For the past 18 years, the masters study of the logistics market has identified trends in the field of logistics by benchmarking various performance criteria via surveys of logistics users. The results of this year’s survey is printed in stages by Logisticsmg.com and analyzes data collected by Georgia Southern University and the University of Tennessee in partnership with the IT services and business consultancy Capgemini and JDA Software. Some 830 logistics, transportation and supply chain professionals participated. The respondents accounted for an estimated $28.4 billion in transportation expenditure and nearly $14.5 billion in international transportation across the range from very small companies to very large and across some 14 industry sectors.
The survey is called Masters of Logistics and uses an interesting model to make year over year comparisons of the industry. They split logistics companies up into three groups, the Masters with sales over $3b, the Contenders with sales of $500m to 3b and the Challengers with sales of less than $500m. In recent years, the Masters have been investing heavily and engaged in consolidation with the aim of providing seamless end to end logistics services and high levels of service. The survey had shown gradual improvements in on time deliveries between 2004 and 2008 but the results were mixed for 2009 with railroads and full truck loads showing a small gain but national and regional less than full truck loads showing a decline. Volatility in volumes is one of the biggest problems for logistics providers and the roller-coaster ride of the last 12 months seems to have hit the major Masters as much as the smaller Challengers. The massive investments the Masters have put into systems has helped them gain efficiencies that have fed through to the bottom line, ultimately helping them survive in spite of high overheads but it has not yet translated into improved service levels.
To be fair, the last 12 months have been pretty tumultuous and it could be that as business levels become a little more predictable supply will balance to demand more effectively and service levels will improve again. The excess capacity in the system has allowed logistics buyers to achieve costs savings. Freight as a proportion of company expenditure or cost of goods sold has not materially changed from last year even though prices have been in recessionary mode, suggesting cost savings have been driven from the area of logistics in the same way as direct materials.
The freight market both regionally, nationally and internationally continues to be in significant over supply so freight costs are unlikely to go in inflationary mode during 2010 unless there is an unexpected spike in fuel costs. The survey showed buyers of logistics services have concentrated what spend they have with core logistics suppliers channeling to firms they have chosen to partner with and feel confident will provide capacity to them in good times and bad. This is a sound policy. Clearly they have on the whole still achieved cost savings but sticking by good service providers in the bad times will yield dividends when the economy becomes busier and freight capacity becomes an issue. What goes around comes around. The number of casualties in the logistics arena means there will come a time when capacity is tight and rates are again on the rise.