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.
A closely watched monthly index of domestic shipment activity fell last month to the lowest level seen since October since 2011, according to the firm that publishes the index.
Shipment volumes last month declined 4.7 percent sequentially and 5.3 percent year-over-year, according to Cass Information Systems Inc., a freight-audit and -payment firm that processes more than $26 billion in annual payables. Freight expenditures fell 2.2 percent over September—the third decline in four months—and 8.7 percent year-over-year, Cass said. The steep year-over-year drop mirrored the fall-off in volumes and also reflected continued weakness in noncontractual, or spot, rates, it added. The truckload market remains awash in capacity, which lessens the need for shippers and their freight brokers to tap the spot market for space. As a result, spot rates remain depressed.
According to DAT Solutions, a consultancy that tracks the spot market, loads in October fell 9.3 percent from September and are off 42 percent year-over-year. Truck capacity rose 6 percent sequentially and 16 percent year-over-year, according to DAT. For the week ending Nov. 7, the firm's load-to-truck ratio for dry vans—the most common form of truckload transport—stood at 1.6, meaning there were 1.6 available loads for every truck posted on the DAT network. At this time last year, the ratio stood at 2.8.
Last year was an extraordinary period for the spot market, as bad winter weather at the front end and labor turmoil at West Coast ports later in the year forced many shippers to seek capacity their contracted carriers couldn't or wouldn't provide. In addition, dramatically falling diesel-fuel prices have allowed many struggling truckers to stay in the game when they might otherwise have been forced to exit the market, according to DAT. Another factor was that shippers, burned by their experiences in 2014, paid up this year to secure more contracted capacity, which lessened the need for spot-market services, according to DAT.
The spot market accounts for between 20 and 25 percent of all truckload activity. However, the direction of spot prices often dictates the outlook for upcoming contract rates. Rosalyn Wilson, who authors the monthly report as well as the annual "State of Logistics Report," presented by Penske Logistics, said truckload carriers are getting 2016 rate increases of only 2 to 3 percent, though pricing for dedicated services, where a customer commits to exclusive use of equipment and drivers for a multiyear period and pays based on round trips, will rise, on average, about 3 to 4 percent. Carriers "are unwilling to lose a good customer over a few percentage points," she said in a narrative accompanying the data.
Wilson said the October declines recorded in the survey were "much sharper" than in recent years and were due to bloated inventory levels, which have led businesses to cut back on new orders during the past three or four months. The results have been reduced import volumes, faltering industrial-production activity, and less freight to move, she said. Consumer spending has been a bright spot, with spending up more than 3 percent over each of the past two quarters. Fortunately for the U.S. economy, consumer spending accounts for more than two-thirds of overall economic activity.
The nation's inventory-to-sales ratio—which tracks the value of inventories relative to monthly overall sales—spiked late last year and into 2015. It has remained elevated throughout the year, with the current ratio of 1.37 sitting above the 1.30 level in October 2014, according to the U.S. Census Bureau.
The inventory bloat was due in part to the impact of the labor strife at the West Coast ports, which resulted in ship delays, cargo backlogs, and fewer sales. After labor and management agreed in late February to a new five-year contract, goods began to flow again. However, much of the delayed merchandise was supposed to be in stores during the first quarter for early spring sales. By the time the goods got to retailers, much of the buying season had passed, and retailers were stuck with oversupplies of product that few consumers wanted at that point.
Wilson said the combination of high inventory levels and the possibility of an interest-rate hike by the Federal Reserve as early as December will cause a significant increase in inventory-carrying costs. It also will result in an inventory drawdown similar to that felt in 2009 and 2010, which included the recessionary period when the inventory-to-sales ratio soared because of sharply contracting economic activity, Wilson said. The analyst said that the November and December months, which are historically weak because most holiday merchandise is already in place and companies have exhausted their annual budgets, will likely be just as subpar this year. That's because retailers have ample supply of product on hand, she said.
Though not as strong as September, which is one of the best freight months of the year, October had held its own during the September-to-November period until the 2008-2009 financial crisis and subsequent recession, according to a chart of the Cass index dating back to 1999.
Correction: An earlier version of this story was based on incorrect data tables that reversed the year-over-year and month-to-month figures. The correct data follows. The numbers have been corrected.
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.