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Thursday, July 30, 2020
Logistics Intelligence Brief
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Trucking

UPS Rides E-commerce Surge to 21% Jump in Package Volumes

The Wall Street Journal Paul Ziobro July 30, 2020

United Parcel Service Inc. rode a pandemic fueled surge in e-commerce to higher profits and a 13% jump in revenue during the June quarter, underscoring how the illness upended daily life. The delivery giant said its average daily shipping volume rose 21% in the quarter, faster than the company has ever recorded, with a 65% increase in shipments to homes. “Our results were better than expected, driven in part by the changes in demand that emerged from the pandemic,” said UPS’s new chief executive, Carol Tome.             Link:  UPS Press Release UPS Releases 2Q 2020 Earnings

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Coronavirus Shifts Pricing Power to UPS and FedEx, and They Are Using It

The Wall Street Journal Paul Ziobro July 29, 2020

The pandemic has created a moment of reckoning for e-commerce, as carriers like FedEx and UPS UPS 3.39% grapple with a surge in online shopping that has pushed their networks to capacity. Increased demand has also given the delivery firms a window to charge higher rates as retailers need their services more than ever. They are starting to exercise that pricing power, with UPS hitting some large shippers with price increases in the double-digit percent range in recent weeks and FedEx following suit, according to logistics executives including shippers, consultants and carriers. Some of the increases have come mid-contract, these people said, while other increases have been made during renewals.

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Q2 U.S. Bank Freight Payment Index sees declines driven by COVID-19

Logistics Management Jeff Berman July 29, 2020

On a regional basis, the report stated that second quarter shipments largely saw declines on a sequential basis, with the West down 1.8%, Southwest up 1.3%, Midwest down 5.5%, Northeast down 12.6%, and Southeast down 14.1%. Annually, shipments were down 15.7% out West, down 9.6% in the Southwest, down 13.5% in the Midwest, down 5.4% in the Southeast, and down 25.2% in the Northeast. As for spend, on a regional basis, the report stated that second quarter spend saw declines on a sequential basis, with the West down 7.5%, Southwest down 14.2%, Midwest down 11%, Northeast down 12.7%, and Southeast down 21.4%. Annually, spend levels were down 13.7% out West, down 20.4% in the Southwest, down 21% in the Midwest, down 19.1% in the Southeast, and down 26.4% in the Northeast.

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COVID-19 disrupts normal seasonal trends on spot market

DAT.com Dean Croke July 29, 2020

These varied results have caused disruptions to carrier networks, as areas most affected by the virus continue to have higher consumption (inbound freight) and lower production (outbound freight), leading to more freight imbalances. And while volumes are down now, more freight that would normally move by contract carriers has moved to the spot market due to the disruptions. Shifting consumer demand also creates uncertainty at the lane level as well, with volumes for some commodities surging while others plummet. The supply side is equally impacted, as manufacturers adapt to new workplace safety requirements. Bloomberg reported that Whirlpool customers were now waiting longer  for their dishwashers. CEO Jim Peters reported deliveries that usually take up to two weeks are now out to six months as a direct result of the pandemic. The main reason for the delay is because the company has spaced factory employees farther apart to prevent spread of the virus, but in the process slowed down production lines and reduced capacity.

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‘Massive’ dislocation eats into US surface capacity

The Journal of Commerce William B. Cassidy July 29, 2020

Dislocation of transportation assets, layoffs and illness, and abrupt changes in US supply chains as e-commerce surges has created one of “the most constrained [surface capacity] environments” on record, according to Shelley Simpson of J.B. Hunt Transport Services. “I don’t really know what a ‘new norm’ is for any of us because it seems to be changing on a regular cadence,” Simpson, executive vice president, chief commercial officer, and president of highway services at the trucking and intermodal services provider, said the July 29 episode of JOC Uncharted. “In the second quarter, we went from not a lot of demand and plenty of supply to more demand and tighter supply.” That tightening of truck supply has kept spot market truckload rates at a higher-than-normal level for July, as shippers that can’t find contract capacity slide into the transactional spot market. Higher demand, especially from e-commerce retailers, isn’t the only reason. Labor shortages caused by the COVID-19 pandemic and hastily reworked supply chains are factors, too, Simpson said.  

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Werner model stands up during downturn

Freight Waves Todd Maiden July 29, 2020

“Encouraging conversations with customers” was one of the highlights from Werner Enterprises’ (NASDAQ: WERN) earnings call with analysts Wednesday evening. Werner President and CEO Derek Leathers said demand is strong throughout the country, particularly in the West, as truck supply is tight. The company reported adjusted earnings per share (EPS) of 62 cents for the second quarter, significantly better than the 40-cents-per-share consensus estimate. The Omaha, Nebraska-based truckload (TL) carrier raised its outlook for rate per total mile in its one-way segment. The new guidance calls for the metric to range between down 1% to up 2% year-over-year for the back half of 2020.

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Industry

Postal Service reaches agreement on $10 billion Treasury loan

Freight Waves John Gallagher July 29, 2020

The U.S. Postal Service (USPS) has reached an “agreement in principle” with the U.S. Treasury Department on a long-awaited $10 billion loan that the agency needs to survive a steep drop in mail volume and staggering financial losses. But the loan comes with a caveat: USPS must provide Treasury copies of its 10 largest service contracts with third-party last-mile delivery companies Amazon (NASDAQ:AMZN), FedEx (NYSE:FDX), and UPS (NYSE:UPS), according to the Washington Post, which obtained a copy of the loan’s term sheet. A USPS loan provision was included in the original CARES Act legislation the Senate passed in March. But President Donald Trump stated at an April 24 press briefing that he would not authorize Treasury Secretary Steven Mnuchin to sign off on the loan unless USPS raised the prices it charges Amazon and others for parcel delivery. Related:  The Wall Street Journal U.S. Postal Service Reaches Agreement on $10 Billion Coronavirus-Relief Loan

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Government/Safety

3 Fleets on the Benefits of Hair-Testing for Drugs

Truckinginfo.com Deborah Lockridge July 29, 2020

At KLLM, Risinger said, other companies that were doing hair testing had told them to expect a 13-15% positive rate using hair testing instead of the 1-2% being disqualified via urine testing. “But that was the objective, right? So we were good with that. Those were people we didn’t want to put in the truck anyway.” But within 60-90 days, they said, it was back to normal as word got out that the company was hair-testing, so habitual drug users just stopped applying. “Before we were doing hair tests, I would hear questions going to our recruiters that sit right outside my office, ‘Do you hair test?’” said Greg McQuagge, vice president of safety for U.S. Xpress. “There’s a reason why that driver’s asking that question.” At Maverick, Newell said, recruits get the word multiple times during the recruiting process that hair testing is required. “I think the more you tell them up front, I think the less positive rate you’re going to have.”

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