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Wednesday, June 2, 2021

Logistics Intelligence Brief

Trucking

How can trucking companies get more drivers on the road?

Marketplace Kai Ryssdal And Minju Park June 1, 2021

“COVID has shown Americans really the importance of the trucking profession,” said Darrel Harris, president of Yellow Corp., a trucking company based in Overland Park, Kansas. “Our drivers and dockworkers worked around the clock through the pandemic to get essential goods to homes and businesses across the country.” Harris spoke to “Marketplace” host Kai Ryssdal about the trucker shortage. The following is an edited transcript of their conversation. Kai Ryssdal: Why do you need so many drivers? Yes, lots of stuff moves on trucks. And yes, there’s pent-up demand. We’ve been talking about that for months now. Why? Why is it so severe right now for your industry? Harris: Well, what a lot of people may not realize is that 70% of the nation’s freight is carried by commercial trucks, and they’re carrying everything from dishwashers to construction supplies, and of course, all that stuff we like to buy on Amazon.

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Knight-Swift bolts on capacity through UTXL acquisition (Subscription Based)

The Journal of Commerce William B. Cassidy June 1, 2021

Knight-Swift Transportation Holdings, the largest US truckload operator, is lengthening its capacity reach through a $22.5 million acquisition of non-asset third-party logistics (3PL) company UTXL. Kansas City, Missouri-based UTXL, which had more than $100 million in revenue last year, specializes in over-the-road truckload and multi-stop loads throughout North America. The deal underscores just how tight the US truckload capacity market has become. In order to gain access to additional capacity and meet changing shipper demands and requirements, even the biggest truckload carriers need to partner with or own non-asset 3PLs that can deliver truckload capacity operated by tens of thousands of smaller trucking companies, as well as their truck drivers. UTXL gives Knight-Swift access to an additional 1,500 carriers operating more than 50,000 tractor-trailers, offering not just full truckload but expedited, multi-stop and less-than-truckload (LTL) services. That capacity will not only help Knight-Swift meet existing customer capacity demands but also enable expansion. Capacity constraints, trucking executives have told JOC.com, limits organic expansion. Complementary capacity

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Industry

Transportation capacity tightens further in May

Freight Waves Todd Maiden June 1, 2021

Transportation capacity diminished further in May, according to a supply chain survey. The capacity subindex of the Logistics Managers’ Index fell 50 basis points from April to 32.7%, “indicating continued downward pressure,” the Tuesday report read. The LMI is a diffusion index wherein a reading above 50% indicates expansion and a reading below 50% indicates contraction. The overall index, which is designed to capture the rate of change in areas like transportation, inventory and warehousing, declined 3.2 percentage points to 71.3%. The latest reading remains firmly in expansion territory and only 4.4 percentage points off the all-time high. “The strains of this continued rate of growth is being felt most acutely on price metrics, which continue to grow at a meteoric pace,” the report said. The transportation prices subindex declined 1.4 percentage points to 91.2%, but still at an elevated level indicative of “a furious rate of change.” Link: CSCMP May 2021 Logistics Manager’s Index Report

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Union Pacific again raising intermodal surcharges in California (Subscription Based)

The Journal of Commerce Ari Ashe June 1, 2021

Union Pacific Railroad will raise surcharges on all domestic intermodal customers in California who ship more than their contractual limits from June 13, the second time UP has increased the fees after implementing them in March. The railroad will charge a fee of $3,000 per container on low-volume shippers and $1,500 per container on all other shippers, the railroad confirmed to JOC.com Tuesday. Initial surcharges were $250, but UP raised them in April to $1,500 for low-volume shippers and $1,000 for all other customers shipping out of California. The latest hike is a signal UP is concerned about having enough rail-owned 53-foot containers to supply core contract customers through this peak season after falling short in a number of instances last year, according to conversations with intermodal marketing companies (IMCs) and shippers.

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DOE/EIA diesel price inches up as broader numbers move higher

Freight Waves John Kingston June 1, 2021

The national average price of retail diesel eked out a small increase effective Monday, rising 0.2 cents per gallon to the highest level since November 2018. The Department of Energy/Energy Information Administration published the price Tuesday, though it was listed as effective Monday. The price of $3.255 a gallon is the fifth consecutive week that the benchmark number used in fuel surcharges rose. It also marks the sixth week that there was no decrease, as the week before the latest run of increases was unchanged from the prior week. The DOE/EIA retail diesel price has not been this high since the $3.261-a-gallon number of Nov. 26, 2018.

