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Logistics Intelligence Brief
Monday, July 12, 2021

Trucking

Trucking market strain spurs acquisitions (Subscription Based)

The Journal Of Commerce William Cassidy July 9, 2021

Supply chain change But it is not just tight capacity that is spurring rounds of acquisitions, especially among larger carriers. Shipping is changing, and companies such as Knight-Swift and Werner Enterprises are taking notice. Werner, traditionally a long-haul carrier, purchased a regional, short-haul truckload carrier, giving it a bigger presence in a fast-growing portion of the trucking market influenced by e-commerce. Knight-Swift's acquisition of AAA Cooper does the same, giving the largest US truckload operator an LTL arm at a time when LTL carriers are taking on more e-commerce and retail-oriented freight. “All supply chains were completely upended” by the COVID-19 pandemic, Tucker said. “Just about everyone had to reimagine their supply chains, and we’ve never seen anything like that. New contracts, new suppliers, new industries. The churn and the turnover and the pivoting that our economy did and the supply chain evolution we’ve gone through are still working themselves out.” New shipping patterns and new shipper demands are creating opportunities for companies with the profits, capital, and flexibility to grow through acquisition.

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New motor carrier approvals at nosebleed levels, FTR says

Freight Waves Mark Solomon July 9, 2021

Approximately 51,000 motor carriers have already received common or contract carrier authority through June, making 2021 likely to surpass 2020’s calendar-year record of 59,000, according to transport consultancy FTR, which analyzed data from the Federal Motor Carrier Safety Administration (FMCSA). The applicants were predominantly one or two-truck entities, though there were some private fleets who applied for authority so they could conduct for-hire carriage, said Avery Vise, FTR’s vice president-trucking, who presented findings during a company webinar Thursday. In a post-webinar interview, Vise said the applicants were not driver newbies, but company drivers who have gone out on their own or owner-operators that had been working under a lease arrangement with larger carriers but became fully independent either voluntarily or after being cut loose during 2020 when the COVID-19 pandemic shut down much of the nation’s economy.

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Industry

Shipping Delays and Higher Rates Get Small Businesses Jammed Up (Subscription Based)

The Wall Street Journal Costas Paris July 11, 2021

Long waits for merchandise deliveries and crippling costs are hobbling the efforts of small and midsize businesses across the U.S. to benefit from the economic recovery after a difficult year. With retail giants like Walmart Inc. and Amazon.com Inc. rushing to restock to meet booming demand from U.S. consumers, smaller competitors are battling over dwindling cargo space on boxships coming in from Asia. Those who want immediate shipments often must pay about three times the going freight cost, according to brokers and cargo owners. Shipping delays and high freight rates are among several challenges facing American businesses, which also are dealing with rising costs for products and a shortage of available labor. These factors weigh especially heavily on small businesses, which tend to have fewer resources to absorb price increases and less leverage either to negotiate lower rates or pass along the higher costs to customers. Things aren’t expected to get better in the near term. Container ship operators say retailers started booking cargo space for year-end holiday merchandise in June, three months before the start of the traditional peak shipping season.

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New Flexport report takes a deep dive into post-Covid demand shifts

Logistics Management Jeff Berman July 9, 2021

Entitled the “Post-Covid Indicator,” Flexport said that this report leverages the company’s copious amount of data related to the movement of merchandise through the global logistics system as input, while not having as much of what it called a lag compared to government data and statistics. And it explained that is methodology based on an analysis of correlations between detailed shipping data and national consumption behavior. “Given how goods move, the closest correlations are between shipping flows in a month and consumption a bit later,” said Flexport. “Using the estimated model, we are able to look at more recent shipping data and forecast the consumption patterns that are likely to follow.” LM: How should supply chain stakeholders, including shippers, carriers, 3PLs, and brokers, approach the current economic environment, given how freight transportation activity has long been viewed as a key economic indicator? Levy: We are still in a crazy time, and one of the things we tell clients is “as best as you can, plan far ahead.” But it is hard because we got into this world, which was largely based on a just-in-time supply chain and keep inventories low.

