- The U.S. freight railroads and unions reached a tentative agreement this week to avert what could have been a nationwide strike. The tentative contract agreement was accepted by the unions with the Locomotive Engineers and Trainmen and Sheet Metal Air, Rail and Transportation Workers stating they will submit the tentative agreement to their members for a vote in a matter of weeks.
- ILWU’s security guard local has authorized a strike. The security guards at the Los Angeles and Long Beach ports have been negotiating a new contract for over three years. No date has been set for the strike. The potential strike could disrupt port operations should the remaining locals for the International Longshoreman and Warehouse union choose not to cross the picket line.
- Amazon is canceling, closing, or delaying 66 active or planned U.S. facilities as it looks to balance its current fulfillment network. Amazon currently has 271 facilities in its pipeline according to MWPVL International, a consulting firm that tracks Amazon’s logistics footprint.
- The month of August showed positive signs for the economy with reports that retail sales were up 0.8% excluding gasoline. On the manufacturing side, U.S. factory production rose 0.1%. U.S. Manufacturing and Trace Inventories continue to increase with July illustrating a positive gain of 0.6%. The business inventories/sales ratio now stands at 1.32.
The Port of L.A. Operations Report is showing some positive gains. The number of ships within 40 nautical miles of the port has been virtually eliminated for the time being. In addition, significant gains have been made in the number of import containers on terminals decreasing 25% to a low of 46,932 from a high of over 62,000 containers on terminals. What remains to be seen is if this is just another lull in the action as the next wave of ships head to the west coast ports versus the east coast where congestion has hit a high mark. Still at risk is the number of containers waiting for rail movement to the east with 27,839 containers waiting to load.
Trimble, a supply chain technology provider for trucking companies, freight brokerages, and 3PLs, is sunsetting its TMS product over the next 36 months. Trimble acquired Kuebix 2 years ago in a $200 million dollar deal. Trimble is pivoting its strategy to support shippers through its Engage Lane technology product. Since its startup in 2008, Kuebix captured more than 21,000 customers through its scalable cloud-based system. Trimble does expect to transition current Kuebix clients to its Engage Lane product. Engage Lane is an operating system that assists both shippers and carriers in the bidding process and workflow for loads.
U.S. Diesel exports continue to rise with 1.4 million barrels a day exported in July. July’s volume set a record for diesel exports as Latin America and the Caribbean shifted imports from Europe to the U.S. As the largest importer of U.S. distillates (diesel and fuel oil), Mexico accounted for 25% of the total exports primarily through short-haul tanker transport. The looming question appears to be, “What are the impacts if the U.S. curbed diesel exports to increase domestic supply and lower prices in the U.S.?” Concerns over the political fallout with the European-Russia issue and our own available capacity takes center stage.
ROCKFARM One View
For the first time in quite some time, we may be witnessing the start of a consistent erosion in the price of diesel. Inventory levels of diesel rose to their highest level since earlier this year. In addition to rising inventory levels in the U.S., China is exploring an increase in diesel exports due to additional capacity from its C19 lockdowns. Taken together, we may be on the verge of diesel moving below the $5 per gallon price point with conditions to keep it there.
Oil prices are now well under $100 a barrel with U.S. production climbing. The U.S. Energy Information Administration (EIA) is forecasting U.S. oil production to hit 12.6 million barrels per day in 2023, exceeding the record 12.3 million barrels per day set in 2019.
In support of lower truckload rates, the Rockfarm truckload cost per mile index is illustrating rates leveling out over the past 45 days. We did see a slight increase in the first part of September which follows the recent increase in diesel cost. The actual cost per mile, excluding fuel, is illustrating a bottom and, barring any major disruptions in our supply chain networks, may level out over the next one to two months.
As we near the end of what some will call our first full year from the pandemic, we can say the pace for new supply chain challenges is not slowing down. As we begin to see a bit of normalcy seep into our networks, the trends that are hitting everyone’s 2023 initiatives fall into three primary buckets: automation, order management and visibility.
Automation initiatives are extending across purchasing, inventory, vendor management and labor. While automation encompasses a number of supply chain verticals, order management is primarily focused on demand, planning and S&OP processes. Lastly, visibility is being sought within shipment, inventory and order management as shippers grapple with a lack of resources and technology to support increased demands in overcoming the visible challenges created by the pandemic. One additional factor that is pushing a top-down review of the S&OP is growth. Manufacturers that are able to produce and ship on time have a remarkable opportunity to grow exponentially within their industry.
The question that has arisen as of late is the backlog of containers still on terminals at the ports. For example, The Port of L.A. is illustrating 47,066 loaded containers on the terminal with just over 11,000 containers have been on the terminal for 13+ days. The backlog has created the potential for containers to be abandoned due to the importer not being in business or refusing to accept the goods. In those cases, the forwarder may take action that includes the following in accordance with the process of law:
- Unpack the containers and return the container into service.
- Reposition the container and goods into bonded storage.
- Sell or auction the cargo, using the proceeds to offset the costs.
- If the sale of the cargo does not cover the costs incurred by the shipping company, then legal action may be taken under international law.
- Return the cargo to the point of origin.
Work With the Experts
For more information please reach out to our Supply Chain Coach team.
FOR MORE INFORMATION, PLEASE REACH OUT TO INFO@ROCKFARM.COM.
By Brad Stewart
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”
Kingston, John. (2022 September). Diesel dropping rapidly in futures market, outstripping declines in crude
Port of L.A. Operations Report. (2022 September). The Port of Los Angeles.
JOC Staff. (2022 September). Tentative contract deal averts crippling US rail strike
Garland, John. (2022 September). Amazon cancels, delays dozens of warehouses as it looks to rightsize capacity.
Mahoney, Noi. (2022 September). Trimble to shut down TMS provider Kuebix
Miller Greg. (2022 September). Tanker could profit if US restricts gasoline and diesel exports
Pickert, Reade. (2022 September). Retail Sales Unexpectedly Rise After Drop in Prior Month
Golle, Vince. (2022 September). Manufacturing Output Increases for Second Straight Month
Jenkins, Don. (2022 September). Oil production expected to rise, diesel prices to fall
Wabtec Corporaton. (2022 September). The Port of Los Angeles Signal
Herr, Ryan. (2014 April). Abandoned Shipping Containers