Bring out your trucks! Whoops, they're already here!
Despite forecasts of dire conditions for buyers of trucking services, no shippers we heard from at NASSTRAC's annual conference last month reported problems finding rigs, trailers, or drivers.
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.
Forecasting the looming truck capacity crunch has become a cottage industry. Nary a week (or industry conference) goes by without someone opining about the lack of drivers and rigs, and the impending impact on shippers.
The latest came from consultancy FTR Associates, which reported last month that its "shippers conditions index" for February hit -9.5, a shade below the -10 reading that indicates an unfavorable climate for shippers. This came several weeks after the firm reported its February truckers index had jumped to 12.9 percent, well above the 10 reading that indicates nirvana for truckers. FTR commented in its shippers index report that shippers haven't faced this dire a situation since 2004, but unlike that period, which the firm characterized as a "one-time blip," the current trends could persist for years.
That may eventually turn out to be the case. But for now, that's news to buyers of trucking services who gathered around the NASSTRAC campfire at the group's annual conference and exposition in Orlando, Fla., late last month. No shipper interviewed or participating in roundtables (all spoke on background lest they be flogged by their companies) reported problems finding rigs, trailers, and drivers.
Bradley S. Jacobs, founder and CEO of Greenwich, Conn.-based freight broker, forwarder, and expedited transport firm XPO Logistics—who went on the record because he runs the place—expressed similar sentiments. "Capacity is very loose," he said in an interview at the conference. Jacobs noted that XPO's load boards, which are chock-a-block when the coffee is brewing in the morning, are usually swept clean by lunchtime. "That tells me all I need to know," he said.
CONTINUING SHIFT TO RAIL
What's keeping the capacity wolf away from the door? For one, a continued conversion to rail intermodal service. Matthew K. Rose, chairman, president, and CEO of Fort Worth, Texas-based BNSF Railway, told the conference that domestic intermodal traffic rose to 24 percent of BNSF's total volumes in 2012, up from 20 percent in 2006. Last year, BNSF converted more than 30 truckers to intermodal service, Rose said. This year, it's added 14.
Shelly Simpson, president of the Integrated Capacity Solutions unit of Lowell, Ark.-based J.B. Hunt Transport Services, reckons that between 7 million and 11 million shipments a year that are now moving on highways can be shifted to intermodal.
Even YRC Freight, the long-haul unit of less-than-truckload carrier YRC Worldwide Inc., moves roughly a quarter of its freight via intermodal, according to James L. Welch, YRC Worldwide's CEO.
The shift is being sparked in part by big shippers' increasing use of third-party logistics service providers (3PLs) and the decisions by 3PLs to steer more of that freight to intermodal, Simpson said. It's also being driven by the flattish status of over-the-road capacity, she said. Capacity has effectively remained unchanged since 2004, which over time has brought supply and demand roughly into balance, she said.
Another factor could be the continued sub-par economic recovery. In a show of hands at one of the general sessions, most transport buyers said their spending growth would be flat to up only 2 percent over the next 12 to 15 months.
CAPACITY CONSTRAINTS
No one knows what the future holds. Industry watchers said capacity will contract between 3 and 7 percent should the federal government be freed by the courts to begin enforcing its new rules governing drivers' hours of service on July 1. Truckers are still not adding capacity; they are only replacing equipment as it ages. The nation's rail network is fixed and finite, and there's only so much converted truck freight the rails can handle before they hit the wall. Railroads can lay new track, but since the industry was deregulated in 1980, BNSF has only added 5 percent more lane-miles to its system, Rose said.
But that is for the future, which is always five minutes away anyway. In the here and now, freight moves, trucks are out there, and shippers aren't complaining.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs 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.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.