Transportation

Transportation Capacity Issues Cause High Inventory Numbers

February 8, 2022 by Levinson and Stefani Leave a Comment

“Because capacity is low and costs are high, it is difficult to move inventory efficiently,” said the Logistics Managers’ Index in regards to its latest survey measuring activity within the nation’s supply chain. “This combination of low capacity and high costs likely led to over-ordering this past Fall, and to goods idling at points in the supply chain where they could not be purchased by customers.”

LMI’s supply chain data shows 12 months in a row with a reading of more than 70–a level of “significant expansion” which depicts inventory throughout the United States supply chain continuing to accumulate without sufficient transportation available to quickly turn it.

Logistics Managers’ Index reports are released regularly by the Council of Supply Chain Management Professionals in collaboration with researchers and experts at Rutgers University, the University of Nevada at Reno, Arizona State University, the Rochester Institute of Technology, and Colorado State University.

“Researchers from leading logistics and supply chain schools are conducting a long-term survey with the goal of identifying trends and developments in the logistics industry over time,” LMI explains on its website. “This data will be used to generate knowledge and content relevant to the logistics industry. Logistics metrics such as transportation, warehousing, and inventory are leading economic indicators, and can point towards potential movements in the overall economy.”

Survey responses allow LMI researchers to continuously analyze the trending movement of these metrics.

“In our monthly survey, we gather the responses of over 100 professionals on the movement and direction of key logistics metrics,” the site continues. “These metrics are aggregated into the Logistics Managers’ Index, which is released on the first Tuesday of every month.”

Specifically, the index rose to 71.9 in January–an increase of 1.8 percentage points. Any reading higher than 50% indicates significant expansion, and a reading under 50% shows contraction. Additionally, the inventory levels’ subindex rose by 9.5 points in January to reach 71.1, which marks the highest recorded growth rate shown since the beginning of 2018. This set of data itself has risen a total 12.3 points throughout December and January.

On top of this, January also saw the inventory costs index rise to 87.9–an increase of 3.9 points.

“Excess inventory in the system is eating up more capacity and causing costs to increase further,” LMI continued. “Essentially, low capacity and high costs led to higher levels of inventory, and now higher inventory is leading to even less capacity and higher costs.”

Costs are reaching record-breaking highs at this point, according to LMI’s warehousing metrics, with space for these goods dwindling rapidly. Capacity within warehouses has continued to stay in a state of contraction with a reading of 47.1, although capacity itself has risen by 0.6 points overall. These capacity numbers have been worsening consistently for the past year-and-a-half.

“The limited availability is encouraging retailers to acquire upstream distribution centers to ensure they have somewhere to store their goods,” LMI’s report noted as warehousing prices data show an increase of 3.8 points, reaching 85.9, and warehouse usage rising 3.7 points to 71. “Until more capacity is available, the growing appetite for e-commerce will keep costs high.”

For nearly a year now, warehouse pricing indices and inventory cost indices have been showing readings reaching 80 or higher–a staggering trend, LMI added.

Additionally, transportation utilization data showed an increase which reached 62.4, with transportation prices reaching 88.7–an increase of 1.1 points. The transportation usage growth rate declined by 4.7 points between December, and transportation prices stayed above a reading of 80 for the 18th month in a row. In January, the transportation capacity subindex rose by 2.1 points to reach 44.8, showing a consistent decline in capacity speed for the third month in a row. For 20 straight months, this particular subindex has been considered to be in a state of contraction.

“Generally, inventory costs are low in January and then increase throughout the rest of the year,” the report explained. “It will be interesting to see if this pattern continues in 2022.”

A Look Back on 2021’s Top Industry Events

January 12, 2022 by Levinson and Stefani Leave a Comment

2021 was a year like no other for the trucking industry, complete with vaccine mandate debates, higher-than-ever demand from the latest surge in e-commerce, supply chain disruptions, and an ongoing need for major infrastructure improvements.

Here’s a look back at some of the most prominent news the industry saw during the second year of the coronavirus pandemic.

Supply Chain Woes Continue

Truckers and ship workers alike waited for solutions in regards to crowded ports with long pickup and unloading lines, which were often reaching numbers of nearly 100 ships waiting to unload at a time. Now, supply chain disruptions have been a common concern among industry members and the public alike, with folks constantly worried about store shelves staying stocked and members of Congress struggling to find ways to more quickly create solutions.

