For the past 21 years CSCMP has issued a report on the state of the logistics industry. This year’s report, prepared by Rosalyn Wilson, has the very apt title, The Great Freight Recession. The report contains some astonishing statistics that place the devastation of the past couple of years in perspective.

To start, the cost of logistics in the United States declined by 18.2 percent, the largest one year drop since the report was first prepared. Taking 2008 and 2009 together, logistics costs have declined by almost $300 billion during the recession. Transportation costs have declined by 20.2 percent since 2008. Trucking and other modes of transport both declined by over 20 percent. Ms. Wilson concludes that this drop was due to two factors - - - “a rapid decline in shipments and the cutthroat rate environment.”

In her report, Ms. Wilson identified some interesting developments in the area of inventories. She noted that compared to 2001, manufacturers were slower to clear out inventories in 2009. One of the main reasons was the long supply chains which resulted in orders being fulfilled and delivered well into the recession. The inventory to sales ratio began to “skyrocket” at the beginning of the recession and is now just returning to more normal levels. While sales are picking up, inventory levels remain moderate due to the lean manufacturing processes put in place by many manufacturers.

Retailers responded by shrinking their product mix and skewing their mix toward more lower cost items. Suppliers were encouraged to hold supplies in their inventories.

Ms. Wilson noted a number of significant trends in transportation. Many shippers abandoned their longstanding relationships with their carriers in favour of spot market pricing or 3PL’s. Average length of hauls and truck-ton miles declined. Increased use of intermodal transportation and more regionalization of DC’s became important. While about 2000 trucking companies left the business, many more reduced the size of their fleets. U.S. freight capacity dropped by 12.5 percent. With heavy truck utilization at 75%, new truck sales dropped dramatically.

The consequences of actions taken (or not taken) by truckers in 2009 will play out in 2010. Those companies that held back on preventative maintenance to reduce costs in 2009 may now face the prospects of not being able to pay for those repairs in 2010. The Federal Safety Administration’s new CSA 2010 (Comprehensive Safety Analysis) program will create challenges for those carriers that receive poor safety scores.

Rail transportation was not immune to the recession. Carload traffic dropped by 16.1 percent in 2009 while intermodal traffic declined by 14.1 percent. This was the worst year on record since the Association of American Railroads began tracking rail data in 1988. By mid 2009, an astonishing 500,000 railcars, or 32 percent of rail capacity, was placed into storage. As Ms. Wilson points out in her report, “the big difference between the loss of capacity in the trucking sector and the loss in the rail sector is the rail equipment has been merely sidelined and is readily available to return to service when demand rises.”

The good news is that 2009 is now in the rear view mirror. Business is picking up, albeit at a slower pace than most of us would like to see.