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Logistics Sector, 2007

U.S. Market Overview

Logistics services involve a range of related activities that encompass the process of planning, storing, and controlling the flow of goods, services, and related information from point of origin to point of consumption. Logistics services traditionally involve transportation services (i.e., air, land, and maritime); retailing, distribution, and warehousing services; and services involving information technology applications.

Currently, $3 trillion per year is spent globally on supply-chain logistics services, and that spending is increasing at a rate of 10 percent annually. Approximately 10 percent of U.S. GDP is related to transportation activity. In 2002, 19 billion tons of freight valued at $13 trillion was carried within the United States. When analyzing the U.S. logistics market however, one must examine inefficiencies in logistics services resulting from deficiencies in U.S. infrastructure that could create broad economic disruptions. Statistics and performance of specific logistics sectors are outlined below:

  • Air transportation: Air transportation suffers from outdated infrastructure and analysts estimate that at the current level of infrastructure investment, the system will face critical operational failures by 2015. Currently, air transportation accounts for roughly 1 percent of U.S. GDP and is a significant GDP multiplier.
  • Maritime: Limited port capacity (i.e. on-dock and intermodal infrastructure) is causing recurring congestion, and U.S. ports are projected to reach maximum capacity by 2010. The reliability of U.S. inland waterways is deteriorating due to outdated infrastructure. Movement of goods through more than 360 ports, 1000 harbor channels, and 25,000 miles of domestic waterways accounts for approximately $750 billion of U.S. GDP. Nearly 80 percent of all trade by volume enters the United States by sea.
  • Rail: The current capacity of the railway system is constrained; nevertheless, forecasters predict a 55 percent increase in rail traffic by 2020. The majority of U.S. railroad infrastructure is privately owned and future necessary capital investments are uncertain due to the high-capital-cost, low-capital-return nature of the industry. Railways provide a key link between ports and trucking and carry 16 percent of freight moved in the United States.
  • Trucking: Trucking capacity is tight due to a shortage of 20,000 drivers (which is expected to rise to 111,000 by 2014. Along with high fuel prices and hazardous materials transportation costs, the capacity shortages are driving up trucking prices. Trucking dominates the U.S. domestic freight industry, moving 75 percent of freight by value and two-thirds of freight by weight.

The impact of any one of the above-mentioned factors within the transport sector could exacerbate capacity pressures throughout the United States and drastically affect the market conditions in the sector, and to some significant extent, the entire U.S. economy.