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Jason Haith is the is branch manager of OEC Group’s Louisville office. He is a career logistics professional. Over nearly two decades with OEC Group, Haith has worked his way up from sales manager. His logistical experience spans many different aspects of the industry, including traditional trans-Pacific trade, trans-Atlantic trade, complex intermodal transportation, warehousing & storage, and domestic trucking.
David Maloney, Editorial Director, DC Velocity 00:01
The latest on freight markets. Railroads in California duke it out over [e]missions. And changing warehouse workforce dynamics.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by PERC, the Propane Education Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: anyone who has followed freight markets over the last year [is] well aware that we've undergone some drastic changes. To find out more of what's going on and how shippers can react as they negotiate new contracts, I recently spoke with Jason Haith, a logistics professional who's worked for the past two decades with OEC Group, and is currently the head of their Louisville office. Here now is our conversation.
Welcome Jason. Thanks for joining us on Logistics Matters today.
Jason Haith, Branch Manager - Louisville, OEC Group 01:31
Thanks so much for having me, Dave.
David Maloney, Editorial Director, DC Velocity 01:33
Jason, for people who are not familiar with OEC Group, could you talk a little bit about what you do and your role there?
Jason Haith, Branch Manager - Louisville, OEC Group 01:40
Sure. OEC Group is an international logistics provider. For the past 35 years we've provided services for companies doing business in Asia; Southeast Asia; West Asia countries like India, Pakistan, and Bangladesh; Europe; and South America. We offer full customs-clearance services along with air freight consolidations for smaller shipments. I'm the branch manager here in Louisville, Kentucky, responsible for working with current clients and finding new ones, along with consultation with current clients and how to manage current logistics issues and future logistics issues.
David Maloney, Editorial Director, DC Velocity 02:21
Very good. Of course, we're experiencing quite a change in the way the transportation environment has been from the past couple of years, facing worldwide crisis, in some ways, and transportation. Is it more than just a letdown from the high consumer spending that we experienced during the pandemic?
Jason Haith, Branch Manager - Louisville, OEC Group 02:40
Yeah, yeah, I think it is. I think we're looking at a large change in how companies do business, where they do business, what types of margins they're comfortable doing business. A lot of that was a direct result of the problems that I think companies faced during Covid, and those problems are sort of morphed from "I can't get enough product to satisfy demand" to "Maybe the demand that we thought was there isn't." And so, I think a lot of companies are very sheepish in what their second-half-of-the-year purchasing looks like, because the numbers are changing. Inventory levels are still relatively high, and, you know, a lot of suppliers are reaching out, looking for new business, new orders for the first time in a really long time. So, I think consumer demand and consumer spending and the changes, or decreases in that have driven part of this. But I think companies are also looking ahead in the next six months or so, really wondering if the numbers that they're seeing are trend and doing everything they can to make sure they aren't stuck with a bunch of inventory, like they experienced over the past few years.
David Maloney, Editorial Director, DC Velocity 04:03
And of course, there are a number of contracts for companies that are already in place based on those previous numbers. As you mentioned, the numbers are changing. Will this require renegotiation, or could carriers actually cancel some of the contracts that they currently have with their shippers?
Jason Haith, Branch Manager - Louisville, OEC Group 04:19
I suppose all of the above are plausible. So, yes, I think carriers could alter or cancel some of those contracts. I think they've displayed the willingness to do so when the landscape changes — or at minimum, restrict to a point where a contract is effectually inoperable: restrict space or access to that to that contract. You know, the rules I think have changed this year, in the latter part of 2022, as this giant blob of cargo made its way through the infrastructure. I think importers were caught off guard by just how quickly some of the contracts they thought they had in place were altered or changed. And there are some, you know, some possibilities for for 2023 that could put carriers in a position where, you know, manipulation of the contracts, mutually agreed changes to those contracts, are definitely, definitely on the board.
