Better days ahead—eventually—for U.S. trucking industry
Anyone who does business in or with the United States should be concerned that the last few years have not been kind to the for-hire trucking industry.
Keen observers of supply chain developments know that the state of the U.S. trucking industry offers clues to the overall health of the country?s economy. Moreover, motor carriers? problems are likely to have some impact on their customers? supply chain performance.
For those reasons, anyone who does business in or with the United States should be concerned that the last few years have not been kind to the for-hire trucking industry. High fuel prices exacerbated the effects of the recession even before the financial crisis began to unfold in September of 2008. Individual shippers—indeed, entire industries—have reduced their demand for transportation services as their own operations have felt the effects of the tough economy. IHS Global Insight has estimated that by the end of 2009, total freight tonnage moving on America?s highways will have dropped by some 20 percent from its peak in 2006.
Article Figures
[Figure 1] For-hire motor carrier tons forecast (2006-2015)Enlarge this image
[Figure 2] LTL yearly growth rate forecast (2009-2015)Enlarge this image
Figure 1 shows this decline as a percentage of total tonnage carried in 2006 by both less-thantruckload (LTL) and truckload (TL) carriers in the United States. As the graph indicates, the decline was very steep and unfolded quickly, giving carriers little time to react to rapidly changing market conditions.
Note that from 2006 to 2007 truckload carriers suffered a much worse decline in tonnage than did the LTL sector. During economic downturns, truckload operators are likely to suffer earlier than LTL carriers because the decline in order volumes makes it harder for shippers to move goods in full trailer loads. That is also the reason why LTL tonnage is expected to recover to 2006 levels before the truckload segment does.
Given such a significant decline in freight volumes, truckload carriers will have to be creative if they are to keep their trucks moving. In fact, there is some evidence that truckload companies are working in conjunction with third-party logistics providers to make a play for freight that traditionally has been handled as LTL. This development is one reason why LTL carriers are likely to experience a steeper drop-off in tonnage from 2008 to 2009 than is expected for truckload carriers.
Capacity continues to contract
At present, motor carriers are responding to the downturn by reducing capacity. One way they are doing so is through fleet reductions and delayed vehicle replacements. The poor economy has meant that carriers are unable to afford new equipment and there is not enough freight demand to justify fleet expansion. U.S. manufacturers have seen a dramatic drop in sales of Class 8 heavy-duty trucks since 2006, from 284,000 units to a projected 92,500 in 2009. Sales are projected to increase only slightly in 2010 before rebounding, albeit to levels that will remain below their 2006 peak.
The trucking industry is also losing not just jobs but entire companies. Donald Broughton, an analyst with the investment bank Avondale Partners, reported that in 2008, more than 3,600 trucking companies went out of business and an additional 480 closed their doors in the first quarter of 2009. In January of 2009 alone, the American Trucking Associations reported, the industry lost 25,000 jobs. The majority of these closures occurred through bankruptcies of smaller carriers, mostly in the truckload sector. All together, these losses account for more than 7 percent of the industry?s capacity that is no longer operating on U.S. highways.
The contraction has been particularly pronounced in the less-than-truckload sector. Because LTL carriers generally require more infrastructure than their full truckload compatriots, they often must do more than simply park trailers to reduce their capacity and expenses. YRC Worldwide, for instance, cut 10 percent of its work force in the first three months of the year and closed or consolidated nearly 200 terminals, including about 30 operated by its regional affiliates, USF Holland and USF Reddaway. YRC Chairman, President, and CEO William Zollars has said that the merged operation (which also reflected the integration of YRC?s Yellow Transportation and Roadway Express units) cut the company?s overall capacity by 35 percent.
Among the other top LTL carriers, Con-way Freight closed 40 terminals in the first quarter of 2009, and in February, FedEx Freight cut 900 positions at 150 of its facilities. All in all, about 8 percent of the LTL capacity in the United States has already left the market, according to analysts. This is still smaller than the 14-percent drop in LTL tonnage seen from 2006 to 2009.
Even though the short-term situation looks grim, less-than-truckload tonnage is expected to rebound to 2006 levels within the next five years. Nationally, the sector should grow at an average rate of roughly 3 percent per year until 2015. But as Figure 2 illustrates, that growth will not occur uniformly throughout the United States. IHS Global Insight?s forecast for total originating and terminating LTL tonnage growth rates, broken down by U.S. Census division, calls for the fastest growth to occur in the Mountain states— almost a full percentage point higher (3.9 percent) than for the country as a whole.
