Supply Chain Blog

Spring Blooms as does the Freight Market

 

Dear Friends,

Spring is in full bloom, the Masters is over and baseball season has begun. I love this time of year! 

Business seems to be going well for most companies and the economy continues to chug along. Let’s look at the numbers. 

Employment continues to grow 

The U.S. added a lot of jobs in March according to payroll processor, ADP, for the biggest gain in two years. This is the fifth consecutive month of job growth over 200,000 showing the year is off to a strong start. 

The Institute for Supply Management points out that the non-manufacturing section grew for the 87th straight month. 

Warehouse labor is harder to find 

Warehouse growth is off the charts driving up lease rates and making the competition for employees to receive, stock, pick/pack and ship as fierce as it’s ever been due to the explosion of growth in e-commerce. 

The low unemployment rate is beginning to drive up the wages with logistics staffing. ProLogistix reported that average starting pay rose 6 percent over the last year to $12.15 per hour.  

Amazon facilities are averaging between 1,000-2,000 employees and every major retailer playing catch up with new facilities, it is understandable that these jobs are becoming hard to fill. The Bureau of Labor Statistics says the warehouse and storage sector accounted for 945,200 jobs which is a 5.3 percent increase over March 2016. 

Companies are also looking at culture as a way to retain people with recognizing birthdays, group holiday celebrations, picnics, incentive pay and flexible shifts/flextime. 

In the meantime, workers will keep coming to work with the want ads in their back pocket looking to make another fifty cents to a dollar, as twenty to forty bucks a week is a big deal to these low wage employees. 

As wages increase, the ROI on automation becomes better, look for an escalation in new systems to drive productivity, efficiency and accuracy. 

New orders rise, barely 

It appears that car sales are leveling off, the Commerce Department reports that new orders for factory goods in February increased 1 percent from the previous month. January was revised to a 1.5 percent increase. 

Durable goods (products designed to last at least 3 years) jumped 1.8 percent from January to February due to aircraft orders. Without aircraft orders, February fell 0.1 percent but core orders rose 9.4 percent for the three month annualized rate. 

March auto sales came in at 1.56 million dropping 1.6 percent from February, it appears the seven year run automakers have enjoyed is leveling off. 

The Institute for Supply Management reported its index of factory activity fell to 57.2 in March from 57.7 in February. Any number above 50 signifies expansion, we are still in positive territory. 

I expect to see a good year for consumer goods with a healthy overall economy, job growth, and continued low interest rates. An initial estimate of first-quarter GDP will be reported on April 28. 

Transportation activity on the upswing 

The transportation demand index measures whether freight demand is increasing or falling across several modes of transportation. The February result was very strong at 51.1 for a 4.1 percent improvement over January and 24.6 percent above February 2016. 

This measurement is a good early barometer of economic activity, it bodes well for the entire transportation industry. 

Swift makes a move 

Swift Transportation agreed to merge with its smaller competitor Knight Transportation to create a huge trucking company. Swift founder Jerry Moyes will serve on the Board while Kevin Knight will control and operate the new entity. Look for better operating discipline as Knight is known as one of the best truckload operators in the truckload industry. 

Schneider recently completed its IPO and is expected to be a major competitor for Swift and JB Hunt with their newfound public funding. 

The truckload market is on the verge of new strength 

Carriers are still working under lower contract rates from RFP responses made in a soft freight market last year. Pricing is moving in a positive direction as we enter produce season and capacity begins to be sucked up by a growing demand for trucks. 

Shippers are unwilling to pay more until they absolutely have to and carriers are hoping for regulatory reform and tax code overhaul. Carriers are also focused on lane balancing to earn money that has been the key to limiting empty miles. 

After reducing capacity by downsizing fleets by 2 to 5 percent in 2016, they are trying to decide whether to ramp up now in preparation for growth or to stay put with their current fleet. Since drivers are hard to find most are staying put. 

DAT Solutions reports that in the week of April 2nd, spot market loads were up 1.7 percent from the previous week and that when comparing March 2016 to March 2017, the load count grew at an astounding 92 percent. 

The national average dry van rate jumped to $1.69 per mile for the week compared to $1.63 the week before. 

The bottom line for truckload carriers is that the produce season could be a precursor to better market conditions in the second half of the year. If you are a shipper, strap on your helmet as pricing could escalate as freight volumes pressure available capacity. 

Railroad traffic growing 

The Association of American Railroads (AAR) reports that U.S. rail traffic for the week ending April 8, 2017 was up 7.1 percent compared to the same week last year. 

Carloads were up 9.8 percent and intermodal traffic improved 4.6 percent in this week.

 The growing commodities were coal (+29%), grain (+ 26%) and nonmetallic metals (+7.6%). The nation’s railroads are enjoying the growing economy as well. 

At Wagner Logistics 

We are enjoying spring at Wagner as business progresses nicely across the enterprise. The transportation group at Wagner is particularly active now and has added a number of new customers. 

Our managers will be traveling in from around the country, it will be great to see everyone. We’ll share our plans for the year, talk safety and discuss goal expectations.  

Are you considering a change in your distribution network? Need carrier capacity? Give me a call as I would enjoy visiting about your company challenges. Wagner has been in business for 71 years and want to use our experience to help craft solutions. As we say everyday, 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 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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