David Maloney, Editorial Director, DC Velocity 05:29
You had mentioned about changing the contracts, obviously, for agreement, but would there be more just thrown out onto the spot market, and what would that do for our transportation industry, if that were the case?
Jason Haith, Branch Manager - Louisville, OEC Group 05:39
Yeah, um, so, you know, carriers rely a lot on contracted space, and for a very long time, it's sort of been, to varying degrees, depending on the steamship line, a sort of basis for what their model will be, and what they'll go out to the spot market with. I think the spot market is maybe more representative of what's actually going on, versus a contracted rate, and, you know, seemingly, those contracts are very difficult to honor for carriers, when there's huge discrepancies between a contracted versus spot-market rate, for example. Maybe the contracted rate is 3,000 [dollars], but the going rate on the open market's 2,000. You know, in order to maintain continuity, importers can certainly, you know, understand for short periods of time, why it's a good idea to pay the higher cost. It's in your best interest, certainly for your carrier to continue operating and moving your product, but there just reaches a point where that discrepancy becomes too much, one way or the other. Either the contracted rate is so low and the spot-market rates are really, really high, and in that instance, the carrier prefers the spot-market cargo, and that's exactly what we saw in '21 and '22. And there are certainly other instances where the contracted rate is too high for a protracted period of time, long enough that substantial savings can't be overlooked by the importer moving forward. So, I think those interests are sort of diametrically opposed. Importers, what really, really low rates that are stable and consistent for long periods of time, and steamship lines sort of prefer the spot market that takes more into consideration what's going on at that given, you know, that given snippet of time. You know, the difficulties of this year, and over the next coming years, are going to hopefully be ground out somewhere in the middle.
David Maloney, Editorial Director, DC Velocity 07:49
And as we are in the summer months now, it's the time when most shippers, and retailers especially, prepare for the upcoming holiday season, the peak season. Is this going to be a typical peak season, with inventories so high and still being dwindled down and consumer spending beginning to wane?
Jason Haith, Branch Manager - Louisville, OEC Group 08:10
I don't actually think it's going to be a typical peak season. I think there's certainly cargo that will continue to move on, certainly, containers, and product that needs to get in, but I think a lot of companies are are much more cognizant of what's going on economically, and are lending a little bit more credence to that in terms of sales and, you know, potentially waning demand, depending on the sector you're in. There's a lot of outsize pressure on the infrastructure itself, with regard to capacity that's coming on board. So, from basically third quarter of 2023, up through third quarter of next year, new vessel deliveries in terms of TEU, or 20-foot-equivalent-unit containers, won't dip below 675,000 per quarter, for the next 12 months peaking in the second quarter of 2024 at 850,000 TEU. To give your listeners maybe some sort of idea of what that looks like, a general, you know, typical vessel, depending on where it's going, might carry anywhere from 10,000 to maybe 20,000 TEU. So, in the second quarter of '24, 850,000 TEU being, coming online and being delivered, that's an awful lot of space, potentially for a time period where there isn't a whole lot moving. And those those new vessel deliveries started, really, second quarter of this year, 2023, and will continue through the first quarter of 2025. At a low point, in the third quarter of 2025, like 400,000. So, you know, steamship lines now are, in some cases, sailing vessels that aren't full, and, you know, the prospect for keeping those boats full, I think will decline as we get in to the latter half of this year, just because there's so much new capacity coming on board. So, I don't think a peak season that we would traditionally think of in terms of volume that sort of maybe outstrips the available capacity, I don't think we're really going to see that third, fourth quarter this year, or, potentially, through third, fourth quarter of '24.
David Maloney, Editorial Director, DC Velocity 10:49
What do you expect rates to do, then, and what advice would you give to shippers as they proceed through the remainder of this year and prepare for 2024?
