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Logistics Intelligence Brief
Thursday, July 22, 2021

Trucking

Yellow Corporation Receives EPA’s SmartWay Voluntary Emissions Reduction Program Designation for 17th Consecutive Year in a Row

Yellow Press Release July 21, 2021

“We are honored to join forces with the EPA’s SmartWay program,” said Darren Hawkins, Chief Executive Officer of Yellow, one of the nation’s largest transportation companies with more than 13,000 tractors, 41,000 trailers, 300 facilities and 30,000 employees across the country. “With every mile we drive, we strive to improve our environmental footprint. Yellow is undergoing one of the largest fleet refreshes in the company’s history, acquiring more than 2,200 tractors, 2,500 trailers and 400 domestic intermodal containers this year. We intentionally seek out new equipment with the most advanced emissions reductions technologies and fuel-saving features. As one of the original 15 Charter Partners of SmartWay, we are proud that 3,000 leading supply chain companies have now joined this public-private sustainability program” added Hawkins. Last year, EPA SmartWay recognized the Yellow Companies as a “High Performer.” Companies earn this recognition through achieving significant freight efficiencies that merit special attention based on their annual emissions report. “We are confident that our sustainability strategy will be an essential contribution to SmartWay’s goal of reducing the trucking industry’s carbon footprint in our nation’s supply chain.” added Hawkins.

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Busy port markets continue to see high rates

DAT.com Dean Croke July 20, 2021

In Stockton, CA, where the bulk of e-commerce imported goods are warehoused after arriving from Los Angeles, outbound rates reached new heights. Rates for dry van loads to Portland, OR, hit a 12-month high last week, reaching $4.17/mile. That’s up $1.37/mile since February. On the 338-mile run from Los Angeles to Stockton, one of the highest freight volume lanes in the country, spot rates are even higher at $4.27/mile this week. Loads east to Phoenix from Los Angeles continue to climb reaching a 12-month high of $4.46/mile this week. This is $0.29/mile higher than the $4.17/mile peak last October when overseas imports from Asia were surging.

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Carriers bracing for rebound from historically low inventory-to-sales ratios

Logistics Management John D. Schulz July 22, 2021

“Inventory-to-sales ratios are basically one-to-one—they’ve never been that low before,” said Kevin Smith, president and CEO of Sustainable Supply Chain Consulting, Windermere, Fla. “That means essentially companies have about one month’s worth of inventory.” Smith said if this situation had arisen 10 or 20 years ago, it would have been a “big, big problem” because shippers lacked visibility into their supply chains and processes that are common nowadays. But today, he said, the situation is different. “This is going to be a big challenge, but it’s a challenge I think today’s supply chain industry is up to,” he added. “I don’t think we should stay at one-to-one long term because it will hurt ability to service customers, hurt the ability to give consumers what they want. But right now it seems to be doing pretty well. But it’s a scary number, a one-to-one inventory-to-sales ratio.” That’s because of what Pitt Ohio’s Hammel called the “extremely tight” U.S. ground freight market as we approach what typically is the peak season for freight. “It’s so tight that we have to limit the freight that comes into our system to prevent our service from suffering,” Hammel told LM. “We are still at near historical service levels and it takes limiting the freight growth to achieve that. Adding additional capacity in today’s market with the driver shortage is a very slow process.”

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Knight-Swift raises outlook; cost challenges to persist

