- Carrier 2020 Q4 earnings reports have been positive as 2020 ended strong with XPO reporting its highest quarterly revenue at $4.67 billion. LTL motor carrier SAIA reported net income of $40.2 million while truckload carrier Werner posted a 25% jump in net earnings to $60.6 million.
- Jumping to maritime financial news, Maersk, the largest global container carrier, posted a $2.9 billion net profit in 2020. Though volume was 5.2% lower in 2020, container rates were 7.35% higher. Maersk expects 2021 to be even more profitable due to strong demand.
- YRC Worldwide is reaching back to its past to rebrand as “Yellow” and begin the reorganization of its various carrier brands as a single super regional brand. As the 2nd largest LTL carrier next to FedEx, Yellow expects to complete the reorganization in 2022.
- UPS is pulling out of the Less-than-Truckload market with the sale of UPS Freight to TFI International, Canada’s largest trucking provider. The $800 million dollar sale comes with a five year service agreement that UPS Freight will continue to use UPS’s parcel network to fulfill package deliveries
- The first year results are in on the Federal Motor Carrier Safety Administration’s Drug and Alcohol Clearinghouse operation. There were 51,998 drivers who were in violation; the largest violation being marijuana with 29,511 positive tests. Of the 51,998 drivers only 6,532 have been cleared to return to work leaving over 45,000 drivers on the sidelines.
- The National Retail Federation is forecasting container volume to be at record levels in 2021. The annual forecast for TEU’s in 2021 are expected to exceed 22 million, surpassing the previous record in 2019 of 21.8 million TEU’s. January’s forecast illustrates a 14% increase in imports over January 2020.
- The numbers for 2020 are in for e-commerce which show a 44% growth in e-commerce sales. E-commerce sales now make up 21.3% of all retail sales which is up from 15.8% in 2019 according to Digital Commerce 360.
Collaboration: Understanding Fleet Expenses
Defining Fleet Expanses
Data is the most sought after commodity within trucking as shippers and carriers grapple with forecasting truck rate fluctuations for budgeting and strategic decisions. The challenge for asset carriers is knowing when and how much of their capacity should be contracted. On the shipper side, going to bid and securing contracted rates provides budgeting and security on knowing you have sewn up a percentage of your needed capacity.
The pandemic has presented challenges to any well defined procurement strategy. As a result, limiting exposure to the spot market becomes paramount. This is where your procurement strategy, with assets and non-assets, plays a big role in your success to stay aligned to your freight expense budget and secure the needed capacity your company will need.
Deeper transparency with your carrier partners is required. The transparency gained should not be a barrier to stay informed. Staying knowledgeable on new technologies and business models that continue to shape the truckload market are essential to understanding if your carrier partner’s operation aligns to your supply chain. To start the conversation, a firm understanding of a carrier’s expense can support your questions regarding lane profile, percentage of non-contract business, broker use percentage and internal commitments such as driver home time. Understanding your carrier partners opens the door to better partnerships and mitigates risks to your success. For further discussions on fleet operations please reach out to firstname.lastname@example.org.
January’s fuel index rose to $2.69 per gallon which wasn’t enough keep the momentum on truckload rates continuing lower. The Rockfarm index for January fell to $2.57 a mile, compared to the year end average of $2.65 per mile. The cost of diesel continues to climb with the U.S. average now at $2.80 per gallon through the first week of February.
Fueling the rise in diesel is the cost of U.S. crude which jumped 7% on Friday. Demand for crude is being driven by economic activity as countries continue to open up from the pandemic.
The EIA (U.S. Energy Information Administration) has raised its forecast for 2021 showing average barrel cost rising from $50 a barrel to $56 thru the 1st quarter of 2021.
Trucking rates continue to settle with the Rockfarm Market Indexes illustrating weekly fluctuations while still within a static range since mid January. Capacity challenges will not be going away as month end and regional shipment traffic will continue to present challenges to shippers to secure truck capacity.
