21st Annual “State of Logistics Report®”

3PL Summit & Chief Supply Chain Officer Forum 2010

eyeforTransport

Atlanta, GA

June 22, 2010

Rosalyn Wilson

Delcan Corporation

The Great Freight Recession

US Business Logistics Costs

1.01 0.97 0.92 0.95

1.03

1.18

1.31 1.39

1.34

1.10

$ T

rill

ion

s

1

The US Business Logistics System Cost is the

Equivalent of 7.7 Percent of Current GDP in 2009

Down 14.1%

Down 20.2%

Down 18.2%

2

$ Billions

Carrying Costs - $1.851 Trillion All Business Inventory

Interest

Taxes, Obsolescence, Depreciation, Insurance

Warehousing

5

233

119

Subtotal 357

Transportation Costs

Motor Carriers

Truck – Intercity

Truck – Local

368

174

Subtotal 542

Other Carriers

Railroads

Water (International 25, Domestic 4)

Oil Pipelines

Air (International 14, Domestic 15)

Forwarders

50

29

10

29

28

Subtotal 146

Shipper Related Costs 9

Logistics Administration 42

TOTAL LOGISTICS COST 1,095

Logistics Cost As A Percent of GDP

10.3 9.5

8.8 8.6 8.8 9.5 9.8 9.9

9.3

7.7

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

3

Total US Business Inventories

Source: US Department of Commerce, Census Bureau

1300

1500

1700

1900

2100

2300Billions of Dollars

US Recessions

Recession Dates: 3/1/2001 to 11/1/2001 and 12/1/07 to 7/1/09

4

The Inventory to Sales Ratio Has Returned to

Pre-Recession Levels

Source: US Department of Commerce, Census Bureau

1.20

1.25

1.30

1.35

1.40

1.45

1.50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

5

US Average Commercial Paper Rates

Continued to Fall in 2009

Source: Board of Governors of the Federal Reserve System

5

0

1

2

3

4

5

6

7

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Perc

en

t

Billions of Dollars

6

The US Business Logistics System Cost is the

Equivalent of 7.7 Percent of Current GDP in 2009

7

$ Billions

Carrying Costs - $1.851 Trillion All Business Inventory

Interest

Taxes, Obsolescence, Depreciation, Insurance

Warehousing

5

233

119

Subtotal 357

Transportation Costs

Motor Carriers

Truck – Intercity

Truck – Local

368

174

Subtotal 542

Other Carriers

Railroads

Water (International 25, Domestic 4)

Oil Pipelines

Air (International 14, Domestic 15)

Forwarders

50

29

10

29

28

Subtotal 146

Shipper Related Costs 9

Logistics Administration 42

TOTAL LOGISTICS COST 1,095

Number of Truck Drivers vs Freight Carried

90.0

95.0

100.0

105.0

110.0

115.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Drivers Freight

Source: Bureau of Labor Statistics, Bureau of Transportation

Statistics, and author estimates

8

Ports 2009 2008 2007 2006

Los Angeles 5,028,998 5,670,897 5,740,261 5,743,400

Long Beach 3,765,560 4,611,671 4,994,949 4,798,617

New York 3,587,740 3,992,258 3,935,262 3,678,247

Savannah 1,914,751 2,115,986 2,041,521 1,609,131

Oakland 1,398,420 1,394,684 1,451,326 1,414,782

Norfolk 1,375,632 1,591,566 1,573,273 1,424,993

Houston 1,256,049 1,370,759 1,415,657 1,295,366

Seattle 1,072,838 1,082,573 1,289,364 1,222,596

Charleston,

SC 954,836 1,330,919 1,408,434 1,517,311

Tacoma 873,708 1,129,301 1,150,590 1,095,896

Source: Journal of Commerce PIERS Database, measured in TEUs

US Ports Lose Ground in 2009

9

Monthly Tonnage Indicator for Internal Waterways

30

35

40

45

50

55

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006

2007

2008

2009

Source: US Army Corps of Engineers, Navigation Data Center

10

Index of Logistics Costs as a Percent of GDP

1989 - 2009

9

30

50

70

90

110

1990 1995 2000 2005 2009

Ind

ex 1

985 =

100

Inventory Transportation Total

US Recessions

11

Recession Dates: 3/1/2001 to 11/1/2001 and 12/1/07 to 7/1/09

GDP Growth and Logistics Cost Growth

2005 2006 2007 2008 2009

GDP Logistics Costs

12

Looking Ahead

• Real GDP estimate for the first quarter of 2010 was revised

downward recently to 3 percent, following a fourth quarter

2009 estimate of 5.6 percent

• Inflation rate remains low at 2.2 percent in April 2010 and the

cost of living declined .1 percent in April as well

• Industrial Production has expanded every month in 2010

-15

-10

-5

0

5

10

Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10

Industrial Production

13

• Unemployment rose again to 9.9 percent in April 2010, but is

expected to decline in May

• The pace of job creation is picking up in the second quarter of

2010 and initial jobless claims are tapering off

• The For-hire transportation industry has lost over 300,000 jobs

since the start of the recession, more than half of them in 2009.

Jobs Lost 2009 Total Jobs Lost

Air (includes passenger) 20,100 50,300

Rail 17,200 20,800

Water 400 9,800

Truck 109,000 216,500

Pipeline 1,800 2,000

14

Looking Ahead

0.00

0.50

1.00

1.50

2.00

Jan Feb Mar Apr

Perc

en

t C

han

ge

2010 Truck Tonnage

-1.5

0.0

1.5

3.0

4.5

Jan Feb Mar Apr

Perc

en

t C

han

ge

2010 Rail Carloadings

-4.5

-3.0

-1.5

0.0

1.5

3.0

Jan Feb Mar Apr

Perc

en

t C

han

ge

2010 Rail Intermodal

0.95

1.00

1.05

1.10

Jan Feb Mar

Millio

n T

EU

s

2010 Container Traffic

15

Looking Ahead

Source: Global Port Tracker Source: AAR RailTime Indicators, SA

Source: ATA Truck Tonnage Index, SA Source: AAR RailTime Indicators, SA

Summary

17

• 2009 Logistics Costs fell to $1.1 trillion

• Transportation costs dropped 20.2 percent and now account

for 4.9 percent of nominal GDP – all modes dropped

substantially

• Logistics cost were equivalent to 7.7 percent of GDP in 2009 –

the lowest level recorded to date

• Inventory carrying costs declined 14.1 percent and now

account for 2.5 percent of nominal GDP – both decreased

inventories and lower interest rates contributed

16

17

• Copies of the 21st Annual State of Logistics Report© are

available at http://cscmp.org/

• More information and related interviews and quotes are

available at http://state-of-logistics.presslift.com/2010

Rosalyn Wilson Delcan Corporation

703-587-6213

R.Wilson@Delcan.com