LandLinkBLOG_banner.jpg

Freight Declines Continue Through September

Posted by Land Link on Oct 17, 2019 11:19:58 AM



The most recent edition of the Cass Freight Index Report issued this week by Cass Information Systems highlighted another month of freight transportation shipment and expenditure declines in September. The Cass freight index is widely considered the most accurate barometer of industry activity and trends.

September shipments, at 1.199, were up 0.8% compared to August and down 3.4% annually, marking the tenth consecutive month of annual shipment declines.

Shipments initially turned negative in December 2018 for the first time in 24 months, when it fell 0.8%. January and February were down 0.3% and 2.1%, respectively. As previously reported, the December and January shipment readings were up against respective all-time highs reached in December 2017 and January 2018, coupled with stabilizing patterns in nearly all underlying freight flows.

The culprit is generally considered to be weakness in spot market pricing for many transportation services, especially trucking, which is consistent with the negative Cass Shipments Index and, along with airfreight and railroad volume data, strengthens concerns about the economy and the risk of ongoing trade policy disputes. This weakness and decreases in the prime lending rate are supporting arguments for a looming recession.

The CASS report highlighted concerns regarding inflation and concerns about contract pricing and cancellation of transportation equipment orders, with four key factors playing a role, including:

1. Almost all modes of transportation used their pricing power to create    capacity, which first dampened and has now killed pricing power.

2. Spot pricing (not including fuel surcharge) in all three modes of truckload freight (dry van, reefer, and flatbed) has been falling for 15 months. Spot pricing, using dry van rates as a proxy, fell dramatically from its peak in June 2018 (more than $0.50 a mile) to at one point in May falling to more than 30.0%below contract pricing (a level Cass declared unsustainable). The highly discounted pricing available in the spot market has attracted an increased amount of demand, which has deteriorated pricing in the contract market (which is down $0.20 a mile or -9.7% in the last 14 months), and has begun to close the gap between contract and spot.

3. The cost of fuel (and resulting fuel surcharge) is included in the Cass Expenditures Index. Since the cost of diesel has been negative over the last 4 months on a YoY basis (down -5.4% June, down -5.8% in July, down -6.6% in August, down -7.9% in September), it is increasing the negative amount of pricing reported.

4. Whether driven by capacity addition/creation or lower fuel surcharges (or a combination of both, which is our best guess) the Expenditures Index has continued to decline: the September 2019 Index is down -4.5% from its peak in September 2018.

What To Expect

In the first half of 2019, around 640 trucking companies went bankrupt, according to industry data from Broughton Capital LLC. That's more than triple the amount of bankruptcies from the same period last year — 175.

The slow down in trucking has especially affected small carriers, who operate largely on the spot market. Trucking loads can either be picked up on demand through the spot market, or through a pre-arranged contract. The contract market comprises the vast majority of the trucking market, according to the American Trucking Associations.  Trucking has been in a recession since the first half of 2019, according to ACT Research. That fact doesn't surprise truck drivers, dozens of whom have seen their earnings slashed this year.

Spot market rates have crashed in 2019, while contract market rates haven't seen the same dip. According to the most recent Chainanalytics-Cowen Freight Indices report, dry van spot rates are down 16.1% from the same period in 2018. Contract rates in dry van are down 8.1%.

To stay informed on this topic and more, subscribe to our blog.

Read More

Topics: Supply Chain Management, Third Party Logistics, Transportation News, Logistics Business, Shipping News, Logistics News

Economic Health Checkup

Posted by Land Link on Oct 8, 2019 11:48:03 AM


There have been rumblings throughout the industry of a potential recession or economic slow down. The transportation industry has historically been an excellent barometer of the overall economic health of our manufacturing sectors. If you manufacturer it, you must ship it. Therefore, the logistics sector has significant foresight into the health of manufacturing both domestically and internationally. Third quarter numbers are not in just yet so we'll take a look at quarters one and two as well as some speculation about the rest of the year to make a somewhat educated guess as to what we might expect for the remainder of 2019 and 2020.

Hard Asset Allocation

The trucking business is asset heavy; meaning, it takes a lot of money to be in this business. The average cost of a standard tractor is about $120,000. Add sleeping accommodations brings you to $150,000. Trailers can run between $20,000 and $50,000 depending upon their additional goodies. Carriers of any significant size generally add 10 plus power units and twice that in trailers when making such an asset upgrade. There is typically millions of dollars in asset purchases at risk every year and estimating demand for transportation services is a critical science for the success of any asset based logistics organization. Over or under asset commitment and utilization can literally make or break a company so let's take a look at current conditions and see if we can project just how many trucks we should buy this year.