These issues did urge the White House, along with Congress, to negotiate new legislation aiming to improve vast amounts of American infrastructure, though.

Infrastructure Bill Passes

The $1.2 trillion Infrastructure Investment and Jobs Act was approved, allocating $115 billion for bridge and highway improvement projects across the nation, passed by 215 Democrats and 13 Republicans voting in its favor.

Truck Driver Shortage

The trucker shortage is still one of the most pressing issues to impact the industry, with trucking companies rolling out pay boosts and benefit improvements to incentivize more trucking candidates to come on board.

Additionally, the Biden administration announced its plans to boost retention of current truckers and recruitment of new ones with the 90-day Biden-Harris Trucking Action Plan. In the plan, carriers, drivers, and unions will be invited to listening sessions to find ways of improving trucker work-life balance, pay, and detention and delay issues. Additionally, experts will work to find ways of attracting more military veterans into the industry, supporting pilot program training and licensing for drivers between 18- and 21-years-old to drive within interstate commerce, incentivizing more women to explore careers in trucking, providing assistance to states with CDL process challenges, and creating further apprenticeship opportunities for drivers.

COVID-19 Rages On

The workforce of truck drivers has dwindled further as some catch the disease, and others leave due to health concerns or a refusal to become vaccinated. Mandatory vaccinations and testing are both in the works for the industry, especially for companies with 100 or more employees. The mandate has reached the Supreme Court, which heard oral arguments on the issue last week.

Additionally, both U.S. and Canadian governments will set forth requirements next month mandating that truckers crossing borders be fully vaccinated.

Still, freight demand is at unprecedented highs as more and more people complete most of their shopping online, a culture of e-commerce that skyrocketed at the beginning of stay-at-home orders early on in the pandemic.

Electric Vehicles Take Reign

Various truck and passenger vehicle manufacturers are expanding choices when it comes to electric vehicles, with many states beginning to mandate electric-vehicle-only manufacturing laws that will come into effect in the coming years.

With these technological changes, many truck drivers are having to learn to adapt to a plethora of new in-cab software and phone application usage while on the job–a modern shift that is believed to be causing many older truck drivers to leave the industry early.

Truck Driver Pay Expectations Reach New Heights

Carriers constantly announced pay jumps for their truckers in 2021, with many also boosting driver benefits multiple times over the span of the year. In fact, driver pay ranked third in the American Transportation Research Institute’s annual list of top industry issues.

Fleets, in a bid to retain and recruit as many truckers as needed in the midst of the driver shortage, began offering sign-on bonuses as high as $15,000, with others increasing accessorial pay and health benefits, along with various new compensation programs to give drivers more control in regards to how they’re paid.

Mitigating pay losses during long shipping and receiving wait times continues to be an issue for truckers, but Biden’s Trucking Action Plan will aim to “lay the foundation for a next-generation trucking workforce that will strengthen U.S. competitiveness and support millions of good driving jobs for years to come.”

Consumerism Rages On Despite Pandemic Setbacks, New Statistics Show

January 1, 2022 by Levinson and Stefani Leave a Comment

2021 has been a year of consumer demand unlike any other–the coronavirus pandemic brought with it stay-at-home orders and folks rushing to online shops to have their home and personal care goods delivered quickly, a culture of modern shopping habits that is likely here to stay.

America’s truck drivers stepped up to the plate to keep the economy moving forward and to get products to store shelves and front doors efficiently, working harder than ever to keep customers happy and shops stocked. Because of this, the country’s shopping methods have changed drastically, with online purchases becoming a part of daily life for most people.

Now, American consumer confidence has risen significantly even as prices continue to rise and the virus’ latest variant makes its way across the world. In fact, although U.S. consumers admit their perception of overall conditions has dropped, their outlook into 2022 is a positive one–a perspective that is suprising consumerism experts.

Last week, business research organization, the Conference Board, noted that its consumer confidence index rose from 111.9 in November to 115.8 in December–it’s highest index number since July of this year. The consumer confidence index factors in current consumer perspectives regarding the present consumer conditions at hand, as well as public outlook for consumerism in the near future.

