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Thursday, October 22, 2020
Logistics Intelligence Brief
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‘Guessing game’: Carriers can expect strong contract rates growth for 2021, though uncertainty abounds

CCJ James Jaillet October 21, 2020

“Supply chains are under pressure,” he said. “Shippers are trying to satisfy this insatiable retail demand with inventories that are at six-year lows. Import activity remains strong, and we absolutely expect this trend to continue.” “Shippers are already thinking about next spring,” said Croke. “They don’t want a repeat of [this] spring. They’re already thinking about how they’re going to get freight in time, because capacity is still tight on the ocean.” Any early rush to prep for the spring freight season would only help prolong the current recovery, even if it sees a lull in the early part of 2021.

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Localized capacity constraints create spot market ripple effects

DAT.com Dean Croke October 21, 2020

The latest September Cass report based on data from shippers freight invoices reported that shipment volumes were only 1.8% below year-ago levels in September, which was a 7% m/m improvement from August – when volumes were down 7.6% y/y. As both contract and spot rates rise, so has the Cass cost per shipment index (measures the total amount spent on freight), which is now up 1.2% y/y. Cass noted, “there are real constraints on driver and industry supply and fewer trucks running, so as freight has rebounded, the capacity squeeze has driven rates up significantly. We don’t see much capacity entering or returning the rest of the year, so as supply/demand remains tight, we expect continued growth in the average freight bill”.  

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Commentary: Think 2020 is weird so far? Buckle up for Q4

Freight Waves Charles Dehoney October 21, 2020

“Depleted inventories, surging demand for consumer goods such as retail and grocery, and the continued recovery of industrial production should continue to drive growth in truckload demand.  Meanwhile, challenges with placing and keeping drivers seated in trucks will continue to result in a constrained capacity environment. These two factors can result in elevated rates and an active spot market through the end of 2020 and potentially deep into 2021,” said Matt Pyatt, CEO and co-founder of Arrive Logistics. Adding further logistical stress, consumers are coming to expect fast shipping from online retailers, an expectation derived from retail giants like Amazon as well as the wider availability of pickup options, and retailers are pressured to offer competitive shipping times. While the demand is increasing, capacity is simultaneously decreasing, further elevating rates. Transportation capacity has reached a two-year low, and tender rejection rates are at an all-time high as a result. Although shipment volumes are accelerating, they’re not yet back to the pre-pandemic numbers of 2019, and it could take until 2021 before we start to see that level of recovery. Still, the sharp increase in demand has led to record pricing levels on key trucking lanes.

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Knight-Swift puts up the Q3 analysts were expecting

Freight Waves Todd Maiden October 21, 2020

The Phoenix-based company cited the expectation for “strong freight conditions to continue” as a basis for issuing full-year 2021 adjusted earnings per share (EPS) guidance of $3.20 to $3.40 a full three months ahead of schedule. The outlook compares favorably to the current consensus estimate of $2.90, which increased several times heading into the Wednesday print. The report also pointed to “inventory restocking” and “low double-digit contract rate increases” during 2021 as supportive of expectations. The carrier did caution that headwinds around recruiting and retaining drivers “will continue and lead to additional driver wage inflation.” The pool of drivers has been constrained recently over COVID-19 fears, the impact of the Drug & Alcohol Clearinghouse and limited driver school enrollment during the pandemic, which has further tightened truck capacity in the market.

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COVID-19 travel curtailments major block to robust 3PL M&A in 2021

Freight Waves Mark Solomon October 21, 2020

“It’s going to be a very busy year in 2021,” added Paul Jones, a managing director at Stifel specializing in logistics M&A. Strategic buyers are today focusing on firms with e-commerce strengths, in particular platforms that can address challenges in last-mile capabilities, according to Bianco. Panelists said there is healthy demand for “platform companies,” firms with strong IT capabilities. Starting in 2020 and accelerating into 2021, so-called bolt-on deals will be commonplace as buyers look to fortify specific areas of weakness that were exposed by the pandemic, they said.

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Pfizer Sets Up Its ‘Biggest Ever’ Vaccination Distribution Campaign

The Wall Street Journal Costas Paris and Jared Hopkins October 21, 2020

The company plans to take cargo space on an average of 20 flights a day on planes operated by FedEx Corp. , United Parcel Service Inc. and DHL International GmbH to fly the vaccines as close as possible to vaccination centers, ranging from big medical facilities to far-flung hospitals. The air carriers are also in line to handle the next leg of the vaccine’s journey, trucking the doses to sites close to where they will be administered. Total delivery time, from distribution center to point of use, is expected to be an average of three days, the company said.  