Jason Haith, Branch Manager - Louisville, OEC Group 10:59
I think the spot market is probably going to be the place to play throughout the remainder of at least '23, and probably '24. There's just so much capacity coming on board that locking yourself into a longer-term contract, I'm not sure is [a] huge benefit, at least for 2023. I think importers need to pay a lot of attention to inventory levels and sales, because it might be enticing for suppliers to be reaching out with new production and new capability in terms of providing those orders or providing that product. But the lower prices, I think are are here to stay, in terms of shipping, for at least a while. I'm not sure inflation has really left the production side of things, so product is still elevated, I think in terms of cost in relation to 2019. I think importers pay a lot of attention to inventory and to what they're purchasing, and I think to some extent, they'll have to. Some changes in the way for example, banks loan businesses money. Those interest rates are related to the Fed funds rate, and every time interest rates increase, it means it's just that much more expensive for businesses to borrow that money that, in some cases, they're using to finance their inventory. So, they've got some different kinds of pressures this year, and I think next, as compared to what they were looking at in '21 and '22. It's just a different set of problems. So, I think my advice would be to, you know, to make sure that you've got a good home for that for that product. And in terms of shipping prices, I think the spot market's probably a better place, but I think they'll remain lower, certainly than they have been over the past few years, but I think they'll remain lower for a pretty extended period of time, and that's directly related to just how much new capacity is coming online over these next, say, 12 to 18 months.
David Maloney, Editorial Director, DC Velocity 13:22
We've been talking to Jason Haith. He's the head of OEC Group's Louisville bureau. Thank you, Jason, we appreciate your insights today.
Jason Haith, Branch Manager - Louisville, OEC Group 13:29
Thanks for your time, Dave.
David Maloney, Editorial Director, DC Velocity 13:31
Now, let's take a look at some of the other supply chain news from the week. Ben, you've reported on new clean locomotive rules for railroads operating in California, and the court fight that's resulted from it. What's the latest?
Ben Ames, Senior News Editor, DC Velocity 13:43
Exactly right, Dave. Cutting carbon dioxide and other greenhouse gas emissions is hard to do. That part's not news for anybody who's been watching the headlines lately. We've been covering those efforts in container ships and last-mile delivery, and long-haul trucks, and drayage and yards — pretty much everywhere throughout logistics. But this week, the fight really came to the railroads. The story began back in April, and that's when the state of California created a rule that would acquire switch railroads, industrial railroads, and passenger locomotives built in 2030 or after to operate in a zero-emissions mode while they're in the state, and that would also apply for locomotives built in 2035 or after for the freight line haul, so, for the for the for the big cargo that we cover. It would also set a 30-minute idling limit for locomotives in California, and would require the railroads to set aside funds to upgrade to those cleaner technologies. So, all this was created by a group called the California Air Resources Board, or CARB. It would also ban the use of all trains older than 23 years old — that's locomotives — starting in 2013. So, lots of changes. All that is scheduled to go into effect in October, which is why, on June 16, we saw two rail industry groups filed suit against California to stop it. That was the Association of American Railroads, and the American Short Line and Regional Railroad Association. So, those two groups argue that the CARB rule would limit the useful life of today's fleet of more than 25,000 locomotives, and it would mandate their premature replacement with zero-emissions units, but they are saying that it's using technology that hasn't yet been sufficiently tested, and in fact, is not even commercially available yet. In the other side, California says that those high costs of replacing the current generation of locomotives would be offset by the health savings. They cited preventing premature deaths, emergency room visits, hospitalizations, just from all the air pollution. CARB estimates that the emissions reductions from its new regulations would be equal to almost double those emitted by all the passenger vehicles in the state between now and 2050. Well, really, it does seem like there's a lot at stake. Is there any sign which side that the court will rule on? Not yet. Of course, the story is only a few days old, but one thing that caught my eye was the railroads' argument that the federal government, not individual states, has exclusive authority to regulate rail operations. That's due to the interconnected nature, of course of rail tracks, and the need to have uniform regulatory policies. Otherwise, there'd be a huge patchwork quilt in our nation of 50 states. So CARB still needs a waiver from the EPA to be allowed to make its own rules for the state. So, if that sounds familiar, it's because we're currently seeing that same argument play out in trucking. Just a couple of months ago, in March, we saw that federal regulators actually did grant the state of California permission to set tighter vehicle emissions standards for trucks than the national standard. So that cleared the way for the state to require that about, roughly half the trucks sold in California are going to have to be all-electric by 2035. In a similar message to the railroads, trucking groups are likewise saying that those new technologies and charging infrastructures aren't ready for primetime yet. So, you know, but both sides have some pretty strong arguments. There's a lot to cover as these debates continue.