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US railroads tightening free time at inland terminals (Subscription Based)

The Journal Of Commerce Ari Ashe June 1, 2021

US Class I railroads on both coasts are tightening free time to speed the pickup of record import volumes flowing through their busiest terminals. The moves will narrow the window on many domestic and international shippers and is meant to encourage quicker turns of containers and chassis to relieve congestion on inland rail ramps. Just two weeks after Norfolk Southern Railway (NS) tightened its free time clock at several of its busiest terminals, BNSF Railway (BNSF) said it will eliminate the so-called 5:00 p.m. cutoff for calculating free time at all its facilities, effective June 7. BNSF’s decision may cause shippers to be billed more storage, or demurrage, fees and place additional pressure on trucking companies to pull containers faster. BNSF is not the only Class I railroad to tighten the window. NS tightened its free time clock on May 15 from two days to one day at all Tier 1 terminals, including Atlanta, Chicago, Cincinnati, and Kansas City. Citing a lack of chassis in Detroit, Louisville, Kentucky, and Birmingham, Alabama, the eastern railroad has eliminated all free time at those facilities except for the hours between notification to the shipper and 11:59 p.m. local time. BNSF said its free time policy change is necessary to “gain the capacity to operate more efficiently” amid a surge of imports that began last summer and has accelerated in the first half of 2021.

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Rethinking Industry’s Role in a National Emergency

MIT Sloan Management Review ManMohan S. Sodhi and Christopher S. Tang May 27, 2021

Transforming the Strategic National Stockpile The demand challenge facing the SNS can be met in the same way as in the snow-shovel scenario: using a combination of inventory, capacity, and capability. Taking this approach would transform the national stockpile into a strategic national emergency reserve (SNER), which entails government and industry working together. For the more frequent severe illnesses or local epidemics, public health needs would be fulfilled — as they are now — using inventory. For the less frequent minor pandemics, in which the need exceeds inventory, domestic backup capacity would be used to quickly manufacture more inventory. It must be domestic, because the ability to import goods from lower-cost countries may be disrupted — or purposely interrupted — in such troubled times. On the extremely rare occasions when need outstrips backup capacity by a huge margin, as in the COVID-19 pandemic, a domestic standby capability would be employed. Such a capability would be composed of pre-identified players from diverse industry sectors that continually develop the product designs and production technology needed to manufacture the necessary goods on a timely basis. This three-tiered approach using inventory, backup capacity, and standby capability dramatically reduces the high costs of trying to address all three crisis levels using inventory alone. Developing domestic capacity and standby capability has benefits beyond meeting the life-and-death demands that arise during the worst public health crises — it also enables existing domestic manufacturers to continually upgrade their products and production capacity over time.

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Shippers/3PLs

Supply chains stick with lean methods despite inventory woes

Supply Chain Dive Matt Leonard June 1, 2021

Growing sales in March were met with flat inventory growth, according to the latest figures from the Census Bureau. The inventory-to-sales ratio dropped to 1.23 in March, the lowest ever recorded. Dive Insight: Inventory woes have been a staple of recent earnings calls, on which executives discuss steps they're taking to build stock. Walmart has started to lengthen its lead times, while Yeti and other companies have turned to alternative ports in an effort to avoid the congestion that has slowed operations at some West Coast facilities. The current environment highlights just how much a company's internal operations and inventory planning rely on a smoothly run freight environment. And the freight environment has been rocky for more than a year. These supply chain issues, combined with high consumer demand, have affected available inventories, according to Jon Gold, National Retail Federation's vice president of supply chain and customs policy. "The ability to get products from overseas certainly has been a challenge," Gold said. "Not just from the factories' ability to keep up and produce what's needed, but the ability to find empty containers and get the product into a container and then onto a vessel and then facing the congestion delays we're facing here at U.S. ports."

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The Southwest Is America’s New Factory Hub. ‘Cranes Everywhere.’ (Subscription Based)

The Wall Street Journal Ben Foldy And Austen Hufford June 1, 2021

Companies producing everything from steel to electric cars are planning and building new plants in Southwest states, far from historical hubs of American industry in the Midwest and Southeast. The lure is open land, local tax breaks and a growing supply of tech-savvy workers. The Southwest, comprising Arizona, New Mexico, Texas and Oklahoma, increased its manufacturing output more than any other region in the U.S. in the four years through 2020, according to an analysis by The Wall Street Journal of data from the Bureau of Economic Analysis. Those states plus Nevada added more than 100,000 manufacturing jobs from January 2017 to January 2020, representing 30% of U.S. job growth in that sector and at roughly triple the national growth rate, according to data from the Bureau of Labor Statistics. Executives say the region’s growing population makes for plenty of available labor, and its lower cost of living is a draw for new talent. “I was surprised how straightforward a choice it was,” said Peter Rawlinson, chief executive for Lucid Motors Inc., an electric-vehicle startup that plans to open a $700 million vehicle factory this year in Arizona, where state officials rolled out the red carpet. “There was only one logical conclusion.”