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Volvo will restart truck production amid ongoing strike

CCJ Jason Cannon July 11, 2021

Volvo Trucks North America said Sunday it will resume truck production at its New River Valley (NRV) plant in Dublin, Virginia, even though a majority of its workforce remains on a labor strike. United Auto Workers (UAW) Local 2069 members rejected for the third time a new labor agreement Friday evening, extending a strike at NRV that has dragged on for five weeks. After reaching another impasse Sunday with UAW negotiators, Volvo said effective Monday, July 12, the company will implement the terms and conditions of the most recent tentative agreement, which was endorsed by UAW leaders July 1 but rejected by local members Friday. Even though the strike will formally continue, any employees returning to work July 12 or thereafter, Volvo said, will receive the wage increases and benefits outlined in the July 1 agreement, except for the ratification bonuses, which would be paid upon contract ratification.

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Shippers/3PLs

Back-to-school shopping could reach nearly $33B: Deloitte

Retail Dive Tatiana Walk-Morris July 9, 2021

• Despite an unpredictable back-to-school environment, overall back-to-school spending is expected to increase by 16% year-over-year to $32.5 billion for K-12 students, according to Deloitte's Back-to-School survey emailed to Retail Dive. This year, parents plan to spend an average of $612 on average per child, the survey found. • Compared to last year, 40% of parents expect to spend more on back-to-school items in 2021. Among the top three places consumers will spend the most on school purchases are mass merchant stores (48%), online-only stores (15%) and dollar stores (5%), per the survey findings. • Remote learning has catalyzed sales growth in electronics. Among survey respondents, 31% said they plan to buy computers and hardware, up from 22% in 2020. Plus, 37% anticipate purchasing electronic gadgets, compared to 24% in 2020.

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Dollar General is trying to get healthier

Retail Dive Jeff Wells July 9, 2021

• Dollar General is expanding its assortment of health and wellness products and services, and wants to be a "health destination" for shoppers, according to a Wednesday press release. • The company has hired its first chief medical officer, Dr. Albert Wu, who previously worked for McKinsey & Company. Dollar General is also increasing its assortment of dental, nutritional, medical, health aids and feminine hygiene products, among other items, according to the announcement. • With more than 17,000 stores, Dollar General sees an opportunity to provide health offerings close to where millions of consumers live — especially in rural communities.

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Freight brokerage gets boost from pandemic-induced digitization

Transport Dive S.L. Fuller July 9, 2021

• The brokerage market is expected to more than double by 2024, thanks in large part to a pandemic-induced acceleration in digitization, according to the Council of Supply Chain Management Professionals' annual State of Logistics Report, authored by Kearney. • Safety measures during the pandemic have incentivized touchless processes across logistics. "The most promising aspect of digitization comes in greater efficiency of LTL loads," according to the report. • As brokerage and freight booking migrate more to online platforms, shippers and carriers will be able to perform transactions in a space to which they both have access, according to the report. "New digital matching functions give carriers the ability to place offers on loads, as well as increasing their flexibility," it reads.

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Workforce

Driver retention problem draws focus at trucking roundtable

Land Line Mark Schremmer July 9, 2021

‘Leaky bucket’ Buttigieg said it doesn’t matter how many people the industry recruits to be truck drivers if the industry is set up in a way that a majority of them will want to leave. “It strikes me that another way to think of it is something of a leaky bucket, and that no matter how many people we pour into the industry for a moment, it’s not going to do us much good unless the jobs are reliable enough, secure enough and stable enough that people want to remain within the industry,” Buttigieg said. “And, hopefully, also stay with an individual employer long enough … to see some of the safety gains that we know correlate not only with time behind the wheel … but with time in a given organization.” The industry stakeholders included representatives from such groups as OOIDA, ATA, and the Teamsters, as well as safety advocates, and academic experts. Much of the discussion focused on the idea that better pay and working conditions would keep more drivers around and, ultimately, increase highway safety. Pay and working conditions “Trucking is a tough life,” said Spencer, who started his career as a trucker and still holds a commercial driver’s license. “It demands the best, and it requires the best. As we learned during the pandemic, trucking is an essential industry. But it is every single day. It’s always essential. And the issues now with retention, every employer in the country has it right now. The secret is pay, benefits and working conditions.” Currently, truck drivers’ pay and working conditions aren’t great, Spencer said. According to the U.S. Bureau of Labor Statistics, the average salary for truck drivers was $47,130 in 2020. While that is well above the U.S. median personal income of $35,977, it seems like much less when you consider the amount of hours truckers work and that they often do so without being able to return home for weeks at a time.

