LOGISTICS COSTS IN THE BRAZILIAN ECONOMY

The lack of information on logistics costs in Brazil makes the use of outdated data frequent. The big problem is that these data do not necessarily represent our current reality, making it difficult, among other things, to compare with other countries. In addition, the lack of a history ends up making it impossible to analyze the evolution of our logistics costs.

Given this scenario, the Center for Studies in Logistics carried out a survey on Logistics Costs in Brazil, seeking numbers and methodologies that would answer the main questions related to the subject. So, in January of this year, we started a survey and soon found ourselves with immense difficulty in obtaining data about the country. In addition to being poorly updated, much of the information is inaccurate and incomplete. Others are not available, or do not even exist. This occurs not only with regard to cost data, but in logistics in general.

To get around the problem, the research used more than 30 different sources (ABCR, ANP, ANTT, ANTF, ANTAQ, World Bank, BNDES, CNT, CONAB, CVM – Economática, CSCMP, DAC, DETRAN, FIPE, GEIPOT, IBGE, INFRAERO , IPEA, NTC, SINDICOM, specialized magazines, companies that use waterway transport, shipping companies, fuel distribution companies, airlines, transport companies and various executives and market specialists) working numbers, in parallel, to guarantee the accuracy of the results.

In addition to the macroeconomic part, a survey was conducted with large companies operating in Brazil, seeking to know not only the representativeness of logistical costs in these industries, but also, how is cost management being carried out, what systems are used for support and what are the expectations for the evolution of these expenses, among other results. However, due to the large volume of information, this microeconomic part will be presented soon, in a next opportunity.

The macroeconomic study that is the focus of this text intends to have its numbers updated at least every two years, allowing the generation of an evolution of expenses with logistics in Brazil. I often compare the need for measuring indicators with the role of a scale in a diet, because regardless of the type of diet used to lose weight, it is practically inconceivable to imagine it without the use of a scale to measure weight and monitor it.

This text will approach the part of the research referring to the calculation of the logistic cost in Brazil, including the activities of transport, storage, inventory and its administration. The scope of this work is limited to domestic operations, including in the case of exports, transport to the port in Brazil and in the case of imports, transport from the national port, including port costs. Finally, a comparison between the values ​​of Brazil and the USA will be presented.

Background

Until this research was carried out, the current estimate of our logistics cost was around 17% of GDP. The origin of this number is linked to a study by the World Bank carried out in 1996. This study focused on transport does not mention the value of 17%, but estimates the cost of transport in Brazil to be between 9 and 10% of GDP. From this number, extrapolation was made – the logistics community in general, not the World Bank – based on the transport cost share, normally around 60% of the logistics cost, to obtain the final result. Thus, starting from the upper range of transport costs of 10% of GDP, a national logistics cost of 17% was reached. Due to the lack of another more precise number, this ended up becoming a reference.

Regardless of the quality of the 17% estimate, it is worth noting the transformations that took place from 1996, the reference date of the previous study, to 2004, the date of the data used.
in this search. In the USA, for example, despite the increase in oil prices, the cost of logistics decreased in relation to GDP during this period, going from 10,2% to 8,6%, according to research by Delaney and Wilson, an American reference, with which comparing the values ​​found in Brazil. As the American survey also considers part of international transport, the comparison value used for the American cost was 8,3% of GDP, after excluding international transport costs.

Variations in the American logistic cost from 1996 to 2004 show that there was a reduction in the cost of inventory and, secondly, in the cost of transportation.

In Brazil, during this period, diesel prices rose by 292%, as a result of the rise in oil prices, which also caused an increase in tire prices. It is noteworthy that these variable cost items are of great importance in price formation. Mainly in Brazil, where the freight practiced is often lower than the total cost, especially in the case of the self-employed. In these cases, the price covers variable costs, but does not remunerate all fixed costs, especially those linked to the investment, such as depreciation and finance.

