Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
If the numbers pouring forth from various sources are any indication, the great inventory rebuild of 2009-2010, which fueled the nation's economic recovery, could be coming to an end.
The latest indication of an inventory slowdown came today with the release of a monthly index that monitors truck drivers' diesel fuel purchases. That measure, the Ceridian-UCLA Pulse of Commerce Index (PCI), showed a sequential decline of 0.9 percent in May, following a 0.5-percent drop in April. The index, which tracks drivers' fuel card swipes as they transport raw materials as well as intermediate and finished goods to businesses and consumers, has declined in every month this year except March and has fallen in eight of the past 10 months.
Ed Leamer, an economist at UCLA's Anderson School of Management who directs the report in conjunction with payroll giant Ceridian Corp., said in a statement that the economic recovery started in July 2009 but lasted only until the following June. Since then, he said, the economy has "been idling, not powering forward."
One bright spot, Leamer said, is that the May results were about equal with May 2010, the strongest month of last year. "Nevertheless, the [May 2011 index] showed no growth, and this is another indication that the economy is stuck in neutral," he said.
Craig Manson, senior vice president at Ceridian, said the 2009-10 recovery was sparked by a rapid replenishment of inventories as companies rebuilt stocks that had been pared sharply during the recession. Restocking activity has now moderated to normal levels, but with the depressed construction and housing industries unable to offset the slowdown in inventory building, the economy has effectively stalled, Manson said. The index's authors have not made any forecasts for the rest of the year, but they don't expect a return to recessionary conditions, he added.
Little relief in sight
The impact of inventory contraction is also reflected in a sobering May 31 report from New York City transport investment firm Wolfe Trahan. In the report, the firm said its prediction several months ago of just 1 percent "freight GDP" growth—which would be about half of even the most downbeat projections for overall GDP growth this year—"no longer feels quite so unrealistic."
The firm, co-run by long-time transport analyst Ed Wolfe, wrote that shipping volumes in 2010 were stimulated by "faster inventory turns" as shippers scrambled to move goods to market and replenish depleted stocks. However, the oil price spike that began late last year has since compelled shippers to cut transportation costs and preserve inventory, the firm said. With an inventory slowdown turning into a potential "headwind" for volumes sometime this year, Wolfe Trahan expects traffic flows to decelerate on a year-over-year basis.
Shippers shouldn't expect much relief on the pricing front either, according to a first-quarter shipper survey conducted by the firm. Shippers polled said they expect a 9-percent increase in their 2011 shipping budgets over 2010, with fuel surcharges accounting for half of that increase. The same poll in the fourth quarter had shippers projecting a 6.5-percent year-over-year increase.
A monthly index published by freight audit and payment firm Cass Information Systems Inc. showed a 0.2-percent decline in May shipments over April figures, as orders and shipments of durable goods flattened out. Year-over-year shipment growth stood at 9.6 percent in May, down sharply from the 12.3-percent year-over-year gains reported in April, said Cass. The Bridgeton, Mo.-based firm bases the index on the expenditures and shipments of 400 clients.
Roslyn Wilson, author of the Cass report as well as the annual "State of Logistics" report to be released next week in Washington, D.C., said retailers concerned about the impact of high unemployment and rising food and fuel costs on consumer demand for finished goods have grown increasingly cautious about inventory restocking. That, in turn, has depressed supplier activity and has caused a downshift in new orders, Wilson said. She expects this sluggish pattern to persist for the rest of the year.
While shipping costs have risen, they are not high enough to be a deterrent to shipping, Wilson added. One grain of good news for shippers is that slowing activity has eased the demand for truckload capacity. "I have observed capacity tightening in the truckload market, but still not to where finding capacity is a problem," she said.
Holding out hope
To be sure, not everyone sees the current numbers as the start of something bad. Ben Cubitt, senior vice president of consulting and engineering at Frisco, Texas-based third-party logistics service provider Transplace, said his customers are providing mixed to favorable responses when asked about economic activity. Some say they're doing very well and staying busy, while others report steady conditions, with a dip in activity followed by a rebound to normalized levels, Cubitt said.
"Most seem to say things are about level—that they are not growing much, but not retreating either," Cubitt said.
In a mid-May survey of 500 shippers, Morgan Stanley & Co. said respondents still reported "robust volume growth," as well as tightening truck capacity and significant year-over-year rate increases. The firm said that orders continued to outpace inventory, suggesting that "inventory restocking could offer another source of upside throughout the year, but is not imminent."
The Institute for Supply Management's widely followed monthly manufacturing report showed a plunge in new orders in May and a five percentage point drop in manufacturer inventories. Inventory being held by customers remained "too low" for the 26th consecutive month, the May report said.
Bradley J. Holcomb, chair of the manufacturing report, said the decline in manufacturer inventories reflects how quickly producers are adjusting their inventories to meet fluctuating demand. "I am seeing that myself at my own company," said Holcomb, whose main job is serving as chief procurement officer at dairy giant Dean Foods.
Holcomb also said customer inventories remain especially lean as retailers shy away from adding to stocks for fear of getting stuck with surplus goods vulnerable to obsolescence. "Retailers have a wait-and-see attitude," he said in an interview. "They are holding back and keeping a tight rein on inventories."
For everyone in the supply chain, the biggest current problem is the persistent rise in raw materials and commodity costs, Holcomb said. One bright spot in May was that the "prices" component of the index declined by nine percentage points from April, indicating a possible moderation in input costs, he said.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.