Supply Chain Blog

An Uncertain 2016 Ahead


Dear Friends,


The tea leaves have me questioning what America will experience both economically and from a logistics point of view as we enter the cold New Year. 

The Department of Labor reported a solid 292,000 gain in payrolls in December beating expectations, and the unemployment rate is holding at five percent. The service sector was the big driver gaining 230,000 jobs, manufacturing 8,000 jobs, the public sector 17,000 jobs and construction jumped by 45,000 positions.

For-hire trucking gained 5,300 jobs in December for a total of 19,100 total added positions in 2015. 

The Census Bureau reported that orders for manufactured goods dropped 0.2 percent in November. The Institute for Supply Management (ISM) manufacturing index dropped to 48.2 in December, below 50 signals a contraction. This is the second consecutive quarter this measure has been below 50 which should cause concern. Usually this would trigger thoughts of recession; but, there is reason for hope. 

The manufacturing section is still producing more than it did a year ago with the combination of the strong dollar, weak exports, and a crisis in energy and commodity prices. Production saw a slight increase, adding 8,000 in December, which is a nice increase given the shift to automation affecting job growth. These are typically good paying jobs. I maintain that until inventories are under control we won’t see improvement in manufacturing. 

The ISM non-manufacturing measure fell a little in December to a 55.3 reading showing continued strength in the domestic service oriented economy. In that manufacturing is about 15 percent of the United States GDP, let’s focus on the service sector which is doing well. 

Consumers drive about 80 percent of GDP; let’s look at how they are doing. The retail numbers are in from the holiday season and it looks like consumers spent, not as much as hoped. 

The National Retail Federation (NRF) says holiday spending was up 3 percent more than the previous year, less than the 3.7 percent they had predicted. In 2014 sales increased 4.1 percent over a very weak 2013 sales year.

Following the trend over the last several years, brick and mortar stores were challenged and e-commerce sites surged. The NRF said e-commerce sales jumped 9 percent to $105 billion surpassing expectations. 

There were some winners such as L Brands (Victoria’s Secret & Bath & Body Works) which saw 8 percent growth. Losers include Macy’s and Gap Inc., while others have yet to report. 

It is telling that Walmart announced they would be closing 154 U.S. stores as part of a plan to close 269 stores worldwide. One must assume that will be placing renewed emphasis on their e-commerce efforts to beef up the battle with Amazon. The Walmart Express model has been abandoned. 

In short, if you are a pessimist there are signs to fuel those thoughts and if you are an optimist, there is plenty to feel good about. 

The psychology of consumers will continue to drive what happens. A falling stock market will impact their 401K accounts and cause worry, higher home values will make them feel good, presidential candidates from both parties will preach fear while a growing employment picture will make them feel secure. Will consumers spend? It’s uncertain for now.

The Freight Market 

Freight surged in the final week of 2015 and that trend continued into the first week of the New Year. This shouldn’t cause excitement as it is the usual freight pattern after a holiday period when trucks are back on the road handling backlogs of orders. 

The American Trucking Associations (ATA) reported modest gains in tonnage to finish out 2015. The seasonally adjusted December measure showed growth of 1 percent over November’s volume, ending on a weaker freight market for the year. 

Wagner TruckLoad board operator DAT said load-to-truck ratios ended the year with demand increasing for the last week of 2015. The dry van load-to-truck ratio increased from 1.9 to 3.4 loads per truck as van load posts were up 27 percent but the New Year isn’t as kind. 

DAT said that in the week of January 6th through the 16th, dry van load posts decreased 21 percent while truck posts were up 29 percent. As a result, the load-to-truck ratio dropped 38 percent, from 2.7 to 1.7 loads per truck. The national average van rate dropped 5 cents last week to $1.68 per mile. 

While capacity is likely to reflect lower demand, truckers are going to have their hands full in 2016 ramping up to meet new regulations in 2017.

  • Increased costs – drivers are going to continue to make more money. It’s estimated a three percent average increase across carriers. U.S. Xpress is increasing pay an average of 13.5 percent for solo over-the-road drivers who demonstrate safe driving habits. Under this model, a safe driver with five years of experience could make more than $70,000 in total compensation.
  • CSA – Carriers are still going to have to prove their fitness as the FMCSA will continue to seek data to verify safe operators. Public access to this data is under review but that won’t stop enforcement.
  • ELDs – The use of electronic logging devices has cleared rulemaking and is on the way to implementation in 2017. There may be some “grandfathering” for carriers who already have systems that need to be modified to comply with the new regulations.
  • Training Drivers – The bill helps military vets and women enter driving careers but didn’t lower the driving age as the industry wanted. Instead a pilot program will be put in place to study the feasibility of lowering the age for drivers to get CDLs and operate in interstate commerce.
  • Speed Limiters - The proposed rule, coming from FMCSA and the National Highway Traffic Safety Administration (NHTSA), has been tied up in review at the Office of Management and Budget (OMB) and was originally scheduled to be published in March 2014. The industry is waiting to see what the results are.
  • Drug Testing – Due in the first half of this year is the drug and alcohol test final rule. The result would be a national CDL testing database. Congress has approved hair testing in the FAST act.
  • Underride Protection - NHTSA proposes to require better rear impact guards that will improve protection in higher speed crashes compared to current trailer rear impact guards. 

All motor carriers will have to deal with a complex economy as the year begins and cope with rising cost and regulatory.


Total North American rail traffic was down in the first week of 2016; but, intermodal traffic was up according to the Association of American Railroads (AAR). 

U.S. railroads reported weekly carloads declined 13.5 percent, while intermodal volume rose 7.5 percent. 

TrainIntermodal freight in the fourth quarter declined for the first time since 2009 on a year-over-year basis, hurt by factors such as low fuel prices (which helped competing truckers), a weaker economy and high inventories. 

The AAR also said positive train control (PTC) implementation is expected to cost the freight railroad industry $9 billion to $10 billion. Railroads spent more than $6 billion in 2015 ramping up compliance which was originally assigned a congressional deadline of December 31st 2015. 

Wagner Logistics

December was busier than usual and Wagner has good momentum heading into the first quarter. 

Wagner is off to a fast start this year with the on-boarding process underway for new customers. We also have some challenging projects ahead of us regarding technology implementations, driver recruitment, and facility renewals but I am optimistic about the New Year. 

As you consider your transportation, distribution center, and other supply chain initiatives this year, reach out to us as we would be happy to share our lessons we have learned in our 70 year history. As we say every day, Bring It! 


Have a great day,

John Wagner Jr.

About Wagner Logistics

Wagner Logistics has been honored 15 years in a row by Inbound Logistics as a Top 100 3PL provider, we offer dedicated warehousing, transportation management, packaging and assembly operations across the United States with over 3,000,000 sq. ft. Current offices include Jacksonville FL, Cleveland OH, Pine Bluff AR, Dallas, TX, Omaha, NE, Clinton, IA, Edgerton, KS, and Kansas City MO and KS. We provide genuine customer service to our customers and our superior onboarding process will make your customer’s transition seamless. We work tirelessly to find innovative solutions to reduce supply chain costs while increasing your speed-to-market with our award winning technology. 

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