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Logistics Intelligence Brief
Wednesday, July 28, 2021

Trucking

Dry van outlook is strong but surging container ships continue to impact rates and volume

DAT.com Dean Croke July 27, 2021

The National Retail Federation (NRF), the world’s largest retail trade association, forecasts a promising demand in the dry van sector. Confirming the NRF short-term outlook and survey findings is the recently released Retail Truck Tonnage Index produced by Yemisi Bolumole, PhD and Jason Miller at the Michigan State University. “The implied tonnage of freight sold by retailers remained strong in June, rising an additional 4.5% from June 2020,” notes Professor Miller. “Tonnage is up an incredible 17.3% from June 2019 with two key sectors responsible for the two-year difference. Compared to 2019, these sectors are building materials — up 22% — and non-store retail, or e-commerce —up 47%. For carriers and brokers, the big question is how long will retail demand continue to prop up trucking volumes with manufacturing down 4% from the highs in 2018 and still accounting for the majority of ton-miles?”

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TFI confronts unprofitable thorns in UPS Freight turnaround

Freight Waves Nate Tabak July 27, 2021

Targeting freight, rates that ‘don’t fit network’ What Bedard did make clear, however, is that TFI moved aggressively to target freight or rates that “don’t fit the network” with large shippers while restoring accessorial charges that have been waived. He noted that the carrier used to do about 1,500 shipments a day out of about 34,000 total for under $100 a day. “You lose your shirt on that,” Bedard said. “If you stop doing that, it’s addition by subtraction. That’s one example that we were able to do fast. If you had asked me, ‘You think that these guys ship bins for $100?’ I would have said, ‘No, impossible.’” Bedard said TFI is having a lot of conversations with shippers that it views as not paying enough. He pointed to one recent negotiation in the current quarter with a major account that the carrier was servicing at a loss. “We were running this account with a 120 OR,” Bedard said. “What were we smoking when we gave the rates to this guy? … So July 1, we address the situation with the shipper. We address a lot of situations like that.” He acknowledged that the charges will drive customers away. “You cannot correct the situation, whereby the customer is taking advantage of you and for sure is going to say no and he’s going to walk. But he may come back,” Bedard said. “We win some, we lose some, but at the end of the day we correct the situation with the quality of the revenue.”

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UPS Ships Fewer Packages as Pandemic Boom Wanes (Subscription Based)

The Wall Street Journal Paul Ziobro July 27 2021

The company has been taking on more small- and medium-size shippers, a segment that tends to be more profitable for UPS compared with larger clients. The company is also benefiting from the broader reopening of economies and rebounding shipments between businesses, which are a more profitable business line since it yields more packages per shop and decreases delivery costs. Business-to-business shipments rose 25.7% domestically in the second-quarter versus last year, while shipments to homes fell 15.8%. The growth of shipments to business shows that there is a shift in the economy back to stores and away from online. “It’s a signal for us that the doors are open again and people are out shopping,” UPS Chief Financial Officer Brian Newman said. Related:  Freight Waves Wall Street finds cloud in UPS’ clear sky, sends shares lower

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UPS: Peak demand projected to exceed capacity by 5M packages daily

Supply Chain Dive Max Garland July 27, 2021

Package delivery demand during the 2021 peak season is projected to exceed capacity by about 5 million pieces per day, UPS CEO Carol Tomé said during the company's Q2 earnings call, as UPS and its competitors ramp up for another holiday shipping surge. UPS is adding capacity ahead of peak season, including 2 million square feet of additional sorting space and more cargo aircraft, CFO Brian Newman said. "Our peak planning is well under way," Tomé said. "We are lining up the aircraft we need to lease to manage the volume, we're lining up all the rental equipment that we need to have in place to handle the volume and, of course, the people side."

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Shippers/3PLs

C.H. Robinson beats the Street, will pursue market share where margins are

Freight Waves John Paul Hampstead July 27, 2021

It wasn’t just funky year-over-year comparisons that worked in C.H. Robinson’s favor this quarter. The company has gone after new business, particularly more profitable less-than-truckload and ocean freight, and grew revenue substantially compared to the first quarter of 2021. Gross revenues were up 14.5% sequentially, for instance, and earnings per share were up 12.5% quarter-over-quarter. A comment by Robinson CEO Bob Biesterfeld put a new emphasis on selling into higher-margin opportunities. “Overall we’ll stay the course with our strategy of pursuing market share gains that align with our profitability expectations,” Biesterfeld said in a statement. Robinson management often discusses taking market share but has not historically emphasized, at least in earnings presentations, balancing profitability with growth. This language from Biesterfeld may be meant to tone down growth expectations for truckload freight, for instance, where thinner margins may be part of a secular trend. About three quarters of Robinson’s revenue is generated by its North America Surface Transportation (NAST) division, which includes truckload, LTL and intermodal freight brokerage. The remainder comes from Robinson’s Global Forwarding division, which arranges international ocean and air shipments. In the second quarter, NAST posted revenues of $3.6 billion, up 44.9% year-over-year and up 12.5% since the first quarter. Income from operations totaled $151 million, up 10.4% compared to the year-ago period and up 11% from the first quarter. Link: C.H. Robinson Earnings Presentation