Apparently, although prices have been increasing lately at the fastest year-over-year rate since 1982, consumer inflation expectations are looking much more positive in December 2o21. Experts attribute these assessments to the falling gasoline prices that have been seen at gas stations across the country over the last month or so.

“Despite high inflation and the rising omicron wave, consumers are bullish on 2022,” said Navy Federal Credit Union economist, Robert Frick. “This reflects growing economic momentum, as job openings remain high and prices are dropping at the pump.”

These outlooks show overall positive changes on the horizon for consumerism in the coming months, and for this aspect of the economy in general, Frick noted.

“This is further evidence that consumer spending will keep rising and be the main factor fueling the expansion,” he said.

In regards to the alleviation of ongoing port bottlenecks and other factors in relation to price hikes and product shortages, President Joe Biden recently met with his supply chain disruptions task force to discuss the group’s ongoing, progressive efforts to bring lasting solutions to these issues. He noted that product availability on store shelves across the country has reached 91%–near its pre-pandemic numbers, and that inventory within various retailers has risen 3% from 2020.

This is a particularly positive sign, as most will remember the shock of seeing so many empty shelves in stores nationwide at the height of the pandemic, when opportunities to purchase sanitizing and clearing products, toilet paper, and even many kinds of foods were few and far-between.

“Packages are moving,” said Biden during his late-December task force meeting. “Gifts are being delivered. Shelves are not empty.”

These latest consumer numbers, collected for the first time since the coronavirus’ omicron variant appeared, shows a strong recovery in the country’s overall economy following the challenges of the recession brought about by the pandemic in 2020. Still, this latest variant may indeed threaten this newly-obtained economic strength, experts say.

Additionally, a recent Commerce Department report shows that American consumer spending decreased between October and November of this year, although holiday season shopping ramped these numbers back up quickly–regardless of any significant product shortages or higher-than-normal prices.

The sales report from November has not yet shown any consumer impact in relation to the omicron variant, however, and the additional uncertainty may bring about further consumer behavior changes.

Still, after making it through 2020 and 2021, these kinds of challenges are now to be expected.

“Looking ahead to 2022, both confidence and consumer spending will continue to face headwinds from rising prices and an expected winter surge of the pandemic,” said the Conference Board’s senior director of economic indicators, Lynn Franco.

Shipping Emissions Rise Again During Pandemic-Caused E-Commerce Boom

October 15, 2021 by Levinson and Stefani Leave a Comment

“Global trade is growing, and that means emissions will come up from transport,” said head of agricultural trading company Cargill Inc., Jan Dieleman. “Container fleet is speeding up, so emissions from that sector are going to be up, not down.”

Emissions in general are rising rapidly once again following the ever-increasing e-commerce orders brought about by the pandemic. With more people than ever heading online to buy their household items, clothing, and just about everything else, more and more fuel is burning with the heavy demand on container fleets.

Additionally, we’re in the midst of a natural gas shortage as these shipping emissions numbers meet new heights. Electricity production is turning toward further fuel oil and coal usage, even though the sector previously predicted emissions would be much lower this year than in 2020.

For Cargill, the company regularly brings in hundreds of vessels to meet the demand of the maritime industry, and while doing so, works to monitor fuel consumption and emissions numbers as accurately as possible. The shipping industry itself is a bigger source of carbon emissions than many realize–the American shipping industry releases more carbon than the United Kingdom and France combined.

The industry has pledged to cut this emissions in half by the year 2050, even while global trade continues to grow.

According to Dieleman, COVID-19 has caused further employee shortages that is leading to port congestion and heavily delaying container loading and unloading processes. Some freight trade companies have begun shipping their loads in bulk products instead of in regular containers, he added, noting that freight shipping activity is “back to the heydays.”

Additionally, although commodity shipments (including shipments of coal) are expected to remain steady into 2022 and coal trade will likely boom when China lifts import restrictions during the winter, energy prices are skyrocketing, and emissions will likely not become as bad as they were at the worst around 2008. This is due to so many industries currently being focused on efficiency and fuel-saving technology–especially within the supply chains.

The International Maritime Organization aims to reduce emissions pollution as quickly as it can, but is still working out the process of doing so as the organization only has oversight regarding shipments at sea and not the entire emissions life cycle. Some potential solutions include a carbon dioxide tax as well as a research and development fund of $5 billion. IMO also announced its intention to restart discussions surrounding potential market-based measures in a formal capacity–a carbon market-adjacent initiative.

