Capacity Crunch
The Good
American’s are receiving their stimulus checks with the potential
for a truly super-charged consumer spending spring.
And with first-time unemployment claims at their lowest since
the pandemic started, we could finally be seeing the hazy start
of our economic recovery.
The Bad
Tender volumes are showing real signs of life after weeks of relative calm –
with the Outbound Tender Volume Index shooting up to an all-time high
of nearly 16,000. Given how strong freight demand is right now you
wouldn’t think there’s much room to run. But we haven’t even entered
the true spring freight season. Oh boy. And with rejections also hovering
at near peak after a slight retreat, it‘s likely that freight demand will stay
elevated for the coming months with no signs of capacity relief for shippers.
Trending
Truckload carriers continue to reject loads at high levels –
the Outbound Tender Reject Index sitting at its familiar 30% natural ceiling.
We’re seeing volatility in major markets going in both directions.
Southern markets like Houston and Atlanta have surged to an all-time
high over the past 10 days while port congestion has prompted retailers
to seek alternate routes benefiting East Coast ports.
But with carriers optimized for LA/Long Beach, we may see lasting volatility.
Outbound Tender Reject Index
There’s been more volatility in March due to late season storms.
I suspect markets will stabilize over the coming weeks as contract rates
solidify and routing guides strengthen.
Hopefully, spot rates will feel some pressure to come down.
National dry van spot rates fell slightly to $3.22 from a high just a couple
weeks ago of $3.24 as shippers worked to clear backlogs after the winter storms.
Contract rates are quickly marking up toward spot rates.
And in our current environment of increased demand and scarce capacity,
those spot rates will remain pretty high. With rising truck orders and the
end of social distancing measures, we could see some added capacity.
The question as always, is when and how much.
Economy
Two economic indicators released this week are worth noting:
Jobless Claims. There was some good news on the unemployment front
as total claims flattened at 4.1 million with a weekly total of 770,000 –
a new low in the COVID era. Other encouraging news was the fact that the
US economy added 379,000 jobs in February, suggesting the economic
recovery is gaining steam from the employment perspective.
Consumer Spending. As measured by weekly debit and credit card data,
total spending increased by 7.4% YOY. The picture is a little less rosey
when you take out auto but overall, still encouraging.
Initial claims of unemployment insurance
Retail
The seasonally adjusted inventory-to-sales ratio dropped to 1.26 in January –
the measure’s lowest level since all the way back in 2012, according to
Census Bureau figures. Wholesale and manufacturing inventories remain flat,
changing less than 1% compared to 2020. However, retailers saw inventory
numbers fall over 6% YOY in January. With sales increasing across all sectors,
supply chains are struggling to keep up.
Inventories drop in Jan as supply chains struggle to keep up
No matter what industry you’re in, supply chain bottlenecks have been
happening for months now causing lower inventory just when spring
collections would normally be coming in.
Generally, retailers are experiencing high demand which should continue
through this round of stimulus checks. Even so, after a month of harsh weather,
a crisis in the Suez Canal and back-ups at most major ports, companies are
dealing with huge delays in getting their products moving.
The Road Ahead
Data & Analytics
Get ready for some serious data & analytics in 2021, according to
Gartner’s Top 10 Trends, 2021 Report.
Disruption stemming from the pandemic led business leaders to
“identify key tech trends and prioritize those with the biggest potential impact
on their competitive advantage,” according to Rita Sallam, research VP at Gartner.
Transportation businesses already see the help that data offers when responding
to disruption. Real-time information has become crucial during the pandemic, as
visibility helps supply chains react and adjust to the uncertainty.
Infusing clean data into business practices from artificial intelligence and machine
learning will be a game-changer, according to CIO at AvisXchange Angelic Gibson.
“It’s going to create efficiencies across the board, opening up new revenue streams
we hadn’t even considered before.”
Real-time data has helped healthcare systems, distributors, purchasing
organizations, state & federal governments and many other sectors manage
their supplies and model staffing needs.
As organizations demand more data & analytics capabilities to compete, businesses
are finally funding these efforts. 66% of senior executives plan to increase investment
in automation and AI. That means data & analytics are coming in a big way.
Insights
Are we headed into a period of inflation?
What impacts will this have on growth?
In normal times, these questions and many others could be answered
with a certain level of accuracy. In the post COVID economy?
All bets are off.
Most CPG companies surveyed expect the higher costs they experienced in 2020 to continue this year. Most respondents said their manufacturing costs increased 20%
YOY with nearly the same increases in warehousing. Higher costs came from labor,
mostly COVID-19 hazard pay and manufacturing overtime.
So bottom line, companies believe these cost increases are here to stay.
At least for the time being.
Businesses don’t expect costs to decrease in 2021
Simplicity by the truckload
Can’t find reliable capacity?
Transportation costs getting a little out-of-hand?
Want to save up to 20% on your annual freight spend?
You need a team of dedicated professionals who can expertly navigate
the latest technologies to find you the solutions you deserve.
You need JTR.
Get ship done
855.754.0039 - Jtrlogistics.com
Source: FreightWaves.com Wednesday, March 31, 2021. https://www.freightwaves.com/truckload
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