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Emerging Freight and Trucking Markets

Posted by Land Link on Nov 6, 2019 9:19:31 AM


The trucking sector is going through a major paradigm shift due to the ongoing digitization of the industry and the increased transparency resulting from the digitization and the launching of a trucking forward and freight futures market. It’s now three-dimensional market comprised of the spot, forward and trucking freight futures markets. As the trucking forward and futures markets gain traction, the three markets will become increasingly more interrelated.

Forward Market

The forward market is being established where shippers place “buy” orders to procure future trucking capacity anywhere from two weeks to six months plus out and carriers place “sell” orders to provide trucking capacity to shippers in the same time frame. As opposed to the existing non-standardized RFP based contract market,  forward contracts are binding and based on a standardized contract. They provide guaranteed load volume/trucking capacity and rates to shippers and carriers, and the contract rates can be hedged via trucking freight futures.

Trucking Freight Futures Market

The trucking rate futures market was launched at the end of March 2019 on the Nodal Exchange. The underlying rate, which the futures markets track, are indices produced by DAT and updated daily. There are seven directional lanes and four calculated indices, each with a 16-month series. Trucking freight futures provide a trucking rate volatility hedging tool for trucking carriers, shippers and third-party logistics (3PL) providers, allowing them to lock in a trucking rate today for up to 16-months in the future. What does this mean for trucking carriers, shippers and 3PLs? Due to this increased transparency, trucking rates will become more volatile, will change more frequently and will be increasingly influenced by changes in the trucking forward and freight futures markets. Carriers and shippers will be able to see changes in trucking rates around the country in all three markets on a more “real time” basis, causing rates in their lanes to adjust much faster.

Trucking freight futures provide a very effective way to hedge trucking rate risk, and the forward market provides a hedge to lock in guaranteed rates and load volume and trucking capacity on a multi-month basis. There are also viable cross-market hedging and profiting strategies that can be executed on in conjunction with the trucking forward and futures markets.

3-Dimensional Execution

The new three-dimensional market provides new ways for market participants to mitigate trucking rate risk, determine trucking rates and pricing and to procure trucking capacity or access load volume. The successful companies in this new market will be those that learn to engineer execution strategies via combined solutions from each of the three markets. Regardless of whether a market participant ever uses binding forward and or trucking freight futures, it will need to stay current on the pricing trends in both the trucking forward and freight futures markets as spot market rates in their lanes will be affected by both.

Technology is spawning hybrid markets in many sectors.  The successful logistics planner will be the one who understands these emerging markets.  To stay informed on this and many other Logistics topics, subscribe to our blog.

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

Parcel Deliveries Clogging Up City Streets

Posted by Land Link on Oct 30, 2019 1:37:40 PM

The boom in online stores is increasing the demand for parcel delivery services, particularly in the big cities. New York, Chicago and Los Angeles are experiencing serious traffic issues due to the amount of parcel delivery vans clogging the city streets. Add to this the number of ride share drivers in any metropolitan area daily and it is easy to see how things are getting congested.

Consumers today are spending less time in local stores and more time online, buying not only retail items but also groceries from Peapod, office supplies from Postmates and whatever they need from Amazon. According to the National Capital Region Transportation Planning Board, it’s estimated that, on average, every person in the U.S. generates demand for roughly 60 tons of freight each year. In 2010, the United States Post Service overtook both FedEx and UPS as the largest parcel-delivery service in the country and delivered 3.1 billion packages nationwide. Last year, the USPS delivered more than 5.1 billion packages. The growth in e-commerce is fueling a rise in the number of delivery vehicles box trucks, smaller vans and cars alike on city streets.

While truck traffic currently represents about 7% of urban traffic in American cities, it bears a disproportionate congestion cost of $28 billion, or about 17 percent of the total U.S. congestion costs in wasted hours and gas. Cities, struggling to keep up with the deluge of delivery drivers, are seeing their curb space and streets overtaken by delivery vehicles, to say nothing of the bonus pollution and road wear produced thanks to a deluge of Amazon Prime orders.

