powered by the readers
25
Figure 23
Sales to Inventory Ratio
1.5
1.5
1.4
1.4
1.3
20
04
20
03
20
02
20
01
20
00
1.3
Source: U.S. Department of Commerce, Census Bureau
26
Figure 24
Summary
• 2003 Logistics Costs rose to $936 billion, but
fell to the equivalent of 8.5 percent of
nominal GDP
• Inventory to Sales ratio decline to a new low
of 1.32 months of supply during 2003
• Globalization is a reality for the logistics
industry and will require innovative and
individualized supply chain solutions
• Third-party logistics providers will continue
to capture an increasing share of the market
as they offer end-to-end solutions
27
Figure 25
Summary
• China is redrawing the world trade
landscape as it expands in to new markets
• Real-time, reliable, and accurate logistics
information must become more free-flowing
and be shared with all partners in the supply
chain
• Security concerns and regulations will
continue on the forefront of transportation
issues
28
Figure 26
Question & Answer Period
29