Industry experts are also looking to a possible increase in tanker recovery sooner than later as the pandemic’s effects lessen, a likely change from the current dry freight boom that continues on–especially as people once again begin spending money on experiences, outings, and travel once again. As of now, the shipping industry hasn’t been ordering sufficient numbers of ships, and still needs clear emissions standards in order for new investments to come in.

“If you are a ship owner and you want to add capacity, what are you going to buy?” Dieleman asked. “What technology are you going to buy? Who is going to finance you and under what [kinds] of conditions? So, we’ve seen very little ordering the dry bulk.”

He explained that right now, the outlook of the industry’s short-term future is clear.

“If you take a little bit of growth in global trade going forward and the number of ships coming to the water, you have a pretty constrictive picture.”

Because IMO works globally and must take into account all intentions and interests from countries across the globe, the potential new carbon market has seen little progress. The United States’ industry often looks to that of the European Union, which has recently announced its goal in including shipping within its Emissions Trading Scheme.

“To some extent, it would be great if it’s all regulated globally, but I think the issue you’re going to have is that it’s not going to go fast enough,” Dieleman added. “It’s going to be probably the lowest denominator. And why would you not let certain jurisdictions go more aggressive?”

$274 Billion Dedicated to Transportation, Buttigieg to Oversee $105 Billion

August 14, 2021 by Levinson and Stefani Leave a Comment

$274 billion in new funding will be dedicated to the transportation industry as part of a $550 billion infrastructure spending package.

This is an unprecedented amount of funding to be allocated toward American bridge, highway, road, port, rail, transit, and airport improvement projects, which comes through the latest bipartisan Senate infrastructure bill. This 2,702-page legislation will also allow Pete Buttigieg, Transportation Secretary, to have complete oversight regarding a $105 billion portion of those funds.

The bill comes after collaborative efforts between 11 Democrats and 11 Republicans have been underway and will have significant effects on EPA and Interior and Energy Department programs and the funding allotted for them. Still, though, it appears that the Department of Transportation will be coming out on top.

In fact, DOT will receive the majority of new funds, including $105 billion allocated for DOT grant programs, according to Eno Center of Transportation‘s Jeff Davis. Although all programs awarding grants must follow certain regulations, discretionary grants distributed by the transportation secretary have come out to be “way more than any other grant,” according to Davis.

The breakdown: $66 million will be dedicated to rail improvements, including $58 billion for Amtrak’s national railroad network, its federal and state partnerships regarding intercity rail capabilities, and its Northeast Corridor. The bill’s appropriations title, which is a supplemental spending fund, will distribute $1.2 billion annually to Amtrak’s Northeast Corridor–coming out to $6 billion a year. Over the course of the next five years, all of Amtrak’s networks will receive around $16 billion, and intercity passenger rail capabilities will receive $36 billion.

These funds for Amtrak are “transformational,” said Rail Passengers Association president and CEO, Jim Mathews. Although the legislation did not implement a passenger rail trust fund, the policies outlined in the new bill are extremely helpful, he added.

In fact, the legislation made clear that the transportation sector wants “to see [Amtrak] do a good job with the money [they] give [it], but [they’re] not trying to make [Amtrak] have a profit,” Mathews explained, noting that the language in the bill made clear that Amtrak is indeed a service supported by the nation’s taxpayers.

Additionally, transit will be offered a $19 billion increase in contract authority as well as $10.25 billion for new transit infrastructure grant funding as part of its overall $39 billion package. $8 billion will be allocated toward Capital Investment Grants regarding improvements and upgrades within light rail, commuter rail, heavy rail, bus rapid transit and streetcar transit projects. For accessibility station capabilities for persons with disabilities and the elderly, the bill awards another $1.75 billion.

The bill indicates that $118 billion will be taken from general revenue to help projects working to repair and improve roadways across the country, and that gas tax revenue will now fund the federal Highway Trust Fund. Highway projects themselves will also be given $110 billion, with $55 billion of that dedicated to contract authority and another $55 billion for other appropriations.

A pilot program for user fee implementation regarding vehicle miles traveled will also receive funding; however, legislators will need to find methods of solving issues surrounding current federal transportation policies, as well as how to help the Highway Trust Fund become much more efficient.

