- Pent up demand triggered the fourth highest sales volume for Class 8 trucks in December as volume rose past 50,000 units for the second straight month.
- Amazon has moved from leasing to purchasing aircraft with its first purchase of 11 used Boeing 767-300 planes.
- Competition for drivers is heating up with large carriers publishing driver pay increases. As competition for drivers increases, ATA is reporting driver turnover has also increased with the turnover rate rising to 92% in the 3rd quarter, still lower than 2019 levels.
- Import container rates to the U.S. in the trans-Pacific lanes have hit a new high at $4,189 per 40 foot container. The last four months of 2019 show the container rates flat linedin the $3,800 to $3,900 range for a forty-foot container. Adding to increased concerns are the upcoming announcements on the Asia-U.S. GRI’s which may exceed $1000 per forty-foot container.
- The Port of Los Angeles is reporting its inbound volume of TEU’s will exceed 150,000 per week in January which is an increase of 66% over last year at this time.
- IHS Markit announced its manufacturing PMI index for U.S. manufacturing continued to illustrate expansion in the economy as 2020 finished at its highest level since 2014.
- The U.S. Department of Labor issued a final ruling on its interpretation of independent contractor status under the Fair Labor Standards Act. The rule, effective March 8, favors motor carriers over the more restrictive ABC test used in the California AB 5 law. The rule explains that independent contractors are workers who, as a matter of economic reality, are in business for themselves as opposed to be economically dependent on an employer for work.
- Air travel throughout TSA checkpoints remains less than 50% of last year’s numbers.
- NASA has awarded its first logistics contract to SpaceX. SpaceX is one of three contractors selected to develop a launch and landing system for travel to the moon and Mars.
2021 Positive Momentum to Begin the New Year
The numbers are in and rising. Get ready for supply chain challenges in Q1 as imports surge and ocean rates hit an all-time high. Similar to July and August in 2020, import volumes are elevating, raising concerns of congestion at ports and
major U.S. hubs as first-quarter orders begin flowing. The Rockfarm indicators are illustrating mixed results across individual indexes, however, the overall average has started to climb after flattening through the holidays. In combination with increased rates is the rising cost of fuel.
This time last year began our supply chain challenges with the impending ChineseNew Year and C-19 hitting hard on inventory levels. Most purchasing managers are well aware of the impact last year’s pandemic had on inventory. Though inventory levels increased dramatically during the start of the pandemic, the subsequent economic recovery left bare shelves as consumers began shopping and manufacturing ramped up. As a result, purchasing managers are now pushing orders through ahead of the Chinese New Year. The U.S. Census Bureau reports that business inventories through the end of November illustrate a decline brought on by the lifting of restrictions and holiday buying. Inventory levels through November are their lowest since2014.
The Rockfarm market indexes do not reflect a softening in rates, rather a mix above and below the trend lines. Rockfarm’s national outlier and regional index exhibit an upswing in rates while both ports and hub indexes show a decrease in cost per mile through the first week in January. The concern is the surge in imports tightening port congestion which will work its way into the regional freight markets that are already showing an upswing in rate per mile. Consequently, 2021 is already showing a bumpy ride ahead.
As we begin the New Year, the unfortunate news is the increases we are seeing as we leave 2020 behind and move into 2021. Fuel expense closed higher to end the year at $2.58 per gallon for diesel. Though we ended the year much lower than we began, the increase of $.15 a gallon from November to December only adds to the line-haul rate increases we are still seeing into 2021.
The International Energy Agency (IEA) is forecasting demand will be lower than expected and has reduced its projections by 170,000 barrels per day for 2021. This is goods news as we determine if the increase in December was a blip or if we have to begin considering fuel as another rising expense in 2021.
The Rockfarm truckload index rate stayed level in December, but still remains the highest rate over the past five years. A big concern is if January’s jump in cost per mile to $2.70 a mile will be sustained as we head deeper into Q1. The Rockfarm indexes as seen in the graph are still reflecting mixed results. If we have a repeat of the July and August import volume, we can expect all indicators to reflect an upward trend toward higher truckload rates through the first half of this year.
Leveraging your Organization to “buy-in” to a TMS solution
As we look at the TMS technology market, we see the adoption of TMS systems has grown rapidly over the past 10 years. The cost of entry has been significantly reduced and the onboarding process has been considerably streamlined to allow for a reduced impact upon our organization as it supports the TMS implementation project. Still, there is a mountain to climb to get the green light to move forward with TMS technology. For smaller to midsize shippers, the shipping, or logistics manager, typically spearheads the search and final selection of TMS providers. The challenge lies in developing your ROI in order to bring the initiative forward for executive buy in. This is where developing a cohesive strategy within your organization can significantly increase your chances of securing the funding and resources necessary to push the organization forward. To start, a high-level overview of the organization becomes the first step to identify the touchpoints within the order lifecycle that can be impacted by TMS technology. Key departments include:
The teams become critical playmakers in your journey to build your case, and more importantly, ROI to secure the green light to move forward. Do not make the mistake of assuming ROI for each team. Better yet, let each team generate their own ROI statement which, in turn, provides a roadmap to the TMS capabilities you are seeking. For example, accounting may desire a real-time freight accrual, in which case, your TMS must have a match pay workflow. Distribution may desire the pick ticket to contain both the carrier routing in addition to the dock door and appointment time for load out or staging. As a result, your TMS must be able to integrate with your ERP or WMS, or both.
Lastly, all things come to one key item: cost. Regardless of the visibility, the automation or better supply chain practices, your value must contain quantifiable ROI. Even so, there are a number of ways to get there and companies choose many paths depending on their size, resources and complexity in approach. For further discovery on a potential path forward please read our Coach’s Corner.
FOR MORE INFORMATION AND OUR EFFORTS IN 2021 TO PUSH FORWARD WITH OUR RATE FORECASTING TOOL PLEASE REACH OUT TO INFO@ROCKFARM.COM.
Roger Gilroy, (2021 January). December Class 8 Orders Fourth-Best Ever. https://www.ttnews.com/articles/december-class-8-orders-fourth-best-ever Matt Day, (2021 January). Amazon Makes First Aircraft Purchase to Expand Network. https://www.ttnews.com/articles/amazon-makes-first-aircraft- purchase-expand-delivery-network
William B. Cassidy, (2020 December). Truckload driver pay, job turnover rate both rising. https://www.joc.com/trucking-logistics/truckload-freight/ truckload-driver-pay-job-turnover-rate-both-rising_20201217.html Greg Miller, (2021 January). Trans-Pacific shipping rates just popped to new all-time high. https://www.freightwaves.com/news/trans-pacific-shipping-rates-just-popped-to-new-all-time-high
Reuters Staff, (2021 January). U.S. final manufacturing PMI ends 2020 at six-year high: IHS Markit. https://www.reuters.com/article/us-usa-economy-pmi/u-s-final-manufacturing-pmi-ends-2020-at-six-year-high-ihs-markit-idUSKBN2991MF
Eric Miller, (2021 January). Department of Labor Issues Final Rule on Independent Contractor Status. https://www.ttnews.com/articles/department-labor-issues-final-rule-independent-contractor-status
Osama Rizvi, (2021 January). Will Oil Demand Recover in 2021? https://oilprice.com/Energy/Crude-Oil/Will-Oil-Demand-Recover-In-2021.html
Bob Trebilcock, (2021 January). One giant step for a space-based supply chain. https://www.scmr.com/article/one_giant_step_for_a_space_based_supply_chain