Figures on logistics costs, widely followed by transportation and logistics professionals and trucking analysts on Wall Street, turn out to be wrong because of a missing factor in the formula, acknowledges the author of those numbers.
For years, Robert V. Delaney, senior vice president of Cass Information Systems, a St. Louis-based freight payment and logistics consulting firm, argued that trucking deregulation has saved billions of dollars in logistics costs. Delaney’s data established a benchmark against which logistics costs were measured.
Last week, however, Delaney acknowledged that reductions in logistics costs that he reported in the early 1990s were off the mark, and that his oft-stated goal of driving down logistics costs to 10% of gross domestic product by the year 2000 would not be met.
After adjusting the data since 1991 to remove the impact of fluctuations in interest rates, Delaney concluded that instead of declining, logistics costs have remained virtually unchanged throughout the 1990s.
Delaney said he did not properly account for the impact of interest rates on the value of business inventory. High interest rates tend to inflate inventory carrying costs, while low interest rates tend to understate costs.
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