Macro View Of The Economy

While the US economy continues to stand on relatively firm ground, GDP growth has converged to its long-run trend of about 2%. Consumer spending growth is holding up, fueled by low unemployment and rising wages. In contrast, business spending and investment are not providing much support to GDP. Additionally, net exports are and will continue to be a drag on overall growth while the US dollar remains strong and imports outpace exports. It is likely that some of these drags will be offset by stimulus, including increased federal non-defense government spending and monetary easing.

GNP Predictions For 2020

Gross national product (GNP) is a broad measure of a nation's total economic activity. GNP is the value of all finished goods and services produced in a country in one year. As previously stated, we in the trucking business get a sneak preview of the developing GNP through industry demand. The demand boom of the last two years seems to hang on even as new truck orders slow. The trucks keep coming as if searching for the lost freight market of 2018. US Class 8 truck registrations lept 29.1% in the first five months of 2019, according to IHS Markit, the parent company of JOC.com. Those trucks simply add to an already overflowing pool of capacity that is improving shipper pricing leverage.

As the third quarter rolls toward trucking’s autumn peak season, “a lot of carriers are going to be more stingy with capital expenditure and adding capacity,” Dan Van Alstine, president and chief operating officer of Ruan, a dedicated trucking and logistics company, said at the recent SMC3 2019 Connections Conference in Colorado Springs. The benefactors of the current environment may be the owner/operators who own their own equipment and pay their own operating expenses.  As you might imagine, those costs can be staggering for a small business owner when it costs $500 just to fill your gas tank..

Dependence On Owner/Operators

Owner/operators have historically been the filler for carriers to maintain an acceptable level of capacity for both equipment and drivers. We'll see just how far out carriers are willing to walk on the ledge of financial commitment going into 2020. It's potentially a pivotal year. The current administration is under some significant pressure to keep the economic fire stoked so carriers can maintain asset funding. The first and second quarters of 2020 should be very telling as to the general health of our domestic manufacturing base.

What To Expect

According to the most recent forecast released at the Federal Open Market Committee meeting on June 19, 2019, U.S. GDP growth is expected to slow to 2.1% in 2019 from 3% in 2018. It is expected to be 2% in 2020 and 1.8% in 2021. The projected slowdown in 2019 and beyond is a side effect of the trade war, a key component of Trump's economic policies.

The unemployment rate will average 3.6% in 2019. It will increase slightly to 3.7% in 2020 and 3.8% in 2021. That's lower than the Fed's 6.7% target but former Federal Reserve Chair Janet Yellen noted a lot of workers are part-time and would prefer full-time work. Also, most job growth is in low-paying retail and food service industries. Some people have been out of work for so long that they'll never be able to return to the high-paying jobs they used to have. Structural unemployment (unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.) has increased.

We will be monitoring these economic indicators over the next 12 months very closely.  To stay informed on this topic and others in our industry, subscribe to our blog.

Read More

Topics: Logistics Business, Shipping News, Logistics News, Industry Trends, Technology

UPS Is Granted FAA License

Posted by Land Link on Oct 2, 2019 1:52:20 PM

UPS announced this week that it is the first to receive the official nod from the Federal Aviation Administration (FAA) to operate a full “drone airline,” which will allow it to expand its current small drone delivery service pilots into a country-wide network. Obviously, it’s a huge win for UPS Flight Forward, which is the dedicated UPS subsidiary the company announced it had formed earlier this year to focus entirely on building out the company’s drone delivery business. There’s still a lot left to do before you can expect UPS drones to be a regular fixture, or even at all visible in the lives of the average American.

Read More

Topics: Transportation News, Logistics News, Industry Trends, Technology

The Disruption of Technology

Posted by Land Link on Sep 25, 2019 2:52:34 PM

Times are indeed evolving, especially around transport & logistics management. Technology is disrupting the supply chain industry at a rapid pace and has taken many by surprise. During this decade, e-commerce and IoT have irreversibly altered every aspect of logistics management. To remain successful, supply chain managers are increasing their adoption of cloud and technology platforms and applications. Innovative technologies, such as blockchain and machine learning, are being implemented today with the potential of significantly reshaping existing supply chain operating models. By 2023, at least 50% of large global companies will be using AI, advanced analytics and IoT in supply chain operations. That same year, over 30% of operational warehouse workers will be supplemented, not replaced, by collaborative robots. In the digital transformation age, logistics is once again undergoing a major shift. Logistics technologies, such as robotic warehouse systems, make automation a reality, while drones improve last-mile delivery capabilities and better tracking with tools like RFID tags, which improve visibility throughout the supply chain.