Economic indicators are showing increased strength throughout 2021 with many experts now revising their GDP forecast to as high as 6.8%. What this means is another bumpy road ahead for shippers as capacity constraints remain a top challenge.
NMFTA: The Impact of a Change to the NMFC
The National Motor Freight Traffic Association (NMFTA) is a non-profit membership organization, consisting of motor carriers engaged in interstate and intrastate commerce, and publishes the National Motor Freight Classification (NMFC). The NMFC standardizes commodity descriptions hauled by member carriers. The NMFC is the basis for freight class application and is used primarily within the Less than Truckload (LTL) industry. With 582 carrier members, the NMFTA is an advocate for LTL carriers, providing research and positions on regulations, safety, security, infrastructure and other challenges faced within trucking.
The NMFTA holds three public meetings per year to discuss proposals to amend the NMFC. Changes to the NMFC are brought forth by members as well as shippers. A change to the NMFC can impact negotiated pricing that may result in an increase when an amended commodity is defined as a new freight class.
As an example, the February 9, 2021, meeting reviewed 40 proposed changes to the NMFC. One proposed change included Docket 2021-1 which would unilaterally change the density table for over 137 NMFC items. The items brought forward are reviewed and voted on for amendment to the NMFC. Statements of position are requested from the public and reviewed prior to ruling on each proposed change. A requested change may be approved as modified or withdrawn.
Understanding the impact of such changes is critical to each shipper’s pricing program. In the case of docket 2021-1, the amendment was withdrawn. Illustrated to the left are two examples where docket 2021-1 would have had a large impact on LTL pricing. To review a copy of the Rockfarm rebuttal letter and upcoming changes to the NMFC please visit the NMFTA website. The NMFTA will also post proposed changes to the NMFC for public review at www.nmfta.org.
Example #1: Item #51140
Current Scenario: 2 pallets @ 833 lbs
48x48x48 = 6.5 pcf (Class 125,
Current Cost: $436.27
Proposed Scenario: 2 pallets @ 833 lbs
48x48x48 = 6.5 pcf (Class 150,
Proposed Cost: $521.51
18.4% rate increase
Example #2: Item #53025
Current Scenario: 2 Cartons @ 340 lbs
32x42x96 = 2.28 pcf (Class 250,
Current Cost: $192.75
Proposed Scenario: 2 Cartons @ 340
lbs 32x42x96 = 2.28 pcf (Class 300,
Proposed Cost: $308.96
37.6% rate increase
FOR MORE INFORMATION, PLEASE REACH OUT TO INFO@ROCKFARM.COM.
William B. Cassidy, (2021 February). Yellow consolidating brands into “super-regional” LTL carrier. https://www.joc.com/trucking-logistics/yellow-consolidating-brands-‘super-regional’-ltl-carrier_20210205.html
Greg Knowler, (2021 February). Maersk posts $2.9 billion 2020 profit, expects even stronger 2021 https://www.joc.com/maritime-news/container-lines/maersk-line/maersk-posts-29-billion-2020-profit-expects-even-stronger-2021_20210210.html
William B. Cassidy, (2021 January) UPS Freight sold to Canada’s TFI for $800 million https://www.joc.com/trucking-logistics/ltl-trucking-logistics/ups-freight/ups-freight-sold-canada’s-tfi-800-million_20210125.html
Max Heine, (2021 February). The tens of thousands of drives with drug violations likely to leave trucking for good. https://www.overdriveonline.com/regulations/article/15042924/thousands-of-drivers-with-drug-violations-may-leave-trucking
The Maritime Executive, (2021 February). Retail Imports Expected to HitMonthly Records in 2021. https://www.maritime-executive.com/article/retail-imports-expected-to-hit-monthly-records-in-2021
Fareeha Ali (2021 January). US e-commerce grows 44.0% in 2020. https://www.digitalcommerce360.com/article/us-ecommerce-sales/