With the increase in variable costs, the existing margin for negotiating the price of the self-employed vehicle decreases, as the variable cost becomes more significant. Data from a 1996 national transport magazine show that diesel at the time represented 16,8% of the total cost of a trailer. In a 2004 issue of the same magazine, diesel already represented 31,8% of the total cost, considering the same type of vehicle and operation.

Although timid, the good news is related to the increase in the railroad's share in cargo handling, which was around 20% in 1996 and went to 24% in 2004. from 64% to 59% in the same period.

As for the financial cost of inventory, when comparing the basic interest rate of 2004 with that of 1996, it is possible to notice a significant reduction. While in 1996 the average rate was 27,15% per year, in 2004 it was 16,44% per year. It is clear that in terms
compared to other countries, the Brazilian rate remains excessively high. In the USA, in the same period it increased from 5,27% to 1,38%.

Transport

To arrive at the transport cost, the cost per mode was calculated, as shown below.

Road Freight

Although this modal is responsible for the largest portion of cargo handled in the country and for the largest portion of costs, data relating to this activity are scarce and unreliable.

Thus, the solution found was to calculate the cost indirectly based on diesel consumption and its share in the freight cost. Toll costs, risk management and the cost of transporting cargo in non-diesel powered vehicles were considered in other accounts and later added.

The study pointed out that 55% of the total amount of diesel consumed in Brazil in 2004 was used for road freight transport, while the remaining 45% was used for agribusiness, rail transport, the government, road passenger transport, navigation, fishing, industries, mining and passenger cars.

Based on the 55% share and the total consumption of diesel, the volume destined to road freight transport in 2004 was 21,7 billion liters, which corresponded to R$ 32,3 billion. From then on, the challenge was to obtain the average percentage of diesel cost in freight in Brazil.

To arrive at this average, it was necessary to perform a segmentation considering the factors that most influenced this percentage, among which the following stood out: the distance of the route, the type of cargo transported, whether the cargo was closed or fractioned, the use of self-employed vehicles and the existence of return shipping.

In this way, a composition was made on what would be the relationship between the cost of fuel and the value of freight for each type of transport profile selected and their respective participation within the total consumption. Considering the different realities, which ranged from 1,5% for short-distance fractional cargo, through 24,6% for intra-regional cargo and 28,1% for inter-regional dangerous goods to 41,8% for general cargo in long distance, an average percentage of 33,6% was reached.

This means that for every R$ 3,00 spent on transport in 2004, an average of R$ 1,00 was related to the cost of diesel, while the other R$ 2,00 was used to cover other costs (driver, maintenance , depreciation, etc.) and still, eventually, generate profit.

Based on this percentage, the road transport cost of diesel vehicles in 2004 was R$ 96,3 billion.

Then, the cost of vehicles that do not use diesel, the toll account and risk management was calculated. The cost of freight transport vehicles using other fuels was estimated at R$7,0 billion based on the number of units and standard cost. Regarding tolls, for example, no information was found on the amount collected from freight transport. Therefore, the reverse calculation was made, subtracting from the total value of tolls paid in Brazil in 2004, the estimated value referring to the transport of passengers, obtaining R$ 2,6 billion. As for risk management, we estimate its cost at BRL 3,3 billion based on the microeconomic part of the survey.

Thus, the total cost of road transport in Brazil was R$ 109,2 billion in 2004, as can be seen in the summary table in Figure 1.

Figure 1

Railroad

Rail transport was the simplest to find. It was enough to obtain from ANTT (National Agency for Terrestrial Transport) the revenue of all the railway concessionaires in the country in 2004, given that this value is equivalent to the cost of all shippers in relation to the railway, in this case R$ 7,5 billion,

waterway

The calculation of waterway transport was segmented at a first level into: solid bulk, liquid bulk and general cargo, in addition to dealing with water transport separately.

In the case of liquid bulk, two distinct realities were considered: that of long-term chartered vessels and another in which only the transport service is contracted. General cargo also had to be segmented between containers and support for offshore operations.