These technologies also contribute to a rise in big data and analytics in the logistics field. RFID tags and robotic warehouse systems generate and transmit data that, when combined with other data sources, allow companies to optimize the supply chain and make better predictions and forecasts to improve efficiency and boost the bottom line.

A Tech Powered Competitive Edge

In 2019 alone, an estimated 60% of millennials’ purchases were made online, up from 47% two years ago. Retailers are increasingly catering to this new target group and shifting their approach to accommodate the unprecedented demand for a seamless, tech-powered e-commerce experience. Amazon’s continued success is proving that millennials aren’t as impressed by store brands or prices as much as by the speed, cost, and convenience of delivery. In order to meet the demands of this growing group of consumers with significant spending power, the supply chain industry has to adapt to meet their buying behavior. In order to meet the demands of millennials for fast, convenient, and transparent e-commerce deliveries, supply chain managers are increasingly leveraging location intelligence and location data to raise visibility throughout their whole logistics process and to optimize their delivery routes. Real-time location tracking and real-time traffic updates are proving to be crucial for matching the one-day delivery expectations set by Amazon. Such technology allows retailers and logistics companies to seamlessly and reliably share data back and forth, to meet ETAs and improve the customer experience. Real-time, data-driven decision making, improved driver efficiency, optimized fleet performance, increased supply chain visibility, precise vehicle tracking, lower operational and insurance costs are just some of the benefits of implementing the right technology application.

Tech Implementation Tips

Introducing new technology into an organization can be daunting, particularly if it disrupts everyday practices or decommissions tools that employees are comfortable with. Tech-savvy supply chain managers, who want to avoid common missteps like employee pushback or loss of service when integrating new technology, may find the following tips helpful.

1. Collaborate with IT, but lead the charge
While IT managers are the ones who will carry out the technology integration, it is the supply chain managers who should own the implementation process. Asking IT to manage the process from start to finish might seem like the easier and cleaner approach, but supply chain managers should be involved in the process to ensure applications and APIs are being utilized to fully meet their needs.

2. Provide education and training
Any successful technological implementation requires employee buy-in, so they understand why it is required, what it does, how it works, and the impact it will have on their job. Employee resistance to change is the most common factor in failed business transformations. To avoid this conflict, supply chain managers are advised to embrace transparency and keep an ‘open-door’ policy.

3. Request feedback
When rolling out new processes, supply chain managers shouldn’t forget to ask staff members for continuous feedback. With an open-feedback policy, managers can stay on top of how changes are being received, the impact of the changes on team morale, and collect suggestions on how to improve the newly implemented process.

Determining the correct technology is merely the first step and can become unhinged if the implementation process is not properly executed. Clearly identify and define the specific goals of the technology application. During the entire implementation process it is vital to ensure collaboration between logistics personnel and the technology team to maintain focus on the original goals. If not kept on track the technology team may wander. To find out more about how technology can improve your operations contact us today.

Read More

The Evolution of the Mobile Supply Chain

Posted by Land Link on Sep 18, 2019 3:19:26 PM

The aggressive progression to everything mobile has been obvious. The Smart Phone opened an opportunistic Pandora's Box that will never close again. Today, mobility is king. "Several key trends are driving mobility investments that support supply chain operations, and more specifically, in-field fleet/transportation,” says David Krebs, VDC Research’s executive vice president of enterprise mobility and connected devices. “These include the ELD mandate that came into effect in December 2017 (with a final deadline is December 16, 2019) and the transition by many operators from the legacy Windows-powered mobile device to Android.”

Read More

Get The Most From Your 3PL Relationship

Posted by Mike Lappke on Sep 11, 2019 9:12:47 AM

Today's consumers are a far from fickle bunch. They know what they want, and moreover, they want it fast. Sometimes I wonder if they really need it that fast or is it simply the mindset of the new generation of consumer. In an extensive career in the expedited freight market I was surprised to find how many receivers were not in a hurry at all for the product that their suppliers spent triple the money to ship expedited. In fact, I rented a box truck and personally delivered a few skids to a major account after an unavoidable traffic accident sidelined the original truck. After a 5-hour white knuckle drive, I was told it would be a couple hours until they could unload me. Turned out, they were in no hurry at all. The takeaway from all this personal wisdom is to be certain of the consignees' requirements before panicking about production delays and transit times. When you’re sick you call a doctor, in a legal matter you consult a lawyer. The same expertise is just as beneficial when managing your supply chain. If you do not currently have a relationship with a 3PL, think about starting one. It's a tremendous resource, particularly in a time of need. If you do have a current 3PL relationship, here are some tips to make the best of that relationship.

