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Logistics Intelligence Brief
Thursday, July 15, 2021

Trucking

Knight-Swift deal shows the value in owning an LTL

Freight Waves Todd Maiden July 14, 2021

A deep moat keeps most from entering The top 10 LTL carriers account for 75% of the more than $40 billion industry. In comparison, the TL industry has roughly 50,000 fleets, 90% of which have five or fewer trucks. LTL requires expansive infrastructure and technology as carriers aggregate numerous smaller shipments on the same trailer. The life of an LTL shipment includes multiple stops, riding on different trucks (local pickup and delivery and linehaul) and different terminals (origination, intermediate and destination). All along the freight is being scanned and handled at facility docks, which requires labor and technology. The combination of the inputs makes the capital hurdle high for new entrants. “LTL carriers are deep, valuable entities. They are tech companies, real estate companies, operational powerhouses,” Curtis Garrett, VP of pricing and carrier relations at Recon Logistics, told FreightWaves. “The core businesses here are not very complementary to each other. However there is a lot of harmony on the periphery.”

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Higher contract rates pull volume from spot truck market

Supply Chain Dive Matt Leonard July 14, 2021

The spot rates in the trucking market have increased to impressive levels over the last year and shippers are starting to see that in their contract rates, Croke said. "What shippers have had to deal with is a lot of the procurement costs escalated throughout the year, and then they went into this period of absolutely crazy spot price volatility late last year when they were doing their 2021 bids for capacity," he said. The high rates, increase in number of shipments and the downturn in demand in 2020 resulted in the expenditure figure for June growing at the "fastest pace ever" on a YoY basis, surging more than 56% YoY. The rates in contracts keep getting higher too. DAT has seen that the contracts entering routing guides have increased 7% in the last two weeks compared to the previous two weeks.

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Record number of new US trucking firms on the books, but not new capacity (Subscription Based)

The Journal Of Commerce William B. Cassidy July 14, 2021

The number of for-hire motor carriers is growing, not shrinking, as thousands of truck drivers strike out on their own each month to pursue the opportunities on the truckload spot market, data filed with the US government shows. But that does not mean they are creating new trucking capacity. More likely, the new entrants point to an underlying shift of trucking capacity to smaller motor carriers that will challenge shippers who are reliant on traditional means of procuring trucking services, especially those using a limited number of carriers, most of which are larger trucking providers. Changing employment picture The wave of new motor carrier operating authority grants over the past year — approximately 89,000 as of June — is unprecedented, according to Avery Vise, vice president of trucking for Indianapolis-based research firm FTR Transportation Intelligence. New authority grants topped 10,000 in two of the last three months, according to FTR. From 2018 through 2020, grants of new authorities ranged between 3,000 and 4,000 a month. Through most of the long recovery that began in 2009, authority grants ranged between 2,000 and 3,500 a month. “This probably affects how we look at the overall employment picture,” Vise said in FTR’s State of Freight webinar on July 8. The employment figures released by the US Bureau of Labor Statistics (BLS) track payrolls at firms with workers in the unemployment insurance program, he said.

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Industry

POLA and POLB turn in strong June volume tallies

Logistics Management Jeff Berman July 14, 2021

Port officials said that demand for household products, electronics, and other goods headed up, with consumers returning to work, as the economy re-opened, with total POLB volume up 38.5%, for the first half of 2021, to 4,753,828 TEU. And they added that second quarter volume—at 2,377,700 TEU—increased 35.8% compared to the second quarter of 2020, for the second-best quarter in the port’s 110-year history. The port also observed that fewer vessels called at POLB in June compared to May because of shifting services, coupled with a COVID-19 outbreak at the Yantian port in China, which subsequently delayed some vessel arrivals into July. “We anticipate e-commerce to drive much of our cargo movement through the rest of 2021 as retailers plan for a busy summer season,” said Mario Cordero, Executive Director of the Port of Long Beach, in a statement. “However, June serves as an indicator that consumer demand for goods will gradually level off as the national economy continues to open up and services become more widely available.”

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State of Logistics 2021: Full speed ahead

Logistics Management John Schulz July 12, 2021

What drove the unpredictability? The explosion in e-commerce (some of which was picked up in-store, but nevertheless proved a boon to trucking companies) resulted in a 33% growth rate to $792 billion—some 14% of all retail sales. According to the report, terms such as direct-to-consumer (DTC) and buy online, pick up in-store (BOPIS) became common retail language, adding that they are “accelerations of existing trends” and are likely to become permanent. Thus, shippers must adjust their delivery offerings and solutions, managing both capabilities and consumer expectations to create a better match while developing new ways to pay for these services and control their costs. All things considered, there were distinct winners in ground transport. Andrew Moses, senior vice president of sales and solutions for Penske Logistics, says the demise of “middle-mile” transport was overstated. “That has not just come back, that has come roaring back,” says Moses. “There is quite a bit of stress among carriers behind the scenes and among carriers trying to keep up with this market.”