Among the most difficult data to be obtained, waterway transport stood out, whose information was inaccurate and not consolidated. In this case, freight values ​​passed on by some shippers and movement data from other works were used.

Based on freight data by type of cargo transported and their respective handling volumes, the cost of the waterway modal was calculated, which resulted in R$ 7,3 billion in domestic cargo and another R$ 5,2 billion in port costs of imports and exports. It is worth highlighting in domestic cargo, the transport of crude oil from platforms to refineries by ship due to its relevance in the total volume.

pipeline

Cost information was based on data available from Transpetro, responsible for more than 80% of cargo transported in pipelines in Brazil. These data were extrapolated, considering the total movement and a cost of R$ 2,1 billion for the pipeline modal was obtained.

Airplane

In terms of air transportation, average values ​​for freight and handling volume were also used. These data largely depended on the collaboration of many executives and specialists linked to companies in the sector, given the difficulty of obtaining them. Post office freight values ​​were treated in another account given their representativeness and their differentiated tariff.

The calculated cost for the Air modal in 2004 was R$ 1,9 billion.

Total shipping cost

Considering the cost of each mode, as can be seen in Figure 2, the result found for the total cost of transport in Brazil in 2004 was R$ 133,3 billion, equivalent to 7,5% of GDP.

Figure 2

floating

The inventory cost was calculated using two different models to validate the result. At first, the value of fixed assets in inventory published by the IBGE for 2003 was used, but adjusted for 2004, in the amount of R$ 221,6 billion. Next, this information was checked against stock coverage data from publicly traded companies, using data from Economática as a source.

On the fixed amount of R$ 221,6 billion, two rates were applied. The first refers to the financial cost, in which the average Selic rate of 2004 of 16,25% pa was used. The second refers to depreciation, obsolescence and insurance costs. In this case, the methodology used by Delaney and Alford-Bangs was used in the calculation of the American logistic cost with the same rate of 15,25% pa given that we had no study in this sense in Brazil and our objective was to compare it with the american number. Applying these two rates, we arrive at an inventory cost in Brazil of R$69,8 billion, which represents 3,9% of our GDP.

Storage

The calculation of the storage cost followed the proportion observed in the American methodological model, resulting from a percentage of the fixed inventory value. This resulted in a cost of R$ 11,7 billion, equivalent to 0,7% of GDP.
Administrative

The administrative cost also used the Delaney and Wilson methodology of foreign data, which considers an administrative cost of 4% of the total logistical cost. In this way, for Brazil, R$ 8,5 billion was obtained, which corresponds to 0,5% of GDP.

Logistic Cost

The composition of all these logistics costs in Brazil in 2004 reaches a total of R$ 222 billion, equivalent to 12,6% of GDP, as can be seen in figure 3.

Figure 3

In the United States, (domestic) logistical costs are equivalent to 8,26% of GDP. Among the costs of activities, inventory is relatively the one that presents the greatest difference in the comparison, 3,9% in Brazil against 2,1% in the USA. The other part of the difference is related to the cost of transportation, 7,5% and 5,0% respectively. Figure 4 shows the graph with this comparison.

Figure 4

Figure 5 presents a table with handling data and transport costs in Brazil, in R$/ 1000.ton.Km, that is, the average value of transporting a ton over a distance of one thousand kilometers. The table provides these values ​​for the various modes and the respective share of participation in the total cargo handled.

Figure 5

The comparison of the figures for Brazil and the US shown in Figure 6 was based on the value of the dollar in 2004. Due to the great influence of the exchange rate on these results, if the 2005 exchange rate were used, all values ​​in Brazil would suffer a 25% increase.

In the table in figure 6, it is possible to highlight the enormous difference between the values ​​of road freight from Brazil to the USA. This difference is partly associated with the load profile and the average size of the routes, but also with the very different market situations.