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Government/Safety/Sustainability

Drug Testing and the Driver Shortage

Truckinginfo.com Deborah Lockridge July 9, 2021

When you change too many variables in an experiment, you can’t tell which one was responsible for the results. And with the current truck driver shortage, too many variables have changed in a short time to reliably single out a cause. Many blame higher unemployment and stimulus benefits from the federal government during the COVID-19 pandemic. While that may be part of the problem, it’s not that simple. What are some of the other variables at play? • Some drivers decided to retire or change jobs because they feared catching COVID-19. • The pandemic affected the pipeline of new drivers coming into the industry, as truck-driver training schools and state licensing offices shut down or limited capacity. • Like many restaurant workers, some drivers may have been prompted by the pandemic to look for other opportunities with better working conditions. But let’s look at yet another variable: the federal Drug & Alcohol Clearinghouse, which went into effect shortly before the pandemic hit. As of May 1, nearly 70,000 drivers had been reported to the clearinghouse with at least one violation. About 12,000 of those (17%) had completed the steps needed to no longer be in prohibited status. But 63% had not even started the return-to-duty process. Positive drug tests for marijuana outpace all other drugs in the clearinghouse — 53%. It’s nearly four times as many as the next-highest drug, cocaine.

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White House executive order ‘encourages’ freight rail and ocean sectors to make changes

Logistics Management Jeff Berman July 9, 2021

The freight railroad and ocean shipping sectors are both very much in the crosshairs of an executive order (EO) issued by the White House this week, which is focused on promoting competition within the American Economy. A main driver for this EO, according to the White House, is that in more than 75% of U.S.-based industries, a smaller number of large companies now control more of the business than they did 20 years ago, adding that a lack of competition has increased consumer prices and also driven down wages for workers.

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Biden executive order adds urgency to FMC review of ocean shipping (Subscription Based)

The Journal Of Commerce Peter Tirschwell July 9, 2021

But the core issues remain. Outside of a few instances of alleged unreasonable export practices by a few ocean carriers that FMC commissioners have indicated they believe represent Shipping Act violations, the disruptive and costly impact of the pandemic on all shippers – importers and exporters -- makes it difficult to conclude that US exporters are being unfairly singled out, or to envision a clear path towards a policy solution. On the other hand, however, allegedly unfair detention and demurrage bills are a longstanding grievance of shippers, to the point that a US shipper group in a rare move recently proposed legislative changes to shift the legal burden of proof in detention and demurrage billing from shippers to carriers. Interest by the FMC in the issue goes back to 2014 when it held a series of port forums where the issue surfaced as a "palpable" concern of shippers.

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Buttigieg, Joshi meet with trucking groups to address workforce challenges

CCJ July 9, 2021

Sullivan stressed the industry’s high priority of reaching new talent – including the recruitment of more urban, rural, female and younger drivers – to help stem the tide of attrition. The median age of truck drivers is well above national average of all workers. And since federal regulations prevent younger drivers from participating in interstate trucking earlier in their careers, the average age of new drivers being trained is 35 – making trucking a career of last resort, rather than first choice, for many.

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How does the Fair Labor Standards Act affect truck driver pay?

Freight Waves John Gallagher July 10, 2021

Included in the Fair Labor Standards Act (FLSA) is an exemption that applies to interstate trucking allowing employers to avoid paying drivers for overtime work. The exemption was established in 1935 with the intent of preventing drivers from taking on too many hours, but some in the industry believe the law has evolved into an excuse for keeping driver pay low. “Simply put, the FLSA exemption makes it the law that a driver’s time is less valued than other professions,” according to Lewie Pugh, executive vice president of the Owner-Operator Independent Drivers Association, whose membership also includes employee drivers. “So many employee drivers are paid by the mile. But at the end of the day, if you remove the exemption, carriers will have to start paying them for their time — including when drivers are sitting idle at a shipper or a receiver. There would be a financial incentive for shippers and receivers to load and unload trucks in a timely, efficient manner,” Pugh said, because carriers could choose to pass on to them added idle time costs.

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