Demand > capacity - FreightWaves |

Welcome to the WHAT THE TRUCK?!? newsletter. In this issue, what carriers are doing about capacity, how SMEs are managing the freight storm, Knight-Swift picks up AAA Cooper and more.

Demand > supply

Truckin’ — With more than 1-in-4 contracted dry van loads getting rejected, one has to wonder if the trucking industry is doing enough to add capacity. FreightWaves CEO Craig Fuller tweeted, “Fleets have added 42k new trucks for hire since the start of the year. Capacity up 2.6%. Volume up 13%.” So how does the industry create more capacity?

Jobs — According to the BLS’ June employment report, released Friday morning, total jobs in truck transportation on a seasonally adjusted basis rose 6,400, the biggest gain this year. The optimism may end there though as Jason Miller, an associate professor of logistics at Michigan State, says, “While the headline figure for the entire sector is certainly encouraging, the data through May provide no evidence of long-haul carriers being able to ratchet up employment to meet demand that is at or near record levels.” How about that driver shortage? According to the ATA’s Quarterly Employment Report, the annualized turnover rate at large truckload carriers averaged 90% in 2020, down one point from 2019. Another minor positive, but one that doesn’t keep pace with demand.
Equipment — Don Ake, FTR Transportation Intelligence vice president of commercial vehicles, said during a webinar last month, “Most fleets have ordered all the trucks they need for 2021. They are getting frustrated because production is unable to keep up with demand. Carriers need more trucks on the road now, but semiconductors and other component shortages continue to restrict production.” Although all indicators point to a prolonged bull trucking market, in a cyclical business like freight, when capacity arrives and when it’s needed rarely align.

For 2022, IHS Markit is predicting a demand growth of 4.9% and a capacity growth of 3.2%. That’s bad news for the customer side. In 2023, demand growth again outstrips capacity growth 3.1% vs 2.1%. — Patrik Berglund, CEO and co-founder of Xeneta

Ocean — While the demand-to-capacity imbalance isn’t nearly as bad with ocean freight as it is with inland, shipping by sea has had its own tsunami of issues. OceanAudit’s Steve Ferreira has dubbed it “containergeddon” for a reason. By March, the Port of Los Angeles had shattered all previous congestion records as 20+ container ships sat at anchor per day. Also in March, the Ever Given, which will finally be released Wednesday, snarled traffic into Europe and the U.S. East Coast. In June, an OOCL vessel knocked over a gantry crane in Kaohsiung and Yantian canceled over 300 port calls due to COVID restrictions. It may not be Christmas in July but for smart importers, securing slots for holiday freight is already underway — and some are paying upward of 600% more per container to do it.

How are small businesses weathering the storm?

It’s a small business after all — Small and medium-size enterprises (SMEs) are often the hardest hit in markets like these. They typically don’t have the advantages larger businesses do of supplier diversity or the same volumes to leverage with carriers. FreightWaves’ Noi Mahoney reports, “Around 64% of 2.4 million SMEs surveyed in May by KfW Research are still struggling with the consequences of the coronavirus pandemic, according to a recent study.” The numbers are even more grim for manufacturing SMEs, 75% of which have experienced supply chain disruptions.

Just dealing with the slowdown in global shipping, being able to get onto a container and then getting it out of the port has been a challenge. For now we’re absorbing the cost of shipping containers. This means higher costs and longer lead times. It’s an industrywide problem, not just an issue Zoomo is facing. — Mina Nada, CEO and co-founder of Zoomo

The BOM — It’s not just about moving the freight. For many shippers, even completing a bill of materials can be a challenge. E-bike company Zoomo has been struggling to match up components such as parts for crank sets, brakes, shifters, cassettes and cables. Hyliion’s Thomas Healy shed some light on the subject during FreightWaves Insiders: “If you’re launching products … let’s say you have a BOM that’s a thousand parts … it’s going to be like three parts that are ultimately going to prevent you from getting that product out there.”

Lead me on — So what’s an SME to do when one feels like a cat being scolded in front of a plate of vegetables? Ned Lilly, CEO of xTuple, a manufacturing and distribution software company, suggests SMEs get intimate with the details of their supply chain. “What are my raw material costs? How long does it take suppliers 1, 2 and 3 to get these things to me? What does that cost me? What are my production costs? What are my labor costs? How quickly are these things moving through the factory? It’s that visibility into every point in the process that helps you make the right decisions,” Lilly told FreightWaves’ Mahoney. Right now that also means pulling freight forward weeks to months in advance to meet extended lead times.

