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.
Effective July 9, FedEx Freight will raise non-contract rates by 6.9 percent on less-than-truckload (LTL) shipments moving within the United States and Canada, between the U.S. and Canada, and on the U.S. portion of shipments in the U.S.-Mexico trade. FedEx Freight is the LTL unit of FedEx Corp. and the nation's largest LTL carrier by sales.
FedEx Freight will also adjust the minimum charge it imposes on LTL shipments. Additionally, it will likely hike accessorial fees tacked on to the base price of a shipment to reflect the cost of services not related to the core transportation component. However, FedEx Freight said it will not change its current fuel surcharge levels as part of the pricing action.
With this announcement, FedEx Freight becomes the first carrier in 2012 to impose what are known as "general rate increases" (GRIs) on LTL shippers. But if history is any guide, today's announcement will be mimicked to a large degree by FedEx Freight's rivals,
In general, GRIs are applied to between 20 percent and 40 percent of the LTL sector's overall product mix. However, the GRIs are considered a starting point for contract negotiations with some of the nation's biggest LTL users, which comprise the balance of the carriers' business.
Across the industry, contract renewals are seeing rate increases--excluding fuel surcharges--in the 4- to 5-percent range, according to investment firm Robert W. Baird & Co.
A healthy rate environment
Analysts say the FedEx Freight move reflects a healthy rate environment that is gradually enabling LTL carriers to rebuild profit margins damaged by a long freight recession and price wars. Rate increases will also help them to re-invest in the resources needed to stay competitive. Even before FedEx Freight made its announcement, David G. Ross, transport analyst at investment firm Stifel, Nicolaus & Co. said that pricing trends were strong enough to help carriers expand their margins and that most of the "re-pricing of bad accounts is done."
Ross said domestic U.S. freight activity is holding steady and is up incrementally from this time last year. The slow growth is broad-based with no single shipping sector showing unusual strength or weakness, he said.
In a climate of somewhat muted growth, pricing and operating efficiencies have become more important to carriers than a quest for market share, Ross said. The industry is "not even at half-time" in its drive to grow profits from the most recent trough in 2009, he said.
That was the year that LTL pricing collapsed as carriers tried to defend market share amid a nasty economic recession that compressed freight volumes. The weak rate environment was also driven by two of the three biggest carriers, notably FedEx Freight and Con-way Freight, reducing prices in an effort to push ailing YRC Worldwide, then the market leader, out of business.
YRC has survived, however, and in the two subsequent years, volumes have picked up—albeit moderately. As a result, carriers began pricing their space rationally while culling unprofitable business form their rolls.
In 2010 and 2011, carriers once again possessed pricing power and raised non-contract rates multiple times. But with supply and demand now roughly in sync and with myriad economic concerns keeping freight demand somewhat muted, carriers have throttled back on the frequency of increases in 2012. Still analysts believe the carriers will retain rate leverage unless they go off on another rate-cutting binge, which seems unlikely.
In another sign of a healthy rate environment, Nashville, Ind.-based consultancy FTR Associates said its monthly "Trucking Conditions Index" for April rose significantly from March levels to a reading of 9.1. Any reading above zero indicates a positive environment for truckers. Readings above 10 indicate that volumes, prices, and margins are in what FTR termed a "solidly favorable" range for the carriers.
"Volume growth is modest, but because the industry is not adding capacity, even modest freight growth is sufficient to support firm rates," Larry Gross, senior consultant at FTR, said in a statement.
Gross said truckers should see a gradual improvement in the operating climate through the rest of 2012 and into 2013. Volumes should continue to grow modestly. Additionally driver supply will tighten as government regulations, such as the CSA 2010 program designed to winnow out purportedly unsafe drivers, begin to have an impact, he added. As a result of the shortage, trucking companies will be able to command higher prices.
Truckers should also feel a tailwind from the continued decline in diesel fuel prices, Gross said. As of June 4, the national average price of a gallon of diesel stood at about $3.84, down about 23 cents a gallon from the end of April alone, according to the Department of Energy's Energy Information Administration.
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 U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
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.