Think Long-Term Commitment

Like in all relationships, when an organization and its 3PL both have committed to mutual success, challenges can be overcome and the relationship can blossom. Service failures are part of our business. When you consider the vast amount of freight that travels thousands of miles across this country every week one must expect it can’t all go right. The true measure of 3PL customer service is how we react to service failures. There are fire alarms daily. A short-term mindset only creates short-term solutions. Your 3PL is invested in the long-term success of your logistics operation, so you should be too. Work together to devise long-term strategies that will improve practices and result in mutual success.

KPI's; A Staple At Land Link Traffic Systems

Many years ago, the founder of Land-Link Traffic Systems Inc. stressed the following. “What does not get measured, does not get fixed”. It would be difficult, if not impossible, for any rational person to repudiate this thought-provoking statement and important underlying principle of business. Yet, many companies do just that. Most companies, in fact, do not have the proper measurements and KPIs in place necessary to drive intelligent business decisions and to serve as support to the policies that are relied upon to drive day to day business activities.

Do not be one of those companies! Land-Link can help you support your business and gain and maintain competitive advantage through effective performance measurements. 

Read More

Ongoing Tariff War Demands Shippers Be More Efficient

Posted by Land Link on Sep 4, 2019 12:13:00 PM

President Trump's strategy regarding the Chinese tariffs has been to right a long time wrong. Again, this was a significant aspect of his presidential campaign. The position, which arguably has merit, may come at a substantial cost to the U.S. economy. The theft and mistreatment of intellectual property, a potential monopoly around 5G cellular technology, and the knock-off market of some very high-end consumer goods have had a major impact. It's a difficult pill to swallow, but until now no political official has been willing to tackle the issue. What remains to be seen is how far Trump will take this battle and how much collateral damage will result. The initial collateral damage is in the lane imbalance of exports vs. imports. In an ideal world, transportation providers would like to see a balance of full containers going and coming to whichever port to reposition assets to meet demand. The trade war is expected to have a detrimental effect on this sensitive balance, specifically regarding U.S. exports. The imbalance of shipping containers is but a symptom of misaligned supply and demand caused by the ongoing trade skirmishes. But it is also an indicator of real impact on the supply chain.

Read More

Be Aware of Cargo Theft Risk Over The Labor Day Weekend

Posted by Land Link on Aug 29, 2019 9:14:05 PM

Cargo theft is the primary concern of shippers and logistics professionals over any national holiday weekend. Holiday weekends pose a higher threat because truckers will park their trucks, and warehouses will be shut for an extended period of time. Millions of dollars are lost, production schedules disrupted, and customers disappointed over the long holiday stretch.

Read More

The Future of Transportation

Posted by Land Link on Aug 21, 2019 3:11:44 PM

Before it was referred to as "Logistics", it was simply trucking. Rail, air and specialty transportation was a rarity. It was operationally simple and customers expectations were basic in terms of service. The world got itself in a great big hurry over the last 30 years. I suppose it was all started by the auto manufacturers when they introduced the "Just in Time" inventory system in the 90's. Manufacturers saved on inventory costs by using trucks as rolling warehouses. Thus was born the concept of time critical transportation. The idea eventually caught on with other manufacturing segments and it seems today everyone is in a rush for everything. Let's take a look at what we can expect the logistics business to look like in the next decade.

Data Engineering

Data engineering will be at the forefront of everything that goes on in supply chains. Data engineering, according to Dr. Michael Watson of Northwestern University, is "the art and science of blending data from multiple sources, automatically cleaning and filtering the data, and transforming the data to be useful for analysis." You may have heard the term "Big Data", referring to the volumes of pertinent data accumulated from various sources along the supply chain. This "Big Data" will be the source of information in the data engineering process. Another term you've likely heard is IoT or The Internet of Things. The IoT is the network of physical devices, vehicles, home appliances and other items embedded with advanced electronics capable of exchanging data with a central computer over the internet.

"Big Data" and logistics are made for each other. Companies are often sitting on masses of under-utilized data that could aid them in a number of ways.

Some of the current applications of Data Science by data-driven businesses within the industry include:

• Reducing freight costs through delivery path optimization
• Dynamic price matching of supply to demand
• Warehouse optimization
• Forecasting demand
• Estimating total delivery times
• Extending the life of assets through finding patterns in usage data — identifying the need for maintenance

The Truck of the Future

Read More

Supply Chain Trends 2019 And Beyond

Posted by Land Link on Aug 14, 2019 1:33:17 PM

In business, a trend can refer to a business model, a process or a technology. However, a trend will only be of more than passing interest if it could directly impact your business and people. We'll look at 4 emerging trends.

Read More