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Q&A: Richard Howells, VP of Solution Management for SAP Digital Supply Chain

Logistics Management Jeff Berman October 21, 2020

LM: Looking at inventories, there has been consensus that retailers, in a sense, are making bets, to a large degree, based on what they think is going to happen over the course of the holiday shopping season. That said, what does inventory management, or allocation, for things like having buffer stock and others, mean from a logistics and supply chain planning perspective? Howells: We are seeing lots of companies look at things like pop-up warehouses, to have inventory closer to where they think demand is going to be and having that finished goods inventory closer to the end consumer, especially in a direct-to-consumer model…that becomes important. The concept of having inventory optimization logic and having ways of determining what products I should be keeping more of and less of and where they should be located across the supply chain. It is not just a case of stockpiling finished goods close to the demand. It is making a network decision of where I should be keeping finished goods and where I should be keeping intermediates, or semi-finished goods, so I can finish them to order, based on customer demand. And sometimes you carry more inventory of some items and less of others. When you talk about inventory optimization, it isn’t always a case of eliminating inventory out of the supply chain, and, in fact, at this time, it is probably the opposite.

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Foley & Lardner LLP report shows less reliance on China

Logistics Management October 21, 2020

Seventy percent of respondents agree that, as a result of COVID-19, companies will lessen their focus on sourcing from the lowest-cost supplier and 62% expect the focus on just-in-time (JIT) manufacturing models will also decrease. “The survey findings point to a significant shift in perspective, but not necessarily a new one,” said Vanessa Miller, co-chair of Foley’s Coronavirus Task Force and the firm’s Supply Chain Team. “After the Great Recession, we saw calls for sweeping change, albeit on different issues, only to find that some of it was easier said than done. But 2020 is not 2009, and we may very well see companies follow through this time – especially if they see continuity of supply begin to overtake price as a key driver for success.” As manufacturers review supply chain processes to mitigate future risk, the Accelerating Trends report details five key categories that can be analyzed through Foley’s Resiliency Review assessment tool, including reliance on JIT models and assessing contractual allocation of risk.

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POLA and POLB set respective September and third quarter volume records

Logistics Management Jeff Berman October 21, 2020

Record September and best quarterly volumes on record were matching themes in recent data issued by the Port of Los Angeles (POLA) and the Port of Long Beach (POLB). POLA reported it handled a record 883,625 Twenty-Foot Equivalent Units (TEU), for the month, which marked a 13.3% annual increase, with second quarter volume—at 2,701,847 TEU also setting a new record, surpassing the fourth quarter of 2018. The monthly average, for the third quarter, came in slightly above 900,00 TEU per month, well ahead of the roughly 627,000 TEU per month over the first six months of 2020.   POLA’s data was issued on October 14. Imports—at 471,795 TEU—headed up 17.3% annually, with exports essentially flat, falling 0.3%, to 130,397 TEU. Empty containers—at 281,434 TEU—rose 14%. POLA said that this tops September 2018’s 801,264 TEU.  Through the first nine months of 2020, total volume is off 8.9%, to 6,463,735 TE  

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Should FMCSA let under-21 drivers cross state lines? It’s polarizing.

Transport Dive S.L. Fuller October 21, 2020

The FMCSA has been mulling a rule change that would allow truck drivers ages 18-20 to haul loads across state lines. The agency said in 2019 it was thinking about implementing a pilot program on the subject and asked for stakeholders' input. In September, the agency floated the idea again and asked for more public comments. During the pilot, 18- to 20-year-old drivers with a CDL would operate interstate while taking part in a 120-hour probationary period, followed by a 280-hour probationary period under an apprenticeship program established by an employer. A driver who is 19 or 20, who has operated commercial vehicles in state commerce for a minimum of one year and 25,000 miles, could also be part of the pilot program.  

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Plaintiff Lawyers Target Trucking Company Safety

Transport Topics Eric Miller October 21, 2020

“Make sure all your paperwork is in compliance as to driver-qualification files, hours-of-service records and employment verifications,” said Ted Perryman, a trucking defense attorney with the St. Louis-based law firm of Roberts Perryman. Also, he said make sure the trucks are in tip-top shape and receive a thorough going-over during pre-trip inspection. He noted the importance of maintenance since police will often inspect a truck after a crash. “If there’s an issue, even if it’s unrelated to the accident, plaintiff attorneys will focus on that,” he said. “I think juries will hit you pretty hard if the truck is not well-maintained.”

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Fleets challenge the driver turnover status quo

Fleet Owner Cristina Commendatore October 21, 2020

What makes drivers leave? To prevent driver turnover, it’s important to understand the root causes of it. A telltale sign that the industry has work to do is that roughly 25% of drivers fall in the involuntary turnover range, meaning they are likely terminated by their employer, while 75% of driver turnover falls in the voluntary range.

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