Federal dollars have also been repurposed in a way to generate revenue for transportation through the bill, including the $205 billion in federal funding for the coronavirus relief bill. For that particular bill, $3 billion was also repurposed from airline payroll support, although passenger airlines used the majority of their $40 billion payroll support packages during the course of the pandemic. Of the $4 billion allocated for payroll support within cargo airlines, only $1 billion was used, leaving the $3 billion up for grabs.

Finally, airports will receive $15 billion over the course of the next five years for tower and runway projects, $5 billion for FAA equipment and facility improvements, and $5 billion for other discretionary grants.

$1 Trillion Infrastructure Package in the Works, Senators Seek Public Support

August 13, 2021 by Levinson and Stefani Leave a Comment

“The pandemic that we have endured for more than a year laid bare the disparities in access to high-speed internet,” said Senator Susan Collins of Maine this month in regards to a $65 billion broadband package.

This funding comes as part of an almost $1 trillion infrastructure package recently developed by Senators now working to gain support from American citizens ahead of a vote that would bring a major boost to the priorities outlined in the plan.

“We have to do right by our Native people,” said Alaska Senator Lisa Murkowski, who explained that the legislation would help Native Alaskans in rural regions of the state gain more access to running water. The bill itself would allocate around $55 billion for wastewater and water systems in those areas.

“It is critically important we keep our aging bridges and roads and airports up to snuff,” said Senator Jon Tester regarding Montana’s piece of the pie, as $110 of the package’s funds would be dedicated to Montana road and bridge projects working to improve access to farms across the state.

“My state has lost as much land as in the entire state of Delaware,” added Louisiana Senator Bill Cassidy. “But other states are losing land, too.” For Louisiana projects aiming to reduce coastal erosion, the bill would offer around $16 billion for the U.S. Army Corps of Engineers to be able to see such efforts through.

The G-10 group of lawmakers that consists of five Democratic and five Republican senators has been working to address the concerns of citizens across the country in regards to improved internet service, road construction, and airports. Additionally, the group has been pushing for bipartisan efforts on Capitol Hill, although many interest groups within both parties have been targeting aspects of the package with which they don’t agree.

Still, though, package supporters have been confident the legislation will be approved by the Senate, although it doesn’t check all of everyone’s boxes.

“It is clear that the deal does not meet the moment on climate or justice,” said League of Conservation Voters’ senior vice president, Tiernan Sittenfeld.

In addition to concerns around climate change, other political leaders have argued that the package will move too far away from utilizing user fees like gas taxes or tolls to be easily able to fund highway projects. Additionally, some say the legislation will require further federal spending even after the $5 trillion government package allocated for coronavirus relief efforts.

This month, the Treasury Department made clear that Congress had been getting very close to the country’s overall debt limit.

“Every single time we add an enormous sum to our national debt, there is bipartisanship behind it,” said Utah Senator Mike Lee.

60 votes are needed for the smaller infrastructure bill to be amended and passed by the Senate, and Senate Majority Leader Chuck Schumer is determined to quickly pass the bill so that the Senate will be able to focus on the budget plan for the fall’s $3.5 trillion package. This Democratic bill will focus on spending in regards to environmental efforts, healthcare, and social programs.

Politicians working to allow further debate over the package have received support from Senate Minority leader Mitch McConnell. Still, though, McConnell has not made clear which way he will vote, but has referred to the legislation as having the potential to become a “bipartisan success story for the country,” although he is wary about Democrats working to expedite its amendment.

“Like a lot of us, I’m interested in what it looks like in the end,” he said, adding that “the past two administrations tried to do it, [and] were unable to. The American people need it. I think it’s one of those areas where there seems to be broad, bipartisan agreement.”

Senators did in fact approve three of the non-controversial amendments–and rejected three others–as they continued to work to determine in what manner the package should be changed and how much effort should be dedicated to doing so with the 60-vote threshold at hand.

The bipartisan package is likely to allocate not only $110 billion in new road and bridge project spending as well as $55 billion for wastewater and water infrastructure, but also $66 billion for rail improvements and $38 billion for public transit projects.

Further spending will be dedicated to projects regarding the improvement and upgrading of broadband internet, electric vehicle charging infrastructure, ports, and airports.