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Logistics Intelligence Brief
Friday, July 23, 2021

Trucking

Freight shipping spend reaches record high as capacity constraints persist: US Bank

Supply Chain Dive Max Garland July 22, 2021

• Money spent on truck shipments reached its highest level on record in Q2 as capacity constraints and rising fuel prices clashed with increased industrial output, according to the U.S. Bank Freight Payment Index. • The index tracking domestic truckload and LTL freight modes increased 10.1% from Q1 to 233.6, a record high. All U.S. regions saw an increase from Q1, with the Northeast leading the way at 14.6%. • "These robust gains stem from extremely tight truck capacity due to a profound driver shortage, as motor carriers have been unable to increase supply sufficiently to meet the growing demand,"

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U.S. Xpress’ bottom line takes hit from big labor cost increases

Freight Waves John Kingston July 22, 2021

U.S. Xpress (NYSE: USX) spent about $40 million more on purchased transportation in the second quarter of 2021 than it did in the corresponding quarter of 2020, an increased cost that went right to the truckload carrier’s bottom line. By several standards, the company had a strong quarter. Its revenue excluding fuel rose to $473.5 million from $393.9 million last year. According to SeekingAlpha, the revenue for U.S. Xpress came in $9.2 million over projections. But the cost of putting people behind the wheel, whether it was the company’s drivers or independent owner-operators, climbed significantly, offsetting the revenue gain. The cost of salaries, wages and benefits at U.S. Xpress climbed to $144.5 million from $140 million in 2020’s second quarter. But the jump to $157.5 million from $117.4 million in purchased transportation was the cost item that jumped out in an overall increase in costs to $466.1 million from $406.2 million. The closely watched insurance and premiums line item on costs dropped to $18.9 million from $21.2 million.

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Shippers/3PLs

Uber’s Freight Unit to Buy Logistics Tech Firm Transplace for $2.25 Billion (Subscription Based)

The Wall Street Journal Paul Page July 22, 2021

The acquisition comes as San Francisco-based Uber is seeking to bulk up delivery operations beyond its core ride-hailing operations built on its app matching people to a fleet of drivers, a business that has taken a hit as the Covid-19 pandemic has upended travel and consumer behavior. The company earlier this week announced the latest expansion of its Uber Eats food-delivery business with an extension of grocery delivery across the U.S. under an agreement with supermarket chain Albertsons Cos. Freight is just a sliver of Uber’s overall business, providing $302 million in gross bookings of the company’s overall revenue of $19.5 billion in gross bookings in the three months ending March 31. The company is seeking to bring greater efficiency through digital bookings to the domestic shipping sector but faces strong competition from traditional middlemen that match freight loads to available trucks and from a lineup of tech-focused startups including Convoy and Transfix Inc. Uber Freight head Lior Ron said in a statement the combination with Transplace would “bring together complementary best-in-class technology solutions and operational excellence…that will transform shippers’ entire supply chains, delivering operational resilience and reducing costs at a time when it matters most.”

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Uber Freight to buy Transplace for $2.25 billion (Subscription Based)

The Journal Of Commerce William B, Cassidy July 22, 2021

Uber Freight has been expanding services as it builds its logistics platform, launching a less-than-truckload (LTL) brokerage service for shippers on July 15 with 3PL partner BlueGrace Logistics. “Our vision is to become a one-stop shop for all freight,” Michael Bailey, Uber Freight’s shipper platform lead, told JOC.com last week. The LTL deal also underscored the importance of partnerships, as well as acquisitions, in the era of digital collaborative platforms. "If we can partner with best-in-class 3PLs such as BlueGrace in LTL, that's great," said Ron. "It's those partnerships that will deliver the value at the end of the day." The acquisition of Frisco, Texas-based Transplace, which manages $11 billion in freight annually and has many employees embedded in shipper logistics departments, is a big leap toward that goal for Uber Freight, started in 2017 as a driver-app-driven digital brokerage by consumer rideshare company Uber.

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Uber Freight goes big, in $2.25B acquisition of Transplace