Freight Waves Todd Maiden July 21, 2021

The nation’s largest truckload carrier, Knight-Swift Transportation, sees “over-the-road contract rate increases trending in the mid-teens” for 2021. However, tractor count and utilization will see some pressure as “sourcing drivers remains challenging.” The outlook was provided in the company’s second-quarter earnings report Wednesday. Logistics and intermodal see improvement On a year-over-year comparison, logistics revenue more than doubled to $162 million as both brokered loads and revenue per load increased 55.3% and 55.8%, respectively. Gross profit margin remained flat at 15.7% even with the cost headwinds associated with purchased transportation. The division recorded 440 bps of OR improvement at 91.1% on an adjusted basis. Intermodal revenue increased 39.4% year-over-year to $115 million with volumes climbing 19.9% and revenue per load increasing 16.3%. The division saw 180 bps in margin improvement from the first quarter even as the industry experienced rail service issues, longer container turns, chassis shortages and labor issues. The 95% adjusted OR was significantly improved from the operating loss (105.3% OR) reported in the year-ago quarter. “Intermodal is exhibiting solid momentum, and we expect operational improvements in cost structure and network design in the coming quarters to lead to continued improvement,” the press release read.

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Covenant sees ‘demand firing on all cylinders’

Freight Waves Todd Maiden July 21, 2021

Covenant Logistics Group (NASDAQ: CVLG) reported adjusted second-quarter earnings of 96 cents per share after the close Wednesday, ahead of the consensus estimate of 67 cents per share. Adjusted net income was $16.3 million compared to just north of $400,000 in the year-ago quarter. The quarterly result was the best in the company’s history. “In the second quarter, we saw freight market demand firing on all cylinders as a result of growing economic activity, low inventories, and supply chain disruptions, accompanied by constrained supply due to an intensifying national driver shortage,” said David Parker, chairman and CEO, in a press release. “These conditions have continued into the third quarter.” The Chattanooga, Tennessee-based carrier’s combined truckload fleet saw revenue excluding fuel surcharges increase 8.5% year-over-year as revenue per tractor per week increased 24.8% to $4,551 partially offset by a 13.1% decline in average tractor count at 2,451 units. The increase in revenue per tractor was driven by a 10.1% lift in revenue per loaded mile excluding fuel ($2.24) and a 13.9% increase in miles per tractor.

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Shippers/3PLs

Leases to non-Amazon e-commerce companies triple for Prologis as online retail diversifies

Supply Chain Dive Max Garland July 21, 2021

• Prologis' leases to non-Amazon e-commerce companies tripled YoY, executives said on the company's Q2 earnings call, as the online shopping ecosystem diversifies and grows beyond its largest player. • Prologis signed 168 new e-commerce leases in the first half of 2021, up from 53 in 2020's first half, CFO Tom Olinger said. Growth from Amazon, its largest customer, was "steady" with 6% of total new leasing. • New signings include major brands like Walmart, MercadoLibre and JD.com and smaller customers using a combination of insourcing and outsourcing for their supply chains, Chief Customer Officer Mike Curless said.

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Industry

Shortage of Railroad Workers Threatens Recovery (Subscription Based)

The Wall Street Journal Paul Ziobro July 22, 2021

America’s freight railroads are struggling to bring back workers, contributing to a slowdown in the movement of chemicals, fertilizer and other products that threatens to disrupt factory operations and hinder a rebound from the pandemic, according to shippers and trade groups. The problems have attracted scrutiny from federal regulators, who have been concerned that cost cuts and new operational plans implemented across most freight railroads that have been celebrated on Wall Street have resulted in lackluster service for some customers. “The railroads cannot strip down to bare-bones operations,” said Martin Oberman, chairman of the Surface Transportation Board. “It’d be like a professional football team only having one quarterback.” Across the freight rail network, employment levels still remain below pre-pandemic levels. According to data shared with the STB, railroads reported 47,444 transportation employees in June, down from about 51,800 in March 2020. The worker shortages are being exacerbated by congestion from products entering and exiting the rail system. Backlogs at ports mean strains on the freight railroads that are pulling cargo inland, while a tight market for trucking also creates pinch points when trains transfer containers to the highways. “The supply chain is only as good as the weakest link in the chain and there are a lot of weak links in the chain,” Citi transportation analyst Christian Wetherbee said.