The problem, really, is that we now live in a world where the brick-and-mortar stores are only one part of the retail equation and, as many a “retail apocalypse” story is warning, they are a shrinking part. Demand is being driven by people in their individual homes and apartments ordering smaller amounts of goods with higher frequency: groceries one day, several items from Amazon the next. As more goods are ordered, more delivery trucks are dispatched on narrow city streets. Often, the box trucks will double-park in a two-lane street if there’s no loading zone to pull into, snarling traffic behind them.

Many American cities are also playing catch-up as they try to understand these new urban delivery challenges and systems. That’s due in part to the failures of urban planning and the nature of the trucking business. While matters of public policy like public transit, bike lanes and walkability fall within the purview of planning boards and municipal departments of transportation, freight has always been a purely private-sector enterprise. Cities don’t have reliable data on the number of delivery trucks coursing through their streets; let alone planning for them.

Looking For Solutions

Cities can’t just ticket their way out of the delivery-truck problem. For big commercial delivery companies, parking fines are just part of the cost of doing business. UPS paid New York City $18.7 million in parking fines in 2006. In 2011 in Washington, D.C., UPS alone received just shy of 32,000 tickets.

If enhanced enforcement isn’t the answer, diverting delivery traffic might be. Seattle is taking an inventory of all the remaining alley space in the city. Instead of letting developers extend housing lots into the alleys, they might be used to accommodate some of the incoming delivery traffic.

Delivery companies are also experimenting with ways to reduce their impact. Late last year, UPS introduced its first “eBike” deliveries in Portland, Oregon. The goal is twofold: Reduce carbon emissions while putting a delivery vehicle on the road small enough to take advantage of curb space. UPS is also integrating across its U.S. routes its new big-data tool, On-Road Integrated Optimization Navigation (ORION). As a UPS driver travels their route, ORION works in the background considering up to 200,000 possible routes before picking the most optimal route for a driver to take to reduce the overall time spent driving around from delivery to delivery. The next generation is going to be a real-time tool taking traffic into account.

UPS currently uses drones to help drivers in rural delivery locations. It’s unclear how practical drone delivery can be in a metropolitan area considering the risk of personal injury, theft and inaccurate consignee deliveries. The solution to the congestion problem will likely come from many angles over the coming years. We simply were not prepared for the online purchasing boom and have never caught up.

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Topics: Supply Chain Management, Transportation News, Logistics Business, Shipping News, Logistics News, Industry Trends, Technology

Emerging Warehouse Automation Technologies

Posted by Land Link on Oct 23, 2019 9:48:03 AM


Those in the logistics business have recently speculated as to the direction of technology as it relates to warehousing and distribution advancements. The pace at which technology is advancing is exciting and a little frightening at the same time. The applications seem almost endless and keeping up on the technology can be a daunting task. Let’s take a look at a few emerging technologies in warehouse automation.

Collaborative Robots Infiltrate Human Interaction

Collaborative robots may be described as round one of the robotic invasions into warehouse operations. In this round, robots are introduced to work alongside, and in collaboration with, humans in the day-to-day operations of the warehouse and distribution centers. Last summer, Forbes gave smart cobots, otherwise known as ‘collaborative robots,’ the illustrious title of “the future of work”. It’s a declaration that struck a chord with many, perhaps because the idea of warehouse associates working alongside robots is a simpler image to accept than a fully automated operation in which robots replace living, breathing human workers.

While cobots are quite flexible when it comes to application, the most talked about are the picking and packing variety currently being used by Amazon. Cobots are a no-brainer for large warehouses owned by multichannel retailers who have the extra capital to invest in the technology. These lightweight robots can be programmed quickly and controlled remotely, require just a few hours of set-up time, are often mobile, and, as far as we know, are safer than many of their stagnant, bolted-down competitors.   Cobots will likely give way to the next generation of robot which will largely replace humans if not entirely.

On-Demand Warehousing

On-demand warehousing has been around for a while.  Now it has become more sophisticated in both space design and geographical placement all based upon big data.  Warehousing and DC centers need to be placed in strategic locations to meet the incredible delivery demands of today's consumers. Terabytes of data are being analyzed to decide exactly where to build strategic on-demand warehousing offering flexible utilization terms and easy highway access. Users want flexible warehouse space and supplier contracts that allow manufacturers to take advantage of the service as they scale and remove the services as they downsize. Third-party firms are offering up smart warehouses to manufacturers and suppliers at a fraction of the cost for the businesses to make the investments themselves. This means that even the most modest of startups can benefit from the use of the latest automated technologies, giving emerging businesses the opportunity to compete with the big guys on fulfillment time and accuracy.

