MEASURING THE COST OF LOGISTICS

In order to improve any system one needs to be able to manage it, and in order to be capable of managing a system one first needs to capable of measuring it.The Institute’s founding Chairman Bob Delaney developed a methodology for measuring the cost of logistics as a percentage of GDP, which he presented annually in his State of Logistics Reports until his death in 2004.

His co-author, Ms. Rosalyn Wilson, has continued his work in publishing these annual reports.Bob’s objective with the report was to quantify the logistics-productivity gains resulting from deregulation and to bolster arguments against re-regulation. His logistics-efficiency ratio showed that US logistics costs as a percentage of GDP peaked at more than 16 percent in the early 1980s, before steadily declining to their current level of below 10 percent.
Bob’s essay “The Disunited States: A Country in Search of an Efficient Transportation Policy” helped lay the groundwork for logistics policy in the US for years to come. In the essay Delaney begins by noting how, during the period of 1980-4, the impact of deregulation on the trucking industry resulting in savings in excess of $50 billion.
Delaney argued that deregulation would lead to public policy allowing the nation’s producers, distributors, and transportation companies to form innovative, cost- effective partnerships that could move goods through the supply chain efficiently.
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Logistics Costs
As a result of his campaigning work Bob was asked to assist in writing the legislation that deregulated the interstate motor carrier and railroad industries in 1980. He also played a lead role in the passage of the Aviation Act of 1994, which ended economic regulation of the trucking industry by the states.
Bobs work laid the foundations for a 50% reduction in the cost of logistics in the U.S. since the introduction of deregulation. The question the Institute is now seeking is how this framework can be extended to calculating the cost of logistics internationally, and to ask what impact the addition of seaborne cargo (which accounts for 90% of world trade) has on these calculations. For the purpose of the research and in recognition of China’s enormous impact on global logistics costs we have focussed on that market.



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