David Maloney, Editorial Director, DC Velocity 17:30
Right, and we'll of course, be following it, and we've come to know that as legislation happens often in California is soon adopted as well by other states. So we'll keep an eye on all those legal battles. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 17:42
Glad to.
David Maloney, Editorial Director, DC Velocity 17:43
And Victoria, you're working on a labor-management article, and have done some research on how to find common ground in today's labor markets. What are you discovering?
Victoria Kickham, Senior Editor, DC Velocity 17:53
Yeah, that's right, Dave. So, I did some research on labor management trends for an upcoming issue of DC Velocity, and I found that flexibility is becoming more and more important for warehouse and distribution center workers. This is driven largely by changes in the broader economy and workplace since the pandemic, of course. Shifting labor demographics and a so-called gig economy are driving demand for more flexible work schedules. In fact, earlier this year, an industrial staffing company called EmployBridge surveyed nearly 30,000 hourly wage earners in the United States and found that flexibility is rising to the top of those workers' wants and needs. Logistics workers are no exception; 35% of the logistics workers surveyed for that report said that they would prefer four-day, 10-hour shifts, for example. On top of that, more than half of all the workers surveyed said they're interested in a schedule that would allow them to choose which four-to-six-hour shifts they want to work. This, of course, is very new in the logistics landscape, where rigid shift work is still the norm, but the study and other industry experts I spoke to for this story said it's a trend that's beginning to change the way companies view warehouse work in general, especially pick, pack, and ship positions.
David Maloney, Editorial Director, DC Velocity 19:10
Victoria, Can you provide any details and what exactly is changing?
Victoria Kickham, Senior Editor, DC Velocity 19:15
Yeah, well, you're seeing increased demand for workforce management solutions that can address the need for flexibility, for one thing. These are systems that allow managers to adjust schedules midweek if demand changes, for example, and that may allow workers to swap or bid on shifts. There's also rising demand for platforms and similar tools to help companies manage labor demands that shift with ups and downs of seasonal peaks, as well as other spikes in demand, and in many industries, especially e-commerce fulfillment, those spikes seem to be adding up all the time. Another interesting note, the study that I mentioned found that more than 80% of hourly workers across all verticals said they're willing to use an app to manage their work, choose their schedule, or even find a job, so this is yet another way that technology is influencing the labor market. As you said, I think at the outset, this story will appear in DC Velocity's July issue, so our listeners can find it online or in print next month.
David Maloney, Editorial Director, DC Velocity 20:19
Sounds very interesting, and we look forward to seeing it. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 20:23
You're welcome.
David Maloney, Editorial Director, DC Velocity 20:25
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today.
And again, we'd like to thank Jason Haith of OEC Group for being our guest. We welcome your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded on Fridays.
Speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane. It's coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. We have a new eight-part series on transportation tech. Check out the first three episodes by subscribing to Supply Chain in the Fast Lane wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by PERC, the Propane Education Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.
Articles and resources mentioned in this episode:
- OEC Group
- Rail industry groups go to court against clean locomotive rule in California
- Finding common ground in today’s labor market
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly's Supply Chain in the Fast Lane podcast
- Listen to Supply Chain Quarterly's Top 10 Supply Chain Threats podcast
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