Above the Fold: Supply Chain Logistics News (April 19, 2024)

The Red Sox have the best Earned Run Average (ERA) in the Major Leagues so far this year. They’re #1 out of 30 teams. Yet, they are in last place in their division. 

How is that possible?

Well, pitching can only take you so far. The team ranks last in the Majors in defense (as measured by average errors per game) and their hitting is awful too (#23 in batting average). They’re also in a very competitive division that includes the Yankees and Orioles.  

What’s the lesson learned here? Don’t draw conclusions based on a single metric. I often see this happen in logistics. Focusing on on-time shipments, for example, but not taking into account on-time arrivals, damage claims, or returns. 

The other lesson learned? It’s probably going to be a long, painful season if you’re a Red Sox fan like me.

Moving on, here’s the supply chain and logistics news that caught my attention this week:

2024: Not Going So Well for Trucking Companies So Far

How is 2024 going so far?

We asked members of our Indago supply chain research community that question a couple of weeks ago. Only 10% said that the year is going “Worse” than they had expected back in December 2023. All of our members, however, are shippers. If we had asked carriers, I’m sure the percentage would have been much higher based on the news this week.

“Shares of U.S. trucking firms fell on Wednesday, after dismal quarterly numbers from JB Hunt Transport Services and Knight-Swift Transportation Holdings signaled a longer wait for a rebound in the freight industry,” reported Abhinav Parmar in Reuters.

Meanwhile, here are some excerpts from a Wall Street Journal article by Paul Berger::

A push by retailers and manufacturers to cut shipping costs is sending trucking industry hopes of an earnings rebound into a skid. 

Freight rates have been retreating for much of the year in the trucking sector’s spot market. Analysts and industry executives say longer-term contract prices are also declining as shipping customers focus on keeping inventories lean and logistics spending tight.

Analysts say the downward pricing spiral is the result of trucking capacity that remains out of step with broader efforts across American corporations to clamp down on the excess inventories that filled supply chains during the pandemic.

How should shippers respond to current market conditions? Should they start squeezing their carriers for rate reductions or should they hold steady knowing the pendulum will eventually swing in the carrier’s favor down the road?

I addressed those questions back in February 2016 when market conditions also favored shippers (see “Time To Squeeze Carriers For Better Rates?”). I recommend you read the post for my analysis and comments at the time, which are still relevant today. I’ll end today the same way I ended that post:

The better question to ask today is not whether the time is right to squeeze carriers for better rates, but whether the time is right for both shippers and carriers to examine the foundation of their relationship. 

How much do we trust each other today? Why don’t we trust each other more? Can we achieve greater things together if we work on strengthening our trust? How do we get there?

Questions to think about and discuss in the coming days. Then post a comment and share your perspective on this topic.

And with that, have a meaningful weekend!

Song of the Week: “Run Away With Me” by Cold War Kids