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Economy

Manufacturing remains on a growth track in May, reports ISM

Logistics Management Jeff Berman June 1, 2021

In its monthly Manufacturing Report on Business, ISM said that the report’s key metric, the PMI, at 61.2 (a reading of 50 or higher indicates growth), saw a 0.5% increase, from April to May. This marked the twelfth consecutive month of PMI growth, coupled with May also representing the twelfth consecutive month of growth for the overall economy. And the May PMI is 2.8% above the 12-month average of 61.2, with March’s 64.7 being the high and June 2020’s 52.2 being the low for that period. ISM reported that 16 of the 18 manufacturing sectors it tracks saw growth in May including: Furniture & Related Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Textile Mills; Primary Metals; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; Miscellaneous Manufacturing; Transportation Equipment; Wood Products; Paper Products; and Petroleum & Coal Products. The only industry contracting in May was Printing & Related Support Activities. “Until that [supplier deliveries] number comes down, I don’t expect inventories to grow much,” he said. “I was happy that that raw materials inventory number did not contract again like it did in the prior month. What I am expecting is that the supplier delivery number will come down as more people enter the workforce, and more than 20 states indicating that they are not going to pay for the enhanced unemployment benefits anymore. That will take the month of June and maybe July to really show itself. The supplier delivery numbers will come down, the inventory number will go up, not much more than the 54-55 level. But, more importantly, the production number will get back into the 63-64 range. There is so much work to be done here, with record backlogs, record customer inventories, and record lead times. There is plenty of opportunity to produce; we just don’t have the people to do it.”

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Manufacturing Surges, but Shortages May Persist (Subscription Based)

The Wall Street Journal Justin Lambert June 1, 2021

Moreover, just because people might ramp up their spending on services doesn’t necessarily mean their penchant for buying goods is going to go away. Many Americans have substantially increased their savings over the past year, providing them with the wherewithal to step up their overall spending, while the continuing recovery in the labor market could further add to demand. The pandemic-related boom in housing could also play a role, since there are rooms and garages that need filling. Indeed, a recent analysis of Bank of America credit and debit card data conducted by the bank’s economists found that spending on durable goods (long-lasting items such as cars and couches) has remained as elevated in Florida as in California, even though Florida’s earlier reopening led sooner to a pickup in services spending.

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Chinese Factories Delay New Orders as Costs Rise, Risking Global Supply Shortages (Subscription Based)

The Wall Street Journal Stella Yifan Xie June 1, 2021

Buffeted by rising costs, some Chinese manufacturers are refusing to accept new orders or are even considering shutting down operations temporarily—moves that could put more strain on global supply chains and cause more inflation.The hope among many manufacturers is that if they delay orders or slow production, they will be able to ride out the present period of higher costs without major losses until commodity prices normalize or global demand for consumer goods cools. Orders for everything from bicycles to laptops have soared, as Western consumers spend stimulus checks and savings built up during the pandemic, which has heaped pressure on global supply chains and helped to push raw-material prices higher. But the strategy could fail if prices of raw materials continue to climb, or if Western demand doesn’t cool. In that scenario, factories that curb production would just be creating more goods shortages that in turn could lead to more cost pressures.

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Workforce

The America Works Report: Quantifying the Nation’s Workforce Crisis

U.S. Chamber of Commerce June 1, 2021

Executive Summary and Key Findings The most critical and widespread challenge facing businesses right now is the inability to hire the qualified workers they need. When businesses do not have enough employees, they are forced to turn down jobs, reduce hours, scale down their operations, and in the worst cases, permanently close. The latest data and surveys reveal a national economic crisis that is getting steadily worse. There were 8.1 million vacant job openings in the United States—a record high—in March 2021, the latest month for which data is available. That’s up more than 600,000 from February. There are approximately half as many available workers for every open job (1.4 available workers/opening) across the country as there have been on average over the past 20 years (2.8 historical average)—and the ratio continues to fall. In several states and several industries, including hard-hit sectors like education and health services as well as professional and business services, there are currently fewer available workers than the total number of jobs open. More than 90 percent of state and local chambers of commerce say worker shortages are holding back their economies, and more than 90 percent of industry association economists say employers in their sectors are struggling to find qualified workers for open jobs.

