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Logistics Intelligence Brief
Monday, September 12, 2022

Trucking

Carriers weigh in on peak season and contract rates

Freight Waves Todd Maiden September 9, 2022

Supply constraints, cost inflation provide ‘floor’ for contract rates
Rourke said Schneider is accepting most contract tenders each day and that truck capacity and loads are closer to in sync than they have been in several quarters. The bulk of the carrier’s truckload business is contracted with spot freight representing only a mid- to high-single-digit percentage of the mix.
When pressed on how long contract rates can hold before following the path of spot rates – which typically occurs in most cycles — Rourke said a support level for contract rates has likely been established due to higher carrier expenses.
“Inflation … particularly around driver wages, which is the highest [expense] element of our income statement … equipment availability, equipment cost, maintenance, you name it, I think all of those are here for a while, and I think they put a floor on where [price] can reasonably go.”
The higher cost profile for “truck, trailer, tire, fuel, labor” and the inability for OEM production schedules to close the demand gap has Leathers believing contract pricing will remain firm. He said the typical lag between spot and contract rates is still six to nine months, which puts the potential inflection point around next year’s bid season.

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Shippers/3PLs

Amazon Is Refining Delivery Operations as It Resets Logistics Network

The Wall Street Journal Liz Young September 9, 2022

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Amazon.com Inc. appears to be fine-tuning its distribution strategy as it pauses its warehouse expansion across the U.S., consolidating operations in some areas while pulling back growth plans in secondary markets, according to logistics experts.
The e-commerce giant has canceled, closed and delayed facilities at each stage of its order fulfillment process, while continuing to move forward with large distribution centers that funnel goods into its home-delivery network since it announced earlier this year that it was pausing its ambitious U.S. logistics expansion. Amazon has shut down, called off or pushed back the openings of 66 delivery stations, fulfillment centers and other facilities as of this week, according to data from supply-chain consulting firm MWPVL International Inc.
Fourteen of the 15 buildings Amazon has closed have been delivery stations, the smaller facilities where the company prepares online orders for delivery to customers’ homes, said Marc Wulfraat, founder and president of MWPVL. Those sites have largely been in areas where the company had multiple facilities close to one another, he said, suggesting Amazon will consolidate the operations in fewer stations.

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Amazon Buys Warehouse Robotics Company Cloostermans

Amazon Buys Warehouse Robotics Company Cloostermans

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Amazon said it has been working with Cloostermans since 2019 and that it plans to use the company’s technology to help robots operate alongside its warehouse employees, including to improve worker safety and to reduce packaging waste.
“Amazon’s investments in robotics and technology are supporting how we build a better and safer workplace for our employees and deliver for our customers,” Ian Simpson, vice president of global robotics at Amazon, said in a company blog post.

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Embrace ‘Shop Early’ and Cancel ‘Black Friday’

Bloomberg Thomas Black September 12, 2022

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Last year, gift buying was dramatically pulled forward as a parade of dire headlines warned that supply-chain issues would leave store shelves bare and ruin the holidays. The supply chain, normally an obscure, behind-the-scenes function of global business, became a household word with worsening port, rail, trucking and warehousing problems blanketing the news this time last year. Retailers held promotions early and people responded.
The result was that UPS and FedEx’s delivery volume surged in October and November compared with a year earlier and then petered out in December. Overall, month-on-month retail sales fell 2.5% in December after rising 1.8% in October and 0.2% in November, according to Census Bureau data.

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Borderlands: Mexico’s automotive production rises 31% in August

Freight Waves Noi Mahoney September 11, 2022

Mexico’s auto production rises 31% in August
Mexico’s production of passenger vehicles registered its highest monthly total of the year with 316,815 units in August, a 31% year-over-year (y/y) increase.
Total exports of Mexican-made passenger vehicles increased 17% y/y in August to 248,704. The U.S. remains the main export market at more than 80% of units produced, followed by Canada, Germany, Colombia and Puerto Rico.
The increase in production was due to supply chains and parts inventories improving from earlier this year, said Guillermo Rosales, deputy director general of the Mexican Association of Automobile Dealers.

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Industry

Three more unions reach tentative agreements with freight railroads

Freight Waves Noi Mahoney September 11, 2022

Three more railroad unions have reached tentative agreements with U.S. freight railroads on a new labor contract, announced the National Carriers’ Conference Committee (NCCC).
The tentative agreements announced Sunday include the Brotherhood of Maintenance of Way Employes Division of the International Brotherhood of Teamsters; the International Brotherhood of Boilermakers; and the International Association of Sheet Metal, Air, Rail and Transportation Workers-Mechanical Department.
“The tentative agreements … include a 24% wage increase during the five-year period from 2020 to 2024 — with a 14.1% wage increase effective immediately — and five annual $1,000 lump sum payments. Portions of the wage increases and lump sum payments are retroactive and will be paid out promptly upon ratification of the agreements by the unions’ membership,” said the NCCC, the group representing Class I railroads in the contract negotiations.

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US railroads to begin cutting service as deal with biggest unions remains elusive

The Journal Of Commerce Ari Ashe September 9, 2022

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Supply chains already near breaking point
The stakes are high for a deal to be reached because the Association of American Railroads estimates that a strike would cost the US economy $2 billion per day. The Bureau of Transportation Statistics reports that about 30 percent of US freight, including non-containerized goods, travels on trains.
The timing of a reduction in service ahead of a possible strike is not good as international supply chains are clogged with containers piling up at intermodal terminals in Chicago, Dallas, Memphis, Kansas City, and Ohio Valley.
Labor action would also cause disruptions in ports across the US because a sizable share of containers is moved off terminals on trains, including from the ports of Los Angeles and Long Beach, New York and New Jersey, Savannah, Seattle-Tacoma, and Virginia.

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AAR report highlights potential economic impact of a railroad service interruption

Logistics Management Jeff Berman September 9, 2022

“As the freight sector heads into peak shipping season, a nationwide rail work stoppage would result in an unnecessary $2 billion daily economic hit,” said AAR President and CEO Ian Jefferies in a statement. “President Biden’s PEB recommended terms that would maintain the highest quality health care coverage and result in compounded wage increases of 24%, bonuses totaling $5,000 — the highest pay increases in nearly 50 years. Like those unions that have already tentatively agreed to the PEB deal, each of the remaining unions can still enter into agreements based on these recommendations. However, should negotiations fail and result in a work stoppage, Congress must act to implement the PEB recommendations—rewarding employees and stopping unnecessary economic harm and uncertainty for rail customers.”

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Government/Safety/Sustainability

Bosch to manufacture EV hydrogen fuel cells in South Carolina

Supply Chain Dive Meagan Ruggles September 9, 2022

Bosch will invest more than $200 million into its South Carolina production facility to build hydrogen fuel cells for heavy-duty electric trucks, the company announced on Aug. 31.
“The hydrogen economy holds great promise and at Bosch we are all in,” Mansuetti said. “This is a significant milestone as we announce the first fuel-cell related production for Bosch in the U.S. to support the growing demand from our local customers,” he added.
Bosch currently supplies fuel cell technology to Nikola, which has completed a pilot of its hydrogen-powered cabover truck and plans to begin production next year. The trucks logged over 12,000 miles and hauled 2 million pounds of freight during the pilot, the release said.

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