Should LTL carriers shed more capacity, as seems likely, they would do well to avoid closing facilities in the faster-growing regions and avoid ceding markets they may have to re-enter as the economy recovers. Instead, they can focus on scaling down in those regions where growth is likely to be slower, such as the Northeast or Upper Plains states. Perhaps more importantly, as more carriers shed terminals, those properties will become available at lower cost than in the past. By paying attention to regional and local freight trends, a carrier may be able to pick up a bargain-priced terminal in a growth area.
The current situation is not very promising for motor carriers, but a crisis can also provide an opportunity for the enterprising trucker. It will be interesting to see how many motor carriers seize the opportunity to prepare for the upturn, and at what point they choose to do so. For as soon as carriers begin making such moves, it will indicate that they believe the economy is about to bounce back.
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Businesses were preparing to deal with the effects of the latest major storm of the 2024 hurricane season as Francine barreled toward the Gulf Coast Wednesday.
Louisiana was experiencing heavy rain and wind gusts at midday as the storm moved northeast through the Gulf and was expected to pick up speed. The state will bear the brunt of Francine’s wind, rain, and storm damage, according to forecasters at weather service provider AccuWeather.
“AccuWeather meteorologists are projecting a storm surge of 6-10 feet along much of the Louisiana coast with a pocket of 10-15 feet on some of the inland bays in south-central Louisiana,” the company reported in an afternoon update Wednesday.
Businesses and supply chains were prepping for delays and disruptions from the storm earlier this week. Supply chain mapping and monitoring firm Resilinc said the storm will have a “significant impact” on a wide range of industries along the Gulf Coast, including aerospace, life sciences, manufacturing, oil and gas, and high-tech, among others. In a statement, Resilinc said energy companies had evacuated personnel and suspended operations on oil platforms as of Tuesday. In addition, the firm said its proprietary data showed the storm could affect nearly 11,000 manufacturing, warehousing, distribution, fabrication, and testing sites across the region, putting at risk more than 57,000 parts used in everyday items and the manufacture of more than 4,000 products.
Francine, which was expected to make landfall as a category 2 hurricane, according to AccuWeather, follows the devastating effects of two storms earlier this summer: Hurricane Beryl, which hit the Texas coast in July, and Hurricane Debby, which caused $28 billion in damage and economic loss after hitting the Southeast on August 5.
The Raymond Corp. has expanded its energy storage solutions business with the opening of a manufacturing plant that will produce lithium-ion and thin plate pure lead (TPPL) batteries for its forklifts and other material handling equipment. Located in Binghamton, N.Y., Raymond’s Energy Solutions Manufacturing Center of Excellence adds to the more than 100-year-old company’s commitment to supporting the local economy and reinvigorating Upstate New York as an innovation hub, according to company officials and local government and business leaders who gathered for a ribbon cutting and grand opening this week.
“This region has a rich history of innovation,” Jennifer Lupo, Raymond’s vice president of energy solutions, supply chain, and leasing, said in welcoming attendees to the ribbon cutting ceremony Monday.
Lupo referred to the new factory as an “exciting milestone” in Raymond’s history and described it as the next step in the company’s energy storage solutions business, which began nearly 10 years ago with the development of a lithium-ion battery to power its “walkie” pallet jack. That work has expanded to include larger batteries and other technologies to support battery-electric equipment.
“We’re not just keeping up with the electrification movement,” Lupo said. “We’re leading it.”
Raymond, a business unit of Toyota Material Handling, has been building forklifts, pallet jacks, and other material handling equipment at its nearby Greene, New York, headquarters since 1922. The Binghamton factory supports local efforts to boost manufacturing and innovation in New York’s Southern Tier, which was recently designated as a regional technology and innovation hub by the Biden Administration.
Raymond is leasing the 124,000 square foot facility at 196 Corporate Drive, situated in an established industrial park. The manufacturer is currently utilizing just 10,000 square feet of the space to produce its 8250 lithium-ion battery, which can power Raymond’s class 1 and class 2 fork trucks, as well as a smaller TPPL battery for powering pallet jacks.
The Binghamton factory employs 15 people, but the company expects to scale up quickly in space and personnel, adding 12 to 25 employees next year and ramping up to 60 employees by 2027, according to Jim Priestly, battery manufacturing manager for energy solutions at Raymond.
The Binghamton facility also represents Raymond’s larger commitment to helping develop greener, more sustainable supply chains, according to company President and CEO Michael Field.
“We recognize energy’s critical role in shaping our future,” Field told attendees at the grand opening, adding that Raymond is seizing the opportunity to participate in the clean energy transition locally and beyond.
“This facility is just the beginning,” Field said.