Supply Chain Blog

A Thankful Season

 

Dear Friends,

As we sit down to enjoy a meal this Thanksgiving season, let us tune out all of the negative chatter and be thankful for our country, our leaders and the military that keeps us strong and protected. We are a divided country but let us give thanks for our families, friends, customers and co-workers. Health and blessings are my wishes for everyone. 

It has been an interesting last couple of weeks for the economy and the logistics industry so let’s dig into the data. 

Retail surprises 

The Commerce Department reported good news as we head into the holiday season. Retail sales grew 0.8 percent in October and revised September sales upward to 1 percent for the best back-to-back months in two years. 

It accounts for two-thirds of the U.S. economy; this is good news indeed, and hopefully a trend that will continue into 2017. 

Strong auto sales accounted for most of the rise in consumer spending but take those sales out and retail sales still gained .08 percent. Sales have increased 4.3 percent in the last twelve months due to more people feeling secure about their job and increasing discretionary income. Unseasonably warm weather did not hurt either. 

Brick and mortar retailers like Kohl’s, Target, Wal-Mart, and Macy’s desperately need a good spending season. 

The National Retail Federation (NRF) has projected an increase of 3.6 percent in retailer and on-line sales (excluding autos, gas, and restaurant sales) for the holiday season. Last year their prediction of 3.7 percent came up short at 3 percent of actual sales. 

Online sales are forecast to grow between 7 and 10 percent to $117 billion. Black Friday and Cyber Monday sales should be strong. 

Inventories fall 

Inventories fell in September, which is very good news to those in the transportation industry. The Census Department’s business inventory-to-sales ratio showed excess stock is being worked off. The retailer inventory-to-sales ratio fell to 1.38, which is the lowest level since August 2015. 

The business measure includes retailers, wholesalers and manufacturers while the retail only inventory to sales measures retailers only, excluding automobiles. 

The reasoning behind it being good news is that transportation companies at some point will be replenishing these stocks driving freight into the supply chain. With strong retail sales and lower inventories, the freight market should improve. 

Factory output and Housing grows 

The Federal Reserve reports that factory output rose 0.2 percent for the second straight month in October. Not a big improvement but positive nevertheless. Factories are hampered by the strong dollar and weak export markets but still in positive territory. 

Housing starts jumped over 25 percent in October to an annualized rate of 1.323 million for the highest rate of growth since August of 2007. This growth spread between single-family home growth of 10.7 percent and multi-family leaping up 68.8 percent. 

Developers are playing catch up with the tremendous demand for housing, which is pushing up prices and rent. 

Trucking uncertain 

The trucking market has been difficult to read in recent months. One week freight jumps up and another week freight returns to its new-normal softness. 

The American Trucking Associations (ATA) reports that trucking tonnage fell 0.9 percent in October versus on year ago for the second consecutive fall in the monthly index. Tonnage dropped 0.3 percent from September. The preliminary seasonally adjusted tonnage index for the month was 131.6 down from the record high of 144 set in February. 

The ATA nonseasonally adjusted index, which represents the change in tonnage actually hauled by the fleets, equaled 138.2 in October, up 1.9 percent from September. 

The DAT North American Freight Index, which measures the spot market activity, rose 1.8 percent sequentially to 347 in October marking a 27 percent increase from last October. DAT Solutions uses spot market activity from 2000 at a baseline of 100. 

It is my belief that while we are treading on uncertain ground due to the new administration as their policies are developed. We are trending into a more optimistic freight market for the remainder of the year. 

Railroad woes continue 

Rather than repeat what I have been saying about the reduction in rail carloads and intermodal loadings, let us take a different look at what railroad executives are probably thinking. 

With the election of Donald Trump, the Surface Transportation Board (STB) will be expanded with three Republicans and two Democrats serving. The American Association of Railroads is pushing the STB not to take any action on major issues until this staffing takes place. So far, the STB leadership seems to think that hot potato issues like the proposed reciprocal switching rule should wait before being decided. 

In the meantime, the number of idle freight equipment in storage reflects the slowdown in rail shipping. There are 381,000 freight cars unused and in storage in North America. That equates to roughly 23-24 percent of the North American fleet. The reduction in oil moving by train there are 63,000 of the continent’s 180,000 tank cars gathering dust too. That is a lot of equity wrapped up in unused equipment. 

At Wagner Logistics 

Wagner operations will be breaking for the holidays with some locations enjoying a long weekend, others will remain open for business to handle Black Friday orders that will be picked and shipped to anxious consumers. 

I am personally thankful for everyone on the Wagner Logistics team for their personal commitment to serving our customers reliably. 

If you are working on your 2017 plans, I invite you to include Wagner in your RFP process. 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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