Supply Chain Blog

Momentum in March

 

Dear Friends,

Jr

I’m feeling a little better about the economy as we close out the winter months. There’s a little momentum as we approach spring in a few weeks. Unfortunately, for those of us in the logistics industry, what is happening now is not moving the needle on the freight side of the business. 

Previously owned home sales bounced up unexpectedly in January with closings up 0.4 percent to a 5.47 million rate. Getting the credit is steady employment, wage growth and low mortgage rates as first time buyers get into home ownership. 

Of concern is the pending sales numbers for housing are looking weak. Perhaps buyers are waiting for the spring sales season or are there deeper issues? Banks are offering low mortgage rates but they are being very selective of who they loan to. 

Manufacturing output advanced 0.5 percent in January and when one includes mining and utilities, total output rose 0.9 percent. Both durable and non-durable consumer goods saw improvement. Capacity utilization, plant capacity in use increased to 77.1 percent from the prior months 76.4 percent, the first increase in three months. 

Consumer goods bounced up 1.6 percent and motor vehicles/parts were up 2.8 percent while factory wages increased along with hours worked. 

January retail sales saw improvement rising 0.2 percent over December. This was the third straight month of retail sales gains according to the Census Bureau. Core retail sales excluding gas and auto sales rose 0.4 percent. On-line sales jumped 1.6 percent at the expense of traditional department stores which saw a decline of 0.8 percent. Department stores experienced a 3.8 percent decline in sales over the last year. 

In a year over year comparison, retail sales were up 3.4 percent over January 2015. The National Retail Federation is forecasting growth of 3.1 percent in 2016 with on-line sales expected to grow 6-9 percent. 

Inventory Challenges 

High inventories at the retail and wholesale level; are getting most of the blame for the stagnant freight market. If retail sales continue to improve, it’s expected that we should see some improvement in inventories during the second quarter as summer products begin filling the shelves. 

Walmart says it has been working on inventory reductions over the past year while keeping its product mix appealing for shoppers. Overall, inventories grew 0.9 percent in the fourth quarter at the retailer on a year over year basis. Inventory measured against comparable stores fell 2.9 percent for the year. 

As Walmart closes stores and enhances it’s e-commerce fulfillment operations, balancing the inventory between the two is a complicated process. 

Trucking Update 

The freight recession is here, 2016 starts slow according to the American Trucking Associations (ATA) with carriers in the energy, export and industrial sectors being the weakest. Carriers hauling loads in the retail and automotive sectors have fared better. 

TruckJanuary’s ATA seasonally adjusted for-hire truck tonnage came in at a reading of 132.8 falling 1.4 percent from December. According to DAT Solutions, there were 4.1 percent more loads posted on their load boards during the week ending February 20th as available trucks fell 2 percent. 

There are signs of stabilization as the national average dry van rate remains unchanged at $1.58 per mile. Load postings increased 4 percent and there were 1.4 loads available for every one truck. 

If the capacity issue continues, expect to see spot rates begin to move upwards. 

In the meantime, some shippers are demanding rate reductions while others are granting small increases in order to keep their core carriers loyal. When the economy begins to accelerate shippers know trucks will be scarce and they will need the goodwill of their carriers to provide adequate equipment. 

When all of the new regulations kick in (electronic logging devices, hair follicle drug testing and speed limiters) some are saying that 15 percent of the current available capacity could evaporate. This combined with a growing economy is going to wreak havoc on shippers. 

Rails 

Ample truck capacity, high inventories, lackluster manufacturing, and a strong dollar all contributed to almost zero growth in intermodal volume in 2015. None of these factors have really changed contributing to a poor outlook for railroading in 2016. 

The Intermodal Association of North America (IANA) still expects to see traffic growth in the 3-4 percent range for the year. International traffic will be the largest contribution to this while domestic traffic should remain flat as ample truck capacity, low fuel costs and ease of dispatch will keep truckers nibbling at the rails expense. 

U.S. rails are working hard on service improvements- train speed has improved by 10 percent year over year to 33 miles per hour. BNSF was the leader at 37.5 mph and bringing up the rear was CSX at an average speed of 29.175 mph. 

In a cost cutting effort railroads are reducing their locomotive fleets and employment. 

In the week ending February 13th the AAR reported that carload traffic fell 15.4 percent when compared to the same week in in 2015. Intermodal traffic was likewise down 3.8 percent in the same period. 

Wagner Logistics 

Wagner continues its growth as we welcome several new customers and take great care to service our current ones. Every week we hear from customers thanking us for great performance by a particular associate or team and it’s music to our ears. 

You see, its Wagner’s culture to have a passion for serving customers with ordinary people doing extraordinary work. We put the best technology tools in their hands and it’s a winning combination.  

When you look at your transportation and warehousing networks, please include Wagner Logistics in the conversation. We love challenges and have great project skills. 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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