Insight from CSCMP
By Oct 19, 2016 oncomments powered by Disqus
I attended the Council of Supply Chain Management Professionals annual conference last week in Orlando and came away with optimism for the future
Not only is technology evolving quickly but also the quality of the young professionals is high. As companies hit a retirement bubble with baby boomers leaving along with the decades of experience they carry, it is good to see young people pursuing their supply chain logistics careers.
I’m honored to participate in a Kansas City SmartPort trade mission to Cuba where we will be touring the port and cargo facilities while meeting with various Ministers. In my next blog, I will describe those meetings and report on what I see.
In the meantime, there is economic data to look at and how it is affecting the logistics sectors.
Manufacturing rebounds in September
U.S. manufacturing expanded modestly in September after shrinking in July. The Institute for Supply Management’s (ISM) index rebounded to 51.5 from August’s 49.4 reading that marked the first contraction in six months. A reading above 50 signals growth.
New orders and production expanded showing that the manufacturing landscape is improving. The ISM new orders metric jumped to 55.1 from 49.1 the prior month for the largest increase since March. Production increased to 52.8 from 49.6.
The ISM measure of factory inventories edged up to 49.5 after 49, while order backlogs increased to 49.5 from 45.5. The index for customer stockpiles climbed to 53 from 49.5.
Consumers become more optimistic
After four months of feeling negative, the University of Michigan’s Consumer Survey said confidence rose in September, as Americans grew more upbeat about the prospects for incomes and low inflation. The sentiment index rose to 91.2 from 89.8 in August. Lower gasoline, grocery costs coupled with moderate wage increases are keeping Americans optimistic that their incomes will stretch further.
As a result, consumers are spending carefully while GDP grows slowly
The Commerce Department reports that consumer spending held steady in August turning cautious after several months of strong gains. Consumers will continue contributing to economic growth in the third quarter after the second quarter spurt in spending.
The Commerce Department also reports that the gross domestic product grew at a 1.4 percent annualized rate from April through June, which is higher than originally estimated. Purchases for the household jumped 4.3 percent while business investment was slow. The savings rate increased from 5.6 percent to 5.7 percent. Durable goods purchases (products with a life of three years or more) fell 1.3 percent reflecting the slowdown in auto purchases.
Housing is still strong
The Case Shiller Index rose 5.1 percent as showing that year-over-year prices continue to increase. The housing sector is looking good with gains in everything from new home construction to sales of existing homes. Multi-family housing continues to boom.
Industrial real estate continues to soar
Owners of industrial real estate portfolios are cutting a fat hog with rising lease rates in this hot real estate market. Prologis reported revenues up 18 percent as rents push for new highs.
Vacancy is below 5 percent in most markets as shippers follow the Amazon model to locate stocks in more locations and e-commerce proliferates. No one wants to be out of stock so inventory levels remain high as products are located closer to consumers in multiple locations.
Trucking remains soft but signs show market changes coming
DAT reports that in the week ending October 1st load availability increased yet the national average mileage rate for dry vans fell two cents a mile to $1.62. West coast outbound markets saw rates rise while rates for flatbeds and reefers held steady.
Pricing is tracking below the five-year average but DAT load-to-truck ratios are higher than they were at this time last year so this may be a sign that we are seeing the bottom.
The Cowen-Chainalytics Freight Indices report compares spot pricing to contract rates and it is showing that spot rates are exceeding contract rates. This is an improvement benefiting carriers. This is the first time in a year that this trend developed and it is another sign that the carriers could be on the path to a better pricing environment.
In the meantime, shippers are continuing to push for lower rates without regard to what is needed to operate and maintain a fleet of equipment and drivers. When the pendulum swings back to tightened capacity, these are the first shippers who will have the hardest time finding trucks. The Hanjin lesson should be learned that downward pressure on rates regardless of the financial needs of the carrier will result in that capacity being taken from the marketplace.
Railroading still slow
The Association of American Railroads (AAR) today reported weekly U.S. rail traffic, as well as volumes for September 2016.
Carload traffic was down 5.4 percent in September and intermodal traffic fell 4.2 percent when compared to September 2015. Combined operations were off 4.8 percent. Nine of 20 commodity categories tracked by AAR saw carload gains including grain (+11.2 percent), waste and nonferrous scrap (+7.5 percent), and nonmetallic minerals (+7.5 percent). Primary metals, coal and petroleum, were all down. Excluding coal, carloads were off 1.1 percent.
For the week ending October 1 2016 total loadings were down 4 percent from the same week in 2015. Carloads were off 4.4 percent and intermodal loads fell 3.5 percent in the period.
Wagner Logistics is rolling
Parking lots are full at Wagner locations as we prepare shipments for Black Friday in advance of the heavy shipping season. Three new distribution centers have opened in the last 12 weeks and we are looking forward to ending the year on a high note.
Our thoughts and prayers are with the Wagner associates at our Florida locations as they batten down the hatches at the time of this writing and evacuate in advance of hurricane Matthew. Products are secured and people are moving out of harm’s way. Be safe!
Wagner’s transportation group remains busy planning loads for on-time delivery as we have added business. All of our new dedicated trucking operations are operational and we excited about the growth in this portion of Wagner’s service offerings.
If you have a project for a distribution center in your network (or 2 or 3) please think of Wagner. If you are looking to release a transportation RFP please give Wagner a shot. 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.