Logistics Management Jeff Berman July 22, 2021

“This is a transformative deal, said Ben Gordon, Managing Partner of Cambridge Capital, an investor in niche supply chain leaders and also Managing Partner of BGSA Holdings, a leading mergers and acquisitions advisory firm focused on the transportation, logistics, and supply chain technology sector. “It gives the ridesharing company a major logistics platform. It combines market-leading technology with a top player in asset-light logistics. And it could help Uber's freight business become profitable. I remember when Transplace was founded in 2000. Six trucking companies [J.B. Hunt, M.S. Carriers Inc.; Swift Transportation Co.; Werner Enterprises Inc., Covenant Transport Inc. and U.S. Xpress Enterprises Inc.] merged their logistics arms and added a .com suffix. Since then, the company has grown to reach $11B of freight spend. It remains at the intersection of Internet and logistics, as the Uber deal shows!” Evan Armstrong, president of Milwaukee-based supply chain consultancy Armstrong & Associates Inc. called this acquisition a big deal, with both companies fitting together nicely, as they are both players in the domestic transportation management (DTM) 3PL segment, have proprietary technology, with Transplace in managed transportation and Uber Freight in the digital freight brokerage space of DTM. “Transplace is number two in terms of gross revenues behind Transportation Insight [based on Armstrong data] for managed transportation companies, and Uber Freight is growing,” he said. “Combined, they will be the eighth largest U.S. 3PL, at $4.4 billion, with Transplace at $3.4 billion and Uber Freight at $1.01 billion, behind DHL Supply Chain North America, the seventh largest, based on 2020 gross logistics revenues. Globally, it makes them combined, at $4.4 billion, number 23 on the global 3PL list [also based on Armstrong data].”

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Workforce

ATA: Driver pay increases could come back to haunt carriers

Freight Waves John Gallagher July 22, 2021

Trucking companies outbidding each other for drivers using salary and per-mile wage increases are leaving themselves vulnerable when the next economic downturn hits, the American Trucking Association’s chief economist warns. Bob Costello told the Motor Carrier Safety Advisory Committee (MCSAC), part of the Federal Motor Carrier Safety Administration, that the slim margins generated in the trucking sector – 5% on average – heighten the cause for concern. “I’m concerned about the next downturn. There are a lot of pay increases going on, but what happens then when rates go down next time?” Costello said on Tuesday. “Those [increases] are hard to take back and puts a lot of fleets under pressure. We could see fleets go out of business because of that, although I don’t see it happening for a while,” he said, adding that ATA is not forecasting the next downturn until after 2023. Costello commented on the issue while presenting to the committee the latest ATA survey data on driver turnover. Turnover rates for large for-hire truckload carriers (at least $30 million in annual revenue) fell from 90% in 2020 to 87% in the first quarter of 2021, according to ATA, while the rate for small truckload carriers increased from 69% to 71% in the same period. Driver turnover in the less-than-truckload sector increased from 13% to 18%. “The majority of the turnover is churn in the industry,” when drivers move between companies in pursuit of better pay and working conditions, he said. “When competition heats up for drivers, carriers aggressively go after each other’s drivers because of the desperate need out there.”

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Industry

A congested freight environment shows no signs of improvement for peak

Supply Chain Dive Matt Leonard July 22, 2021

"Peak has started," National Retail Federation Vice President for Supply Chain and Customs Policy Jon Gold said Wednesday. The annual rush to get inventory onto shelves for the busiest retail season of the year is underway. Cargo owners have been dealing with short space in the ocean shipping market for months, so they're bringing in cargo earlier than usual in the hope that it will arrive for peak season. Anyone hoping for a return to normalcy for the 2021 peak season could be in for a disappointment. Congestion on the West Coast is getting worse, and the deluge of containers is not expected to stop any time soon

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Government/Safety/Sustainability

Study: The Dangers of Distracted Truck Drivers

Truckinginfo.com David Cullen July 22, 2021

The most distracted truck drivers are nearly 72% more likely to be involved in a “near collision” than other drivers, according to new data insights released July 22 by Omnitracs. The company said that the data analysis, based on aggregated and anonymized data from its SmartDrive video‐based analytics platform among trucking fleets, “clearly demonstrates that the most distracted drivers are less safe overall, commit significantly more fundamental driving errors, and drive faster than the speed limit compared to all other drivers.” And despite federal law limiting commercial drivers while driving to using only a hands-free phone “located in close proximity,” the report shows that “drivers who are distracted by mobile phones are three times more likely to drive 10 plus miles over the speed limit.” Given the danger inherent in that noncompliance, perhaps it is little wonder that SmartDrive data also indicates that the most distracted drivers are less likely to wear a seatbelt. Other significant conclusions include: • Truck drivers distracted heavily by mobile phones are involved in collisions at a rate 2 times higher than the least distracted drivers • Drivers identified as “most distracted” roll through stop signs and traffic lights at a rate 2.7 times higher than the least distracted drivers • Drivers distracted heavily by mobile phones had speed incidents of 10 plus mph over the speed limit at a rate 3.2 times higher than the least distracted drivers • Drivers identified as “most distracted” drift out of lane at a rate 2.3 times higher than those identified as “least distracted” drivers. • Drivers identified as “most distracted” fail to wear a seatbelt at a rate over 3 times higher than “least distracted” drivers

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