Welcome to the WHAT THE TRUCK?!? newsletter. In this issue, the problem with switching to just in case; trucking urban legends; spot rates near all-time highs; Zim is bearing gifts; and more.
While the gettin’s good
Up 9 cents again — The final push to get freight restocked on shelves is keeping carrier bank accounts full as well. We’re now just 4 cents off the September high of $3.60 set in SONAR by the Truckstop.com weekly dry van rate per mile inclusive of fuel. Better yet for carriers (not so much for shippers) is this run of rates over $3 is on a nine-month-long streak. Want to dive deeper into your lanes and spot pricing with near real-time intelligence? Check out FreightWaves TRAC in SONAR today.
(What’s the story) Inventory?
Lighting the match — While few would argue that inventory decisions made at the start of the pandemic in March 2020 lit the powder keg on our current shipping crisis, was it enough to actually change the way companies keep inventory on the books? Nobody knows this reality more than any business reliant on semiconductors. In fact, chip shortages have led to a backlog of Class 8 truck orders that now is over 13 months long. CNBC reports that those shortages are “expected to cost the auto industry $210 billion in revenue in 2021.”
JIT vs. JIC — Rock Magnan, president of RK Logistics Group, told Modern Shipper, “There is a lot of stuff that is stuck because of the way they’ve prioritized the ships they’re unloading. [It’s left retailers] with unsalable stuff right now.” A reliance on just-in-time stock goes ass over teakettle when we’re dealing with a supply crisis like we have now as JIT becomes not-in-time holiday gifts. When that freight does arrive, especially if it is seasonal, perishable or fashion, retailers are left with a massive quandary: hold onto the goods until the following season and pay warehousing costs or dump them on outlets.
“I think that outlet stores like TJ Maxx and Marshalls are really going to be in the hot seat coming up because there’s going to be a lot of brands dumping inventory because they over ordered.” — Kinsley Partners’ Frazer Kinsley
The case against just in case — Given all of the issues above, why don’t retailers bet heavily on just-in-case inventory? First off, tariffs. Bringing goods into the United States and having them ready to go means paying what can be substantial duty rates, especially for categories like fashion and footwear. While FTZ and bonded warehouses could be an option, they’re in short supply. Speaking of warehouses, the warehousing prices index hit its highest reading ever during the month of November. What’s driving that is both a lack of space and a shortage of labor.
Rent inflation — Even if you’re able to find available warehouse space in an area that you need it, it’s going to cost you in ’22. Mark Solomon reports, “For the 18 big industrial markets surveyed by CBRE, the lowest cumulative percentage increase from the average rent at a lease’s five-year expiration date to the current asking rent levels was 29.1%. The average nationwide increase was 25%.” As rent goes up so does what every warehouse charges per square foot. In a business world that lives quarter to quarter, it would take a massive sea change in the way finance departments think in order for them to warm up to the idea of keeping significant costs like that on the books.
What are trucking’s urban legends?
It came from Reddit — I saw this post about trucking’s best urban legends on the r/Truckers subreddit and it got me thinking. What are some supply chain urban legends? Email me yours. A few of these from Reddit are too good not to share:
Zim and Horizon make Christmas wishes come true
Shine a light — Zim and Horizon teamed up to deliver 600 gifts for foster kids in Michigan. As Zim operations and logistics manager Oswaldo Gutiererrez posted, “Merry Christmas 🎄 kids!”
WTT this week
Wednesday — We’re talking about the true cost of detention and demurrage; the art of photographing container ships; spreading goodwill this holiday season; and the latest news.
Special guests are Mason George, president at IMC National Accounts; Nick Souza, president at Nick Souza Photography; and Grace Sharkey, a reporter at FreightWaves.
Friday — Call the hogs! On this episode we’re highlighting Arkansas as a supply chain hub and how the Razorbacks and J.B. Hunt are making this area the epicenter of freight in the U.S.
Special guests are Shelley Simpson, chief commercial officer and EVP of people and HR at J.B. Hunt Transport Services Inc.; David Dobrzykowski and students from the University of Arkansas; and Trent Broberg, CEO at Acertus.
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.
Now on demand
Driver retention: The coal in trucking’s stocking
Should truckers chase sign-on bonuses?
The next generation
Three generations of Gracey — I had a trucker, his recruiter son and his black belt grandson on to talk about the impact of family on getting into freight and trucking. Take a listen to what this 11-year-old had to say. We were most impressed.
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One love,
Dooner