Figure 6

With regard to cargo and route profile, while in Brazil the transport of agricultural products over relatively long distances predominates in this modal, in the USA it is aimed at transporting products with a higher added value and complementing other modes through a shorter distance road tip.

From the market point of view, while in Brazil there is an excess of supply in the sector, mainly due to low regulation and the large number of self-employed workers, in the US there is a shortage of drivers.

Air transport is a little cheaper in Brazil, and the difference is not significant. The cost of pipeline transport in Brazil is twice as high as in the United States, with long distances and the large volume transported by pipelines in the US contributing to this result, which allow for great economies of scale. Besides, of course, the high cost of capital in Brazil, which makes high investments in this modal difficult.

The large waterway cost difference between Brazil and the US may largely be related to two critical factors. The first is related to the large use of the waterway in the USA, which uses large trains at a low cost, reducing the American average. The second is related to the large volume of oil transported over short distances off the coast of Brazil, which, together with a relatively high port cost, ends up raising the cost per ton kilometer of this modal.

The railway modal appears cheaper in Brazil due to the operation of Vale do Rio Doce, which, in addition to the high volume and high productivity, operates at a cost price for the mining company itself, which greatly influenced this result. By removing it from this calculation, this number would increase from $12,44 to $16,93.

Even considering the composition of the transport matrix of the two countries, the cost of transporting a ton per thousand kilometers in 2004 was on average lower in Brazil than in the USA. But why does this happen if in Brazil the cost of transport is equivalent to 7,5% of GDP and in the US only 5,1%? The answer to this question lies in the relationship between cargo movement and the size of the economy.

While the American economy is practically 20 times bigger than ours, they only move 7 times more cargo than Brazil. In fact, the aggregated value of the cargo handled there is much higher than here, and there is also a greater share of services in the economy, 79% against 56% in Brazil.

The big problem with Brazil's transport matrix is ​​that due to the lack of adequate infrastructure, we don't always use the most appropriate modal for the type of cargo transported. Thus, in several markets, the shipper, given the lack of availability of other modes, ends up having to use the road, which, despite the low freight rates, would not be able to compete with a railroad or waterway, especially over long distances.

CONCLUSION

The difficulty of obtaining information on logistical costs in Brazil is very great, and the study developed by CEL-COPPEAD in 2005 on the subject, although quite complete in some areas, is just an initiative. Among the areas in which the study should be deepened, storage stands out, given that this research only replicated international models in calculating this cost.

Despite its limitations mainly related to the availability of data, the research can reach important conclusions regarding the national logistics cost, among which it is worth highlighting:

• The reduction in transport costs from 1996 to 2004 in the USA and Brazil in relation to GDP, despite the increase in oil prices, probably due to an increase in the efficiency of this operation.
• The high cost of Brazilian inventory, which is almost double that of the US due to our very high cost of capital.

The expressive increase in revenue from the railway modal in 2004, which could give impetus to new investments, allowing for an increase in the volume of cargo in this modal.

• The reason why logistics costs in Brazil are higher than those in the United States in terms of GDP is mainly linked to the smaller share of services in our economy and the lower added value of our products, in addition to our higher cost of capital.

Finally, it is worth mentioning that the road freight rates practiced in Brazil are quite low, however, the lack of adequate infrastructure often makes it impossible to transport cargo by other modes, which are often more suitable for the distance and type of product, due to capacity and availability issues. Thus, the result ends up being high freight for those who pay, but low for those who receive it.

BIBLIOGRAPHY

The World Bank. Brazil Multimodal Freight Transport: Selected Regulatory Issues. Report no. 16361-BR. Oct, 1997.

Wilson, R.. 16th Annual State of Logistics Reset. CSCPM: Jun, 2005.

Bowersox DJ, Calantone RJ, Rodrigues AM. Estimation of Global Logistics Expenditures Using Neural Networks. Michigan State University. JBL: Vol.24, No.2, 2003.

Castro, NR. Logistic Costs and Brazilian Regional Development. The World Bank: Aug, 2004.