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.
It's springtime, and as per usual in the less-than-truckload (LTL) industry, general rate increases (GRIs)—adjustments
that apply to cargo not moving under contracts—are busting out all over. Six of the biggest LTL carriers—FedEx Freight,
UPS Freight, YRC Freight, ABF Freight System Inc., Con-way Freight, and SAIA—have already hiked their tariffs to varying
degrees.
But the latest round isn't over yet. That's because the big dog hasn't barked.
Old Dominion Freight Line Inc., by almost every measure the nation's most successful LTL carrier, has, at this writing, not
announced its intentions. That, in and of itself, is not unusual. Old Dominion is usually the last or one of the last carriers
to disclose tariff adjustments, more commonly known as GRIs. These changes generally affect 25 to 30 percent
of a carrier's book of business; at Old Dominion, that figure is around 25 percent.
Some, like David G. Ross, analyst for Stifel, Nicolaus & Co., argue that the GRIs are insignificant because much of the
hike can still get negotiated away. Ross cites the example of Con-Way, whose last six GRIs dating back to January 2010, resulted
in a 37-percent aggregate increase in tariff rates. However, Con-way's overall yield, including the impact of fuel surcharges,
rose 23 percent during that time, according to Ross. The disparity indicates that "real pricing is much lower than these announced
rate increases," he wrote in a note.
Still, carriers prize the GRI business because it represents small to mid-size companies, which are the carriers'
most profitable accounts and often subsidize the large customers, which leverage their volumes to extract big price
concessions during contract talks.
If history is any guide, Old Dominion will price its tariffs at the low end of the industry's current range, which has
so far been set at 3.9 percent by FedEx Freight, a unit of FedEx Corp. and the nation's largest LTL carrier. Old Dominion
reports first-quarter results on April 24.
PRICING WAR AFTERMATH
In each of the past three years, Thomasville, N.C.-based Old Dominion raised its tariffs by 4.9 percent, effectively
underpricing most of its rivals during that period. Old Dominion had the luxury of coming in low because it stayed out
of
the bottom line-busting price wars of 2009 as carriers desperately tried to defend their market share and grab share from
rivals in a recession-wracked economy. Another motive at the time was to undercut financially ailing YRC Worldwide Inc.
in an effort to force the then-market leader out of business and take capacity out of the market. The strategy didn't drive
YRC to the sidelines and succeeded only in damaging the profit margins of several of the carriers who tried the scheme.
Chip Overbey, Old Dominion's senior vice president, strategic planning, said in an e-mail that the company's past GRIs were
driven more by a desire to balance price and service rather than a change in philosophy to become more aggressive on rates. "We
do not knowingly price business to chase volume at the expense of a price," he said.
Still, Overbey notes that the company had latitude its rivals lacked. In 2009, "we did not dig the same pricing hole as did
many of our competitors," he said. "Therefore, we did not need a significantly higher GRI to recoup the pricing [or] margins
previously given away during that period."
Some might argue, though, that Old Dominion is now out to put the hammer down on pricing in a drive to attract tonnage.
Data recently published on
Seeking Alpha, a financial website, showed that Old Dominion's fourth-quarter yield, or
"revenue per hundredweight"—which many consider the metric to define a carrier's pricing strategy—declined slightly
from year-earlier levels. Fourth-quarter tonnage, though, rose nearly 11 percent. By contrast, Con-way, ABF, and Saia showed gains
in revenue per hundredweight over that period. However, none reported tonnage increases of more than 2.9 percent. The website data
reflects Old Dominion's "aggressive stance" in going after tonnage and, by extension, market
share.
Not necessarily so, said Overbey. Old Dominion's yield is influenced by multiple factors such as price, a shipment's
weight and density, its length-of-haul, and any unique handling characteristics, he said. Revenue-per-hundredweight data "is a
very dynamic measure, and it is not a complete or accurate measure of pricing," he said. Changes in the carrier's freight mix, as
well as other shifts in the variables of Old Dominion's business, can alter its yield measurement on a day-to-day or
month-to-month basis, he said. As a result, yield fluctuations "cannot be construed as a change in pricing strategy," he said.
Interpretations aside, Old Dominion hasn't found it hard to attract business. Earlier this year, it estimated that
first-quarter tonnage would grow between 11 and 11.5 percent from year-earlier levels. January tonnage rose 11.6 percent
year-over-year, followed by an 11.7-percent increase in February. March's data has not been released. For 2013, Old Dominion's
revenue rose 9.5 percent to $2.34 billion, while net income climbed 21.6 percent to $206.1 million.
The latest spate of GRIs comes amid a solid pricing climate for LTL carriers. William Greene, lead transport analyst at Morgan
Stanley & Co., noted that the current round of increases occurred only nine months after the last cycle, as opposed to the 10 to
12 months seen in recent prior cycles. This is a positive for pricing as carriers feel emboldened—partly because of weather-related
capacity tightening and partly because of firmer demand—to raise rates at faster intervals than before, Greene said. Ross of
Stifel said that, overall, carriers should expect to see 3-percent rate increases for 2014, net of fuel surcharges.
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.