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LA-LB terminals cast wary eye on intermodal rail cutbacks (Subscription Based)

The Journal Of Commerce Bill Mongelluzzo July 21, 2021

Terminal operators at the ports of Los Angeles and Long Beach are bracing for an increase in their rail container backlogs as both Union Pacific (UP) and BNSF this week are implementing measures to restrict the flow of intermodal containers to their congested ramps near Chicago. At the same time, tracking tools at both ports project a significant increase in laden imports from Asia in August, which will only pile more containers into a supply chain that is expected to be severely taxed during the peak shipping season that begins in a matter of days. “The surge is very much alive and will continue in the months ahead, and it will stress the entire system,” Noel Hacegaba, deputy executive director and COO at the Port of Long Beach, told JOC.com Wednesday. Rail container dwell times may increase further depending how long restrictions on intermodal shipments to Chicago remain in place. Although the national rail networks from Southern California serve many of the intermodal rail hubs in the eastern half of the US, Chicago is the largest destination.

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Cargo congestion on West Coast is a consequence of complex issues

Logistics Management Patrick Burnson July 22, 2021

New research commissioned by the Pacific Maritime Association (PMA) finds that equipment shortages, capacity limits, and logistical chokepoints throughout the entire supply chain have created the backlog of container vessels and marine terminals slowing trade at U.S. West Coast ports. Congestion triggered by this influx has corresponded with diminished rail capacity, longer truck turn times, and increased dwell times for containers and truck chassis. Terminal dwell times, which measure how long containers remain at terminals, peaked in January at over five days, more than twice the standard length. Meanwhile, street dwell times for chassis have also hit crisis levels, exceeding the industry “red zone” of six days continually since November 2020. In fact, early December 2020 and January 2021 showed peak street dwell times for chassis at nine days – a full week above the optimal level of one to three days. “Our findings indicate that the breakdown in off-terminal logistics, rather than a lack of longshore workers at terminals, has fueled the terminal and vessel congestion,” maintains Martin.

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Government/Safety/Sustainability

CVSA Sidelines 1,273 Vehicles for Brake Violations

Transport Topics Eric Miller July 21, 2021

Commercial Vehicle Safety Alliance inspectors removed more than 1,200 commercial motor vehicles with critical brake violations from roadways during an unannounced single-day brake safety enforcement operation. Inspectors in Canada, Mexico and the U.S. conducted 10,091 inspections May 26, placing 1,273 vehicles out of service. The brake-related out-of-service rate in North America was 12.6%, CVSA said. The U.S. rate was 13.3%, Canada rate was 11.4% and the Mexico rate was 2.9%.

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Senate Commerce Leaders Push Supply Chain Efficiency

Transport Topics Eugene Mulero July 21, 2021

Sen. Roger Wicker (R-Miss.), the committee’s ranking member, echoed Cantwell’s sentiment focusing on efforts meant to promote global competitiveness. As he put it, “As global competition has increased, control over our supply chains has fallen into the hands of fewer and fewer countries, most notably China.” “Such geographic concentration of supply chains has left many U.S. companies vulnerable to disruption, something we are now acutely experiencing. Helping U.S. companies identify and address areas of vulnerability will require strong partnerships and international partners,” said Wicker. “The federal government can also help by investing in [research and development] and workforce development to make sure new innovations are conceived and developed here in the United States.”

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FMC starts permanent program to oversee detention, demurrage

Transport Dive Matt Leonard July 21, 2021

• The Federal Maritime Commission created a "Vessel-Operating Common Carrier Audit Program" Monday that will review the detention and demurrage billing practices of ocean carriers, the agency said in a release Tuesday. • The FMC will audit the practices of the nine largest carriers as measured by market share. The agency said it will work with the carriers as it relates to their implementation of the FMC's interpretive rule on detention and demurrage that it released last year to "clarify any questions or ambiguities." • The program was established through the direction of Chairman Daniel Maffei, who said in a statement that the agency "is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages." He added that if the audit uncovers issues in the detention and demurrage billing practices, the agency "will take appropriate action," but the release doesn't outline what this action would be.

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