Advanced Inventory Scanning Techniques

Fully automated warehouses  have been a hot topic as of late. Trailblazing companies, like Aquifi, have already found a way to automate the task of bar code and label scanning, eliminating the need for handheld scanning tools and the people who operate them. This technology is accomplished through a sophisticated smart dimensioning and 3D identification function that processes a warehouse’s items with more precision than ever before. It’s big news for operations that take advantage of tried and true asset tagging and bar coding. While these materials will not be replaced, the very scanners, and the people who use them, may soon be deemed obsolete.

3D Printing

3D printing has been around for a few years now.  It utilizes the 3rd dimension to not print, but build a particular item.  Most 3D applications are designed for simple replacement parts made out of basic materials. As printers become more sophisticated, the applications have expanded. The sneaker industry is just one example of 3D printing technology application. In the old days, making a customized piece of footwear meant a disruption in the everyday processing of the manufacturer’s movements and a much higher price tag for the customer. Ever since sneaker behemoth, Adidas, invested in 3D printing powerhouse Carbon, the once-fabled affordable customized sneaker is now a reality. In fact, consumers are so completely on board with this 3D-printed footwear option that Adidas is projected to sell millions of units in 2019 alone.

3D printing is also a powerful tool for plenty of other manufacturers, particularly those who are in the positions to take advantage of additive manufacturing according to the operation’s precise needs. This is a big win for manufacturers, as it reduces material waste and shortens processing time in one fell swoop. As technology continues to evolve, so does the variety find in the world’s smartest, most cutting-edge warehouses. Always pay attention to emerging automation technologies and the companies who are making them a reality. These are the very actors who will be dictating how we manufacture, distribute and consume goods in the years to come.

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Topics: Logistics Business, 3D Printing, Shipping News, Logistics News, Industry Trends, Technology

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%.

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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.

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

Leveraging Digital Applications To Open New Markets

Posted by Land Link on May 15, 2019 11:12:14 AM

Digitize Your Communication

In this era of rapid digital transformation, new technologies have opened up opportunities and created challenges, fundamentally transforming customer experiences, operating models and the work environment. Today's transportation providers need to explore their value added viability features to attract new customers and instill confidence in shippers. It has never been more important to provide real time tracking and tracing options for domestic and international shipments.  Shippers basically expect it in this market. Doing it at digital speed is the key. Digitalization is about leveraging technology to create, enable or transform a business process. The basic advantage of digital applications is data compression to improve the speed of transactions. Speed is king in today's logistics world in all facets of execution. Data automation also provides enhanced communication between shipper, consignee and any other interested party. All technologies aside, there is still a strong personal aspect to our business in terms of negotiating contracts, customer service and the commitment of everyone in the organization to be mistake free.

Cloud Technology

Cloud computing is really the internet as we know it today on a commercial scale. Cloud technologies help mitigate the need for physical IT infrastructure, and on-premise support personnel to manage computing capabilities, by running operations across server farms or data centers. Using cloud-based services providers, businesses can leverage IT assets as programmable resources, which are global and scalable on demand. This allows a business to access or lease computing resources and storage power far greater than what it may have been able to access on local infrastructure, while still being able to scale up or down in a cost-efficient manner. Simplicity, affordability and ease of expansion are all enhanced with cloud computing. Enterprise IT is among the fastest growing segment of computing easily set to replace on site systems.

Be Sure Of Your Needs

Everyone wants to utilize the latest technology to remain competitive. The race is on to define the industry’s future. With an estimated US$4.6 trillion of revenues at stake, companies can’t afford to sit back and watch; they need to adapt to changing markets proactively. Before rushing in, consult an industry export to provide the direction and pace of technology applications to stay on point and within budget. Like most other industries, transportation and logistics is currently confronting immense change; and like all change, this brings both risk and opportunity. New technology, new market entrants, new customer expectations, and new business models. There are many ways the sector could develop to meet these challenges, some evolutionary, others more revolutionary. These are indeed interesting times. And its in these times that the council of an expert is vital. For a consultation regarding your current supply chain protocols, please contact us today. To keep informed on these emerging topics and more subscribe to our weekly blog on our site.

