This Week in Logistics News (March 9-13, 2015)

By Adrian Gonzalez

Our snowman passed away on Wednesday from Warm Air Syndrome. We are sad, but we are also comforted by the news that our beloved Beach Sandman will be visiting us soon.

Here’s the news that caught my attention this week:

Freight stats dominated the news this week. Here are some of the highlights:

Freight TSI Index: The Freight Transportation Services Index (TSI)…fell 0.2 percent in January from December, declining for the second consecutive month…Rail carloads, rail intermodal, and pipeline grew in January but air freight, trucking and waterborne decreased, resulting in the continuing decline in the overall freight index. Institute for Supply Management data indicated that growth in production, orders, and inventory slowed in January…January 2015 freight shipments were up 5.6 percent from January 2014.

Cass Freight Index: North American shipment volume jumped up in February, while total freight expenditures reversed a three‐month slump…The number of shipments increased 5.5 percent in February and is 0.9 percent higher than the same month a year ago…Freight expenditures were up 4.3 percent after declining for three months, and were up 0.6 percent over February 2014.

DAT Freight Index: Spot market freight availability declined for a second consecutive month in February, a seasonal pattern that mimics the first quarter of 2013, but at higher volume. Month-over-month freight volume dipped 6.0 percent…Compared to the extreme demand created by the Polar Vortex in February 2014, however, volume was 37 percent lower. Compared to January, freight volume by equipment type declined 3.9 percent for vans, 3.4 percent for flatbeds and 18 percent for refrigerated (“reefer”) trailers. Truckload freight rates on the spot market drifted down 1.9 percent for vans, 3.2 percent for flatbeds, and 5.2 percent for reefers.

Although the West Coast port slowdown impacted freight activity the past two months, looking at the year-over-year comparisons for January and February, freight shipments are up about 5.5 percent so far this year compared to the same months in 2014. A potential red flag, however, is that the inventory-to-sales ratio has reached the highest level since 2009. As reported by Reuters:

In January, business sales fell 2.0 percent, the biggest decline since March 2009, after falling 1.0 percent in December. At January’s sales pace, it would take 1.35 months for businesses to clear shelves, the highest inventory-to-sales ratio since July 2009. The rise in the ratio from 1.33 in December could be a sign that inventories are now probably approaching levels that might make businesses uncomfortable about adding more stocks.

We’ll have to see if sales improve as the weather gets warmer.

One of my predictions for 2015 was that 3PLs would focus more on serving the needs of companies in the Energy and Process Industries. As I wrote back in December:

A similar race is on to expand beyond the usual set of industries — namely, Automotive, High Tech, Retail, and CPG — and establish a leading presence in historically underserved and underpenetrated vertical industries, such as Oil & Gas and Chemical. Generally speaking, companies in the Energy and Process Industries are lower on the supply chain maturity curve than companies in Automotive and High Tech, but they face significant supply chain challenges and opportunities nonetheless — and more importantly, they are now motivated to move up the maturity curve (that is, invest in technology and pursue outsourcing relationships) as cost pressures, competitive forces, regulatory requirements, and customer expectations intensify.

Therefore, I wasn’t surprised by C.H. Robinson’s announcement this week promoting its services for the Oil and Gas industry. “Today’s game changer is going to be the oil and gas companies that can drive down their supply chain costs by improving efficiencies and adding visibility,” said Kent Stuart, director of oil and gas for C.H. Robinson. “The speed of fracking requires a nimble, global supply chain that can be up and running in a moment’s notice.”

Coincidently, Kent was my guest on Talking Logistics this week where we discussed Market Fluctuations in Oil and Gas Industry: A Catalyst for Supply Chain Improvement. If you missed the episode, I encourage you to watch it now on demand. I’ll share the highlights of our conversation in a future post, so stay tuned. Also, tune in on March 24th when Keith Richard, VP of Operations at Transplace, will be my guest on the program to discuss “Collaboration and Optimization in the Oil and Gas Industry.”

Finally, the Teamsters Union, joined by Advocates for Highway and Auto Safety and the Truck Safety Coalition, filed a lawsuit against the Department of Transportation’s recent decision to open the border to Mexican trucks. Here are some excerpts from the press release:

The lawsuit, filed with the U.S. Court of Appeals for the Ninth Circuit, contends that the DOT’s final report to Congress violated the Administrative Procedures Act because its conclusion—that Mexico-domiciled carriers operate at a level of safety equal to or greater than U.S. and Canadian carriers—is arbitrary and capricious in light of the admitted lack of significant data from a pilot program Congress required DOT to conduct.

The DOT announced in January that it would move forward with opening the border to trucks domiciled in Mexico later this year despite the DOT Inspector General (IG) issuing a report which acknowledged that it had been unable to develop statistically significant data in the pilot program. Due to the lack of significant data, the IG could not have determined with any degree of confidence the future safety performance of Mexico-domiciled carriers.

My view, which I shared a few weeks ago in Are Mexican Trucks and Drivers Safe on U.S. Roads?, is that assuming Mexican trucking firms are held to the same safety, security, and inspection standards as U.S. carriers, I don’t believe they will pose a greater risk to U.S. drivers than domestic carriers. The bigger safety risk all of us have to worry about is distracted drivers — which, if we are honest with ourselves, includes most of us.

And with that, have a happy weekend!

Song of the Week: “Ex’s & Oh’s” by Elle King