Supply Chain Blog

Looking out at the landscape & Labor Day thanks

 

Dear Friends,

As we prepare for the long Labor Day holiday weekend, let me thank all our associates at Wagner Logistics for their efforts in caring for our customers and commitment to our principals. I appreciate all of our ordinary people who accomplish extraordinary results. 

Factory Goods Rebound & Production Gains 

Disregarding volatile aircraft orders that rose in July, core capital goods posted significant gains for the turnaround in business investment we have been waiting to see. The Commerce Department reports that new orders for durable goods (products expected to last three years or more) jumped a seasonally adjusted 4.4 percent in July. 

Nondefense capital goods (think business investments) new orders rose sequentially from June to July by 1.6 percent excluding aircraft. This should provide a small push forward helping the economy. 

Demand for machinery increased 1.6 percent while orders for computers and electronic products posted the biggest increase since March last year, up 3.6 percent. 

In my last blog, I wrote about the challenges caused by the American workers flat productivity. The investment in robotics, systems, and machine tools works in favor of increased worker output. Increased productivity helps justify increased wages and benefits while enhancing corporate profitability. 

Supporting the Commerce Department report is the August Manufacturing Purchasing Managers’ Index (PMI), which came in at a 52.1 reading from July’s 52.9. Readings above 50 signify expansion. The Federal Reserve also reported that industrial production rose 0.7 percent in July. 

The takeaway is that manufacturing is stronger heading into the second half of the year. 

Consumer spending rose for the fourth straight month 

The Commerce Department reports consumer income is improving resulting in spending which rose 0.3 percent. This is the fourth straight month of positive consumer spending. 

Disposable income (cash left over after taxes) adjusted for inflation rose 0.4 percent suggesting a stronger third quarter than previously thought. 

New housing starts are up while existing home sales moderate 

The National Association of Realtors reported that sales of previously owned homes came off a nine year high in July as sales fell year-over-year by 6.7 percent. There are fewer homes to sell as available properties fell 5.8 percent from 2015. This supply and demand challenge pushed the average home price up 5.3 percent to $244,100 when compared to last year. 

New houses are coming at a fast clip as new housing starts rose 2.1 percent. Year-over-year, new starts were up 5.6 percent in July. 

Inventories, damn inventories 

Inventories have been the blame for the freight recession and retailers are struggling to get them under control. The question becomes, with eCommerce sales rising and store sales up and down, what is the right balance to satisfy the consumers’ needs? 

  • Walmart – Inventories fell 2.3 percent year-over-year in the latest quarter, helping improve free cash flow at the retailer. A one billion dollar reduction. 
  • J.C. Penny – Reduced inventory 1 percent in the last quarter. 
  • Target – Increased their inventory 4.5 percent in the quarter as they boost their non-seasonal inventories. 

The U.S. Census Bureau says total U.S. business increased 0.2 percent from May to June and are up 0.5 percent year-over-year. 

Is trucking on the cusp of improving? 

According to load board operator DAT, in the week of August 21 to 27th, the vanload to truck ratio jumped to 8.4 percent suggesting there were more loads available than trucks. The national average van rate stayed flat at $1.60 per mile however. 

Year-over- year in July, spot market capacity is down 9.6 percent. 

The American Trucking Association’s monthly For-Hire Truck Tonnage Report released last week said tonnage dipped in July 2.1 percent from June. Tonnage is up 3.2 percent year to date. 

So when will the freight recession end giving pricing strength back to the motor carriers? 

It appears we are bouncing along the bottom on pricing while the industry awaits a strengthening economy, an inventory correction, and a political resolution to the direction of the country. Consumer income is up, retail sales are headed in the right direction, and manufacturing is in positive territory, one would think that the trucking market has reached a tipping point for the pendulum to swing their way…eventually. 

At the railroad, volume woes continue 

With the grain harvest underway farm products, food, and motor vehicles are helping the weak car loadings at the railroads. Commodities falling include petroleum products and metallic ores as coal continues its slide with more power plants converting to cheaper natural gas. 

The Association of American Railroads (AAR) reported U.S. rail traffic for the week ending August 27, 2016 was down 6.2 percent compared to the same week in 2015. Carloads were off 7.3 percent while intermodal loads fell 5.1 percent.

For the first 34 weeks of this year compared to 2015, carload traffic is down 11.3 percent and intermodal loads are down 3 percent. In total U.S., railroad traffic is off 7.2 percent from the previous year’s volume. 

At Wagner Logistics 

Approaching Labor Day, I want to thank our many associates for their commitment to the values we share: taking care of the customer, being proactive and fair. As we enter the last month of the third quarter, we have great momentum to finish on a strong note. 

We are currently running in full stride at Wagner with project plan execution, hiring underway at new locations, and our information technology staff having a full plate. Existing operations are running well with several locations reporting 100 percent accurate inventories recently. 

In the lead up to Black Friday, we are assembling and fulfilling well over 30,000 complex display pallets for retailers. 

The transportation group is adding tractors and trailers for our new locations while moving thousands of loads through our brokerage operations. With our combination of assets and non-asset transportation, we offer a wide range of options for our customers.  

If you are putting together a distribution center RFP for one or more facilities or thinking about a transportation RFP in the coming year, please invite Wagner Logistics to the party. With 70 years of business experience behind us, we say “Bring It” every day!

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 4,500,000 sq. ft. Current offices include Jacksonville FL, Cleveland OH, Pine Bluff AR, Dallas, TX, Omaha, NE, Clinton, IA, Kalamazoo, MI, Charlotte, NC, Memphis, TN, 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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