May 2022: Supply Chain Digest

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INDUSTRY NEWS

• Knight-Swift continues investment in its LTL network with over 13% of its revenue now generated by its LTL subsidiaries.
• About 5% of the U.S.’s oil refining capacity remains shut since the pandemic. To make matters worse, 1.69 million barrels of U.S. capacity is targeted for closure compared to 2019 levels, according to Turner, Mason & Co., With no plans for new plants, the higher fuel expense is going to stay around for a while.
• The port of Savannah posted a record 495,782 TEU’s handled in the month of April. Savannah was also ranked as the top U.S. container port by “loaded” export volume, handling 1.38 million TEUs in 2021.
• U.S. inventory levels continue to increase slightly with the U.S. Census Bureau reporting the March inventory level at 1.27 sales to inventories/sales ratio. March 2022 shows a 14.1% increase in inventory from March 2021.
• For the week ending May 8, the nationwide out-of-stock average for baby formula reached 43% according to retail technology firm Datasembly.
• Yellow Corp.’s transition to consolidating its regional companies into one national brand continues to push forward. Yellow improved its Q1 comparative from 2021 to 2022 by $36 million. The Q1 loss came in at $27.5 million.

UPDATE: ILWU and PMA Labor Negotiations

The International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) have laid out their initial positions for contract discussions that began on May 10th. The ILWU represents all the port workers at West Coast ports, while PMA represents 70 terminal operators and ocean carrier lines. The key item in the negotiations, as it was in the 2015 strike, is automation. A study by the

The University of California illustrates that automated terminals have a 44% edge in productivity over non-automated terminals. In addition to automation, work hours, wages, healthcare, and working conditions are topics being addressed in the negotiations.

Looming ahead is the expiration of the current contract set for July 1. It has been a full seven years since the negotiations began with the last contract, which saw months-long work stoppages in 2015. Pressure has been mounting on the West Coast ports to maintain a competitive position as less congested markets in the East and Gulf Coast offer routing alternatives for importers. Initiatives toward deeper automation have been underway to protect the over 14,000 workers represented by the ILWU. The PMA members have been pushing more automation initiatives throughout the port operations. As we move through the end of May we will be in a good position to understand each side’s positions and the extent to which July 1st may be another domino to fall in dealing with yet another disruption to our supply
chains.

ROCKFARM One View

It doesn’t take a data scientist to figure out that fuel costs are completely off the chart. Since February we have been seeing a decline in the cost per mile for truckload shipments. In comparison, diesel expense is in another universe as it fast tracks past $5.60 per gallon for the first half of May. On the West Coast and in New England, the average price per gallon now exceeds $6 per gallon.

With our supply chain vertical now shouldering the blame for all of our economic woes, it leaves little doubt we have our work cut out for us in laying out deliberate and effective measurements that reduce exposure and secure an effective plan of action. At the top of the list is visibility. Visibility not as it relates to every “in transit” milestone, as much as it answers the question, “What is coming around the next corner that is going to disrupt my network?”

The answer is derived as much from historical markers as it is from current intelligence. Present challenges are great examples with import congestion on the West Coast as our new normal and the ongoing labor negotiations between the West Coast ports and the longshoreman’s union keep all of us jumping from one disruption to the next.

What is needed in your supply chain tool chest to stay abreast of changing conditions on the ground? Here is a punch list of items to begin building out the visibility you need to stay in front of the next disruption:

Data Indexes

It is not enough to forecast if rates will trend higher or lower for the next bid or for our annual budget. Today’s world demands keeping a pulse on a number of indices that foretell coming challenges. Energy, Inventory, Retail Sales and Employment are just some of the indices that can lend a more clear line of sight to potential disruptions.

Technology

Engineered data does wonders for visualization and deciphering trends and points of volatility. Combing through data, assembling data and creating the visuals are brought to us via business intelligence (BI) platforms. Though many sources of data exist, engineering the data with technology delivers a meaningful impact on your business and supply chain goals. In addition to your visual technology, the most important within your business intelligence platform is your data warehouse. The construction of your data warehouse is critical to bring your data to life.

Baseline

Start with what you know today and build upon it as your BI gets its legs and events become the historical record.

Identify Business Influences

Alignment of outside business influences to your indices and what you want to measure internally goes a long way to identifying trend lines that lead to action. As one example, a slowdown in consumer spending may lead to less port congestion and greater intermodal availability indicating a move from trans-loading at the port to landing your containers in Chicago or Dallas.

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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.

Contact Rockfarm

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By Brad Stewart

Co-Founder, CCO

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.”

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References

Berman, Jeff. (2022 May). PMA’s McKenna addresses key negotiations with ILWU on a new labor deal
https://www.logisticsmgmt.com/article/ pmas_mckenna_addresses_key_negotiations_with_ilwu_on_a_new_labor_deal

NFI. (2021 July). What the Approaching ILWU-PMA Contract Renewal Means for Shipper

https:// www.nfiindustries.com/about-nfi/insights/what-the-approaching-ilwu-pma-contract-renewal- means-for-shippers/

Cassidy, William B. (2022 April). Knight-Swift expands LTL reach with terminal buying spree

https:// www.joc.com/trucking-logistics/ltl-trucking-logistics/knight-swift-expands-ltl-reach-terminal- buying-spree_20220422.html

Transport Topics. (2022 May). Diesel, Gas Refining Capacity Too Low to Meet Demand
https:// www.ttnews.com/articles/diesel-gas-refining-capacity-too-low-meet-demand

Georgia Port Authority. (2022 May). Port of Savannah moves nearly 500k TEUs in record April

U.S. Census. (2022 May). Manufacturing and Trade Inventories and Sales, March 2022
https:// www.census.gov/mtis/www/data/pdf/mtis_current.pdf

Kulisch, Eric. (2022 May). Abbot Labs ramps up air cargo imports of baby formula
https://www.freightwaves.com/news/abbott-ramps-up-air-cargo-imports-of-infant-formula

Logistics News. (2022 May). Yellow Corp. narrow loss in first quarter to $27.5 million from $63.3 million inQ1 of 2021
https://www.supplychain247.com/article/ yellow_corp._narrows_loss_in_first_quarter_to_27.5_million_from_63.3_millio/LTL

Reynolds, Penny. (2022 May). Forecasting Fundamentals
https://swpp.org/certification/articles/forecasting-fundamentals/