TT Logistics 50: Firms Seek Ways to Cut Costs to Cope With Revenue Drop in 2009

This story appears in the Nov. 9 print edition of Transport Topics.

Logistics service providers are adjusting as the global economic downturn has caused many companies to curtail production and reduce inventories, stalling the longtime trend of expanding international trade, thereby reducing demand for transportation services in North America.

“We estimate that 2009 will be the first recorded negative year in third-party logistics revenue growth since we started tracking it in 1996,” said Richard Armstrong, chairman of Armstrong & Associates in Stoughton, Wis.

Armstrong works with Transport Topics to compile the annual list of the Top 50 Logistics Companies.

UPS Supply Chain Solutions and Exel Americas remain Nos. 1 and 2 on the list, which is based on revenue from logistics activities in the United States, Canada and Mexico.

While revenue for some companies has fallen in the past 12 months, industry observers said they expect spending on logistics services to continue to grow as more companies look for ways to reduce distribution costs.

“We’ve seen a very significant increase in focus on the supply chain,” said Paul Carbery, managing principal of Frontenac Co., an investment firm with stakes in several distribution-related companies.

Carbery said firms are targeting improvements in transportation and logistics as a way to reduce operating costs and limit the need for debt to fund ongoing business operations.

John Paugh of Carter Logistics in Anderson, Ind., said his firm sees increased demand for what he calls a “shared milk-run network,” in which parts and materials for several different manufacturing firms are picked up and delivered in the same tractor-trailer. That reduces the number of trucks required to make deliveries and reduces storage costs by fully utilizing space in trailers and in warehouses.

With excess freight-hauling capacity, especially among air and ocean carriers, many shippers are seeking to lock in lower freight rates.

Steve Sienkiewicz, senior vice president of global sales and marketing for Agility Logistics, said shippers are requesting more “dialogue” with freight carriers on capacity commitments, and they want the ability to make adjustments as market conditions change.

And there are signs that the economy is improving.

“Retailers are slowly starting to import more merchandise, and that’s a positive sign,” said Jonathan Gold, vice president for supply chain and customs policy for the National Retail Federation.
To read more on developments in logistics, see the special section after p. 16.
Editor’s Note: The 2009 Transport Topics 50 will be posted online at a later date.