Every day transportation and logistics professionals are inundated with more bad news regarding the current economic conditions and the prospects for a quick recovery. The road to recovery will apparently be a long one.

To support these contentions, the Council of Supply Chain Management Professionals recently released its State of Logistics Report which unfortunately does not paint a very rosy picture. In addition, one needs to only look at the financial reports of the major parcel carriers, UPS and FedEx, as well as motor carriers and ocean carriers.

While the report documents supply chain performance in 2008, it is clear that not much has happened in the first half of 2009 to make anyone believe this recession will be over soon. There is one bright spot, however, and that is Logistics costs overall have dropped to 9.4% of GDP, the lowest percentage since 2004.

Here are some of the key points of the report that are worth noting:

· Most improvements came from reductions in interest rates which reduced the cost of maintaining inventories.

· Inventory to sales ratios for 2008 increased from 1.25 to 1 in June to 1 to 1.46 in December. The sharpest jump since 1982.

· Retailers and manufactures are finding it virtually impossible to draw down their inventories.

· Despite weak demand, the report contends that transportation costs rose 2%. Most of this increase came from increased fuel costs and not from higher base rates. No surprise here!

The prospects for 2009:

· Many economists believe that we are in the early stages of recovery. Do you believe this?

· Unemployment will certainly get worse before it gets better. Can anyone say “Stimulus?”

· In the first quarter of 2009, GDP contracted by 5.7% and is expected to drop another 2% in the second quarter.

· Since transportation is the largest slice of the supply chain pie, the buyers market should continue. However, we warn you once capacity starts to dry up the carriers will be at the shippers’ doorstep looking to make up lost revenues in the shortest time possible. We believe this will be especially true with the parcel carriers. Remember the transportation industry has been shrinking for some time now and demand will probably outweigh supply.

· For those companies that have not prepared for the economic recovery by solidifying their relationships with their freight carriers and logistics service providers, watch out you will be far behind the eight ball.