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

Warehouses Are Experiencing a Metamorphosis In Operational Procedures

Posted by Land Link on Mar 20, 2019 9:30:00 AM

Warehouses and distribution centers around the world are coping with massive change and investment to stay competitive. Challenged by the demands of e-commerce and omni-channel fulfillment, smaller orders, ever-shrinking delivery timeframes, and a persistent labor shortage, operations are in perpetual need of tools that can help them tackle these and other ongoing productivity issues. Technology is the driving force in the warehouse and DC transformation. With automation, robotics, artificial intelligence and other advanced technologies making their way into the world’s distribution facilities, the warehouse management system has become a vital component to manage the increased amount of information. And because it collects valuable information along the way, WMS also provides actionable data analytics that companies can use for good decision-making.

Let's take a look at some industry trends for 2019.

Software and Equipment Vendors Offer Creative Financing

In an effort to convince warehouse and DC managers to take the next leap in automation implementation, equipment suppliers are coming up with creative finance plans to make it easier to upgrade. One approach that more companies are adopting is that assets can be rented versus purchased or leased. In other instances, the WMS vendors which sell the systems that run the automated equipment are now working more closely with their end users to help make it more affordable for a wider swath of customers.

A Focus On a more User Friendly WMS Interface

Perhaps the biggest turn off to any computer program is a complicated user interface.  Logistics managers don’t have the time to sift through reams of data to find what they’re looking for. Pertinent data needs to be a mouse click away. WMS vendors are focusing on their user interfaces and coming up with ways to present data in a more logical format to users. The focus is on making systems more engaging and easier to use, and particularly in a same-day-shipping environment, where a field service technician or retail clerk can use the system with little or no training.

More Improved Inventory Return System

In the online ordering world returns are a major line item in the profit and loss statement. Managing those returns more accurately will mitigate the return allowance figure in the financial statements. Returns management systems have made a sizable impact on the distribution environment, and are pushing technology vendors to add better precision management capabilities into their systems. Companies have to be able to manage precision, while more economically managing individual items. While WMS systems certainly help companies pick, pack, and stage, they are also inventory systems. As items get returned, shippers need to be able to return those goods to either inventory, vendor, wholesale or scrap to accurately determine their value.

These are just a few trends to watch for in 2019. Form more information on how technology can benefit your organization contact us today.

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Topics: Logistics Business, Logistics News, Industry Trends

How the Trump Tariffs May Affect Shippers

Posted by Land Link on Jun 20, 2018 10:46:47 AM

The Trump administration on Friday escalated a trade war between the world’s two largest economies, moving ahead with tariffs on $50 billion of Chinese goods and provoking an immediate response from Beijing. Today Trump suggested possibly moving forward with additional tariffs which may exceed $200 million. The shipping community has been on edge about the impact the tariffs may have on the logistics market since the tariffs were proposed some 18 months ago. Before we examine the potential fallout lets outline precisely what industries will be affected.

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Topics: Transportation News, Logistics Business, Shipping News

Diesel Prices at a 3 Year High

Posted by Land Link on Apr 18, 2018 12:39:49 PM

Just as the domestic manufacturing sector is enjoying a strong and steady growth a 6.1-cent jump in diesel fuel prices across the country, during the week ending April 16, have diesel at its highest point of 2018, and its highest since the beginning of 2015. The U.S.’ average price for a gallon of on-highway diesel now stands at $3.104, the highest since the week ending Jan. 5, 2015, when diesel averaged out at $3.137. The increase was spurred by significant increases in all regions across the country, with the most significant increases being seen in the West Coast, which saw a 7-10 cent jump.

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

LTL Market in High Gear Early 2018

Posted by Land Link on Mar 22, 2018 9:46:21 AM

Buoyed by surging demand, LTL carriers are revving up for a strong 2018, warning that tightening capacity means sharply higher rates in what is anticipated to be possibly the highest demand market in a dozen years. It is a generally unanimous feeling among Logistics market analysts that the current environment of consistently steady industrial and retail demand, the tightening of overall trucking capacity throughout the industry, and LTL’s special operational niche all are factors in creating the perfect storm of premium price points and strong demand.

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Topics: Third Party Logistics, Logistics Business, Logistics News