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Volvo union okays new labor deal, ending strike after more than 5 weeks

CCJ Jason Cannon July 14, 2021

United Auto Workers (UAW) Local 2069 members on Wednesday ratified a new six-year labor agreement, ending a strike at Volvo Trucks North America's New River Valley (NRV) plant in Dublin, Virginia, that had turned the corner toward six weeks. The new six-year agreement includes elimination of the second tier; health care premiums protected for the life of the agreement; provides protections around shift scheduling and plant operations; as well as providing a major signing bonus and aggressive annual wage improvements every year of the agreement.

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Most Companies Kept Supply-Chain Sustainability Goals Despite Covid-19 (Subscription Based)

The Wall Street Journal Paul Page July 14, 2021

Beyond the broad commitments, companies signaled a shift toward focusing more on social goals such as employee safety and attention to equity and inclusion as they sought to broaden their base of suppliers, according to the survey. The number of respondents who said employee welfare and safety was a priority for their companies rose 10% from 2019, while the number who said that was the case for supplier diversity, equity and inclusion increased 5%.

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Technology/Innovation

Walmart to install Symbotic robots in 25 of its 42 regional DCs

DC Velocity Ben Ames July 14, 2021

Retail giant Walmart will install an automated material handling system in 25 of its 42 regional distribution centers, saying the technology platform from robot vendor Symbotic will modernize and digitize its existing supply chain facilities to support evolving customer demand. Wilmington, Massachusetts-based Symbotic first implemented its system in Walmart’s Brooksville, Florida, DC in 2017 and the parties have been optimizing the system ever since. Terms of the deal were not disclosed. According to Walmart, Symbotic’s system deploys a fleet of autonomous “Symbot” robots in combination with proprietary software to improve throughput and efficiency and to increase warehouse capacity. When in place, it will help reduce the time it takes to unload, sort, and stock freight in Walmart stores, the company said.

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Government/Safety/Sustainability

FMCSA: Trucking’s umpire

Fleet Owner David Heller July 14, 2021

Regardless, ELD-generated data, as it pertains to the truckload segment of the industry, places daily driver utilization rates at about 6.6 hours of drive time per day. This number is a result of the recent changes to the HOS provisions. That being said, prior to the newly implemented rules, our segment of the industry was hovering around 6.5 hours of daily driver utilization. Keep in mind that these numbers are based on an allowable 11 hours of drive time per day. As they say, data is the new oil, and the data derived from these devices certainly shows that even the new regulations do not allow the average driver to venture even remotely closely to the allowable daily limits. Effectively, the increased flexibility that the new HOS provided was minimal at best.

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Economy

Businesses See Above-Average Price Increases, Worry About Lingering Inflation, Fed Beige Book Says

The Wall Street Journal Bryan Mena July 14, 2021

Employers throughout the country also saw varying job gains, with many noting difficulties in finding workers. Wages increased at a moderate pace and demand for low-skilled workers rose, suggesting workers have increased leverage in a tight labor market. Still, businesses told the Fed they were experiencing a widespread worker shortage, coupled with workers quitting or leaving jobs at an above-average pace. A staffing agency in upstate New York told the Fed that it saw many jobs remain unfilled after they had been advertised “in part reflecting increased turnover and churn, as more workers have changed jobs.” The economy would have had a much stronger rebound if it weren’t for looming supply, labor and price issues, said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University in Los Angeles.

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Beige Book Summary of Commentary on Current Economic Conditions (Trucking References)

The Federal Reserve July 14, 2021

Summary of Economic Activity The regional economy continued to grow at a moderate rate in recent weeks. Manufacturers experienced robust de mand and increases in shipments and new orders. District ports reported strong growth in volumes driven by imports of retail goods and exports of agriculture products. Trucking companies also reported strong growth and a level of demand that exceeded supply. Richmond District Truckers in the Fifth District reported robust volume growth in recent weeks. Volumes were high for most goods, but especially for retail and industrial goods. Companies were unable to meet demand amid labor constraints and equipment shortages, which led to higher spot market prices and increased profit margins. Contacts reported keeping trucks and trailers longer than intended, to help with both increased demand and delays in equipment arrivals. Atlanta District Transportation District transportation activity strengthened over the reporting period, and contacts noted that demand for transportation services far outstripped the supply across the industry. Trucking firms and freight brokers reported robust activity combined with limited availability of container, trailer, and truck capacity. Southeast ports experienced unprecedented container volumes and capacity utilization amid continued strong demand for imported goods. Railroad contacts reported solid increases in overall traffic as compared with year-earlier levels. However, dwell times in rail yards rose due to significantly low trucking capacity.

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