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Walmart’s latest business: Selling its e-commerce tech to other retailers

CNBC Courtney Reagan July 28, 2021

Just as Amazon Web Services is the profit center that powers much of Amazon’s other businesses, Walmart CEO Doug McMillon has been increasingly interested in expanding his company’s profit pools beyond its core retail business. Starting Wednesday, small- and medium-sized retailers can purchase the technology Walmart has developed to allow shoppers to buy items online and pickup the purchases at the store. These businesses also will be able to add products to Walmart’s online marketplace with just a few clicks. To offer the suite of cloud-based services, Walmart has partnered with Adobe, which will sell the software through a subscription. “When we started on the journey, Covid had just hit,” said Anshu Bhardwaj, vice president of technology strategy and commercialization at Walmart Global Technology. “We reaped the benefits of getting on this omnichannel journey early on.”

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Stores may soon use one-third of their space for e-commerce fulfillment: report

Retail Dive Daphne Howland July 27, 2021

E-commerce, already on the rise when it was propelled by the pandemic, could lead stores worldwide to dedicate as much as a third of their space to online order fulfillment, according to research from Edge by Ascential. That's based in part on the firm's estimate that by 2023, 34.8% of global chain retail will be online, up from 30% in 2021, rising to nearly 40% by 2025. But online retail sales are considerably lower in the U.S., where even swiftly rising e-commerce is set to reach 23.6% of retail sales by 2025, according to a July report from eMarketer. Store fulfillment services are on pace to reach $140.96 billion by 2024, per that report.

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Industry

June intermodal volumes see solid gains, reports IANA

Logistics Management Jeff Berman July 27, 2021

June intermodal volumes turned in another solid performance, according to data provided to LM by Intermodal Association of North America (IANA). Total June shipments—at 1,585,111—rose 12.0% annually, below May’s 22.4% annual gain, to 1,616,620 units. Domestic containers—at 663,998—headed up 1.1%, with trailers—at 96,621—falling 3.2%. All domestic equipment—at 762,619—headed up 0.5%, and international, or ISO, containers—at 822,492—headed up 25.2%.

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Oil Rises Amid Signs of Drop in U.S. Stockpiles, Dollar Move

Bloomberg Elizabeth Low And Grant Smith July 28, 2021

Global inventories are expected to tighten through the rest of the year as key energy consumers continue to rebound from the pandemic, although the latest Covid-19 resurgence is raising concerns about the short-term demand outlook. The fast-spreading delta variant has led to renewed restrictions in some regions, putting crude on track for its second monthly loss since October.

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Wildfires halt Union Pacific, BNSF trains in Northern California

Freight Waves Joanna Marsh July 27, 2021

Western U.S. railroads Union Pacific and BNSF have been grappling with wildfires in California and Oregon that have closed portions of their networks. Current weather conditions aren’t helping either: The next couple of days will be hot and dry in the intermountain West as severe drought conditions persist, reports FreightWaves meteorologist Nick Austin. There’s a chance of thunderstorms in parts of the Northwest, Great Basin and Northern California areas. However, many of these could be dry thunderstorms, so lightning could spark new fires, according to Austin. UP said more than 80 large fires have been burning in 13 states across the western U.S., totaling more than 1.3 million acres of damage to date, according to a Tuesday service advisory. That includes multiple locations on UP’s network, the railroad said.

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Workforce

Young workers remained with manufacturers because of training opportunities, report says

Supply Chain Dive Kathryn Mood July 27, 2021

In a recent survey, more than half of manufacturing employees under age 25 said they stuck with their employers because of training and development (69%) and career opportunities (65%), according to a July 15 study from the Manufacturing Institute's Center for Manufacturing Research. Senior leaders are more satisfied with their companies' development programs than frontline workers; 9 in 10 leaders were satisfied, according to the survey, while only two-thirds of frontline employees said the same. While development is a key part of employee retention, manufacturers also should equip their frontline managers with the ability to support their workers, the Manufacturing Institute said.

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Government/Safety/Sustainability

Biden Proposes Broad Shift to Favor American-Made Products

Bloomberg Jenny Leonard July 28, 2021

The new rule is designed in a way that gives contractors time to shift their supply chains but is stringent enough to have an immediate impact on the way taxpayer dollars are used, one official said. President Joe Biden began the process in an executive order he signed in January, shortly after taking office, and the White House has received input from businesses and unions, the officials added. The president’s proposal comes as federal spending on contracts is increasing, in part because federal agencies are awash in stimulus money to combat the coronavirus pandemic. Federal spending on contracts reached a record high of $682 billion in fiscal year 2020, up 14% from the previous year, according to Bloomberg Government’s federal contracting data. Lockheed Martin Corp., Raytheon Technologies Corp. and General Dynamics Corp. received a combined $129.5 billion of that spending.

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