The Great Freight Recession

Gus J. Bourgeois, III

July 21, 2010

The Council of Supply Chain Management Professionals released a report in late June 2010 entitled “The Great Freight Recession”, which stated that U.S. business logistics costs plummeted to $1.1 trillion in 2009, a decrease of $244 billion from 2008. In addition, the report noted that in 2009, “U.S. logistics costs as a percentage of Gross Domestic Product (GDP) hit a record low of 7.7 percent, the lowest point ever recorded in the 30 years that data has been collected. In the past, a low ratio signified that American logistics managers were doing a good job controlling costs and efficiently moving and storing goods. But last year, that number slipped for a different reason. As the volume of goods produced in the United States declined, so did the amount of tonnage to be shipped, thus dragging down logistics spending.”

The fact of the downturn in logistics spending is certainly no surprise — but the depth of this downturn remains a major concern, not only for the transportation and logistics industry, but for the U.S. economy as a whole. Conventional wisdom holds that the Great Recession ended in late 2009 and that economic activity began to substantially rebound in early 2010, with manufacturing leading the way. However, unless shipping and logistics activities enjoyed a significant bounce in the first two quarters of 2010 — which appears unlikely, in light of recent downward GDP revisions for that time period — then, to paraphrase Mark Twain, reports of the death of the Great Recession may have been greatly exaggerated.