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Technology/Innovation

DAT and FourKites team up for visibility-focused strategic partnership

Logistics Management Jeff Berman June 1, 2021

Portland, Ore.-based DAT Freight & analytics, an online marketplace for spot market truckload freight, and Chicago-based FourKites, a provider of real-time tracking and visibility solutions across transportation modes and digital platforms, recently heralded a strategic partnership focused on bringing FourKite’s real-time, end-to-end supply chain visibility into DAT’s network. The companies said that this partnership will enable freight brokers to augment customer service and boost carrier relationships, subsequently reducing the need for things like check-calls and ETA management, and also let carriers to quickly integrate tracking through things like ELD and other applications. And they also said that from within the DAT platform carriers will gain access to FourKites’ Partner Hub, an industry-first ELD onboarding offering focused on meeting brokers’ and carriers’ needs for total transparency, advanced security, and user controls. In terms of how this partnership works, Greg Hastings, Vice President, Strategy Execution, DAT Freight & Analytics, told LM that as brokers identify carriers available to transport freight, they negotiate terms and ensure the carrier is fully qualified on a load-by-load basis.

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Government/Safety/Sustainability

25 deadliest U.S. highways: 2021 edition

Fleet Owner Josh Fisher June 1, 2021

A lot has changed over the past four years. But one thing that hasn’t is that Interstate 4, which connects Tampa and Daytona Beach, Florida, is still the deadliest highway in the U.S. This 132.2 miles of divided highway is the only interstate that averaged more than one death per mile from 2016 to 2019, according to the latest data compiled by Teletrac Navman, a fleet management software provider. The transportation technology company recently updated its popular 2017 infographic of the 25 deadliest highways across the country. Tracey Kretch, a product marketing manager at Teletrac Navman, said the list and infographic are a good reminder for all drivers—both professional commercial drivers and passenger car drivers—to be aware and cautious on the road. “We’re getting in a large box of metal that’s going to go very fast down the road,” she told FleetOwner. “Sometimes we kind of forget that—we just think about getting to the next place. Focusing on paying attention and being more of an active participant in our driving experience is important.”

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What a truck-specific VMT tax would mean for the industry

Transport Dive Jim Stinson June 1, 2021

The Texas Trucking Association also opposed the VMT proposal, noting that a truck that travels 100,000 miles annually would pay $25,000 in taxes each year — "almost half the average salary for a truck driver," it said. OOIDA, the network of independent drivers, bashed the proposal and wondered why the fuel tax wasn't being eyed. The tax on diesel and gasoline has not been raised since 1993. "Truckers are not rolling piggy banks," said Norita Taylor, OOIDA spokesperson, in an email. "After a year of working throughout the pandemic to keep critical supplies moving, it is frustrating that anyone would single out truckers to address the funding shortfalls created by the bad decisions of others. An increase in fuel tax would be an efficient means of raising funds, provided the dollars only go to roads and bridges."

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Business

From survival to renewal: At-scale holistic transformation in the consumer-goods industry

McKinsey & Company June 1, 2021

In the face of these challenges, the classic transformation playbook won’t suffice. Consumer-goods companies must embrace a new breed of transformation to build a sustainable competitive advantage in the postpandemic world. Cost-cutting can no longer be the main compass for change. Instead, transformations must take a truly holistic perspective (across functions, geographies, and levers) to unlock new opportunities that companies have failed to harness at scale in the past, while enabling companies to adapt at a much higher speed. Similarly, a large consumer-goods company embarked on a transformation to become more agile and reduce complexity in the next normal, with an explicit focus on growth and cost efficiency and a truly holistic perspective across functions, geographies, and levers. It redesigned its operating model to create a leaner, faster organization by reducing the number of touch points. The mobilization of the entire organization was accomplished by empowering local markets to drive the transformation journey: markets have been involved from the start in the identification of growth initiatives and efficiency levers, and they played a key role in steering the effort and tailoring the transformation to local conditions. The empowerment of local business units was designed to increase their autonomy and decision-making power. Central functions acted as global expertise teams, with shared resources and capabilities enabled by automation and digitalization.

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