Why does Knight-Swift need AAA?

Cleanup on AAAisle 5 — FreightWaves’ Todd Maiden reports, “The nation’s largest truckload carrier, Knight-Swift Transportation, announced Tuesday it has acquired less-than-truckload carrier AAA Cooper Transportation in a transaction with an enterprise value of $1.35 billion.” Why does Knight-Swift need a middling LTL carrier? After losing out on a bid for Roadrunner in March, it appears the carrier still wanted a piece of the action in LTL. FreightWaves’ John Paul Hampstead notes that the key to that answer may rest in the carrier’s name.

Not Taylor Swift — “Remember that in 2017 when Knight merged with Swift, Swift was a decidedly underperforming carrier in the TL space,” Hampstead tweeted. “Now, of course, Swift looks great, as the astonishing recovery of its operating ratio attests.” Under Knight-Swift management, AAA may look like a blank space for a turnaround. While AAA Cooper’s overall weighted performance score (99.59) trails regional competitors, Knight-Swift may be saying, “I knew you were in trouble but we can shake it off as there’s no bad blood and you belong with me.”

Alexa, can you change your name?

Bully up — Be it glasses, weight, clothing or even your name, unfortunately kids can often be cruel before they are kind. Fox32 Chicago reports, “Parents are calling on Amazon to [change Alexa’s name] after a teenage girl named Alexa legally changed her name after being bullied for having the same name as Amazon’s smart speaker assistant.”

She started to not want to introduce herself because of the jokes and the backlash. — Alexa’s mother to the BBC

What’s in a name? — The U.K.-based family Fox 32 spoke with claims their daughter went so far as to legally change her name, cut off friends and move school systems. Massachusetts-based Lauren Johnson started a letter-writing campaign called “Alexa is a human” because her daughter was being bullied at school and camp. Amazon told the BBC in a statement: “As an alternative to Alexa, we also offer several other wake words customers can choose from, including Echo, Computer and Amazon. We value feedback from customers, and as with everything we do, we will continue to look for ways to offer them more choice in this area.” Of course, that would only really work if everyone manually switched their Alexa’s name to Computer and everyone began calling it that. Seems unlikely TBH.

The Karen conundrum — Alexa isn’t the only name that children have weaponized against their peers. Numerous petitions and Facebook groups such as Karens Who are Against Karen Memes have popped up across the internet after the Karen meme went viral last year. Karen has even been turned into a controversial horror movie. In fact, only 325 Karens were born last year in the U.S. For comparison, there were 6,052 Alexas born in 2015 but only 1995 born in 2019.

ATTENTION: Send me your dogs and win a ticket to F3

Dog days of freight — It’s officially the dog days of summer and in honor of that we will be showcasing the dogs of the people that make freight happen. Want to see your best friend on an episode of WHAT THE TRUCK?!? Simply reply to this email with a picture of your dog(s), its name and one fact about him/her. The first litter of pup pics will be on Wednesday’s episode of the show. By submitting your dog you’ll be entered to win a ticket to F3!

Speaking of dogs — According to the Oklahoma Highway Patrol, a quick-thinking trucker saved a lost dog caught in the rain on the Turner Turnpike. The incident occured last Thursday when the trucker saw the husky roaming around. Upon pulling over, the scared canine crawled under the driver’s trailer before a trooper was able to convince the good boy to climb in his car. CDLLife reports, “The dog was taken back to central dispatch to be taken care of until they could locate its owners.”

WTT Wednesdays

WTT airs live on FreightWavesTV Monday-Wednesday-Friday at noon et and on podcast players everywhere

Wednesday — Edmund Zagorin, founder and CEO of Bid Ops; KJ McMasters, founder and president of Talent Solvers; and Grace Sharkey, reporter at FreightWaves.

Friday — Glynn Spangenberg, CCO of Locomation; Kristy Knichel, president and owner of Knichel Logstics; and Jon Cox, senior director of solutions design at DHL Supply Chain.

Catch new shows live at noon ET Mondays, Wednesdays and Fridays on FreightWavesTV, FreightWaves LinkedIn and Facebook or on demand by looking up WHAT THE TRUCK?!? on your favorite podcast player.

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