Dr. Jason Miller's Data-Driven Analysis of Supply Chain and Trucking Market Dynamics
Matt Waller
William Dillard II Endowed Leadership Chair | Professor of Supply Chain Management | Board Membership | Private Equity
In a recent episode of the Matt Waller podcast, Dr. Jason Miller, a full professor and interim department chair of supply chain management at Michigan State University, shared his expert insights on the current state and future trends of the supply chain and logistics industry. With over 40,000 followers on LinkedIn, Dr. Miller has established himself as a trusted voice in the field, known for his data-driven analyses and ability to challenge common industry misconceptions.
Dr. Miller began by discussing a fascinating graph that tracked the proportion of manufacturing plants citing insufficient supply of materials as a reason for operating below full capacity. This data, sourced from the Census Bureau's Quarterly Survey of Plant Capacity Utilization, revealed a dramatic shift in supply chain dynamics over the past few years. Prior to 2017, the percentage of plants reporting material shortages hovered around 5%. However, this figure began to climb in 2017-2018, reaching about 10% due to strong commodity markets and global demand.
The real shock came in 2021 when the percentage skyrocketed from 15% to nearly 45% by the fourth quarter. Dr. Miller attributed this unprecedented spike to a series of events, including the severe polar vortex in early 2021 that disrupted chemical production, leading to cascading effects on plastic and paper products. This period marked a time of severe supply chain disruptions, with manufacturing plants struggling to maintain production levels due to material shortages.
Interestingly, the situation has since improved steadily. By the first quarter of 2024, despite ongoing challenges such as the Red Sea crisis and Panama Canal water levels, the percentage of plants reporting material shortages had dropped back to 10%. This return to near pre-pandemic levels suggests a significant recovery in supply chain resilience, even in the face of continued global disruptions.
Dr. Miller also presented data on transportation and logistics constraints, which showed a pattern remarkably similar to the material shortage graph. This correlation underscores the intricate relationship between material availability and logistics capabilities in the supply chain ecosystem. The data indicated that while current conditions are not quite back to the stability seen in 2014-2015, they are significantly improved from the crisis levels of 2021.
Turning to the trucking industry, Dr. Miller analyzed DAT Freight and Analytics data on dry van contract and spot rates. This data revealed multiple market cycles over the past decade, with alternating periods of bull and bear markets for carriers. The COVID-19 pandemic triggered a unique dynamic in the trucking sector. Initially, rates plummeted due to a massive drop in freight demand. However, this was quickly followed by a surge as certain industries experienced dramatic increases in demand, disrupting the usual balance of freight networks.
The stimulus checks issued in March 2021 further fueled this trend, causing an incredible surge in consumer spending. This, combined with increased housing activity and a commodity market surge, led to an exceptionally strong freight market in 2021. However, by early 2022, the market began to cool as interest rates rose and manufacturers found themselves with excess inventory.
Dr. Miller emphasized the current state of the trucking market, noting that despite spot rates being considered weak by current standards, they are still near the highs seen in 2018 and well above 2019 levels. This perspective highlights the importance of historical context when interpreting market conditions.
One of the most intriguing aspects of Dr. Miller's analysis was his discussion of the relationship between spot and contract rates in the trucking industry. He introduced a metric that measures the percentage difference between these rates, revealing that a threshold of about 10% often signals an impending market turn. Currently, this metric suggests that the market is not yet poised for a significant shift, leading Dr. Miller to maintain a bearish outlook on the dry van truckload sector for the near future.
Dr. Miller attributes this prolonged bear market to several factors. He points out that 2024 is an election year with significant policy uncertainty, which may deter firms from making major capital investment decisions. The lack of interest rate cuts by the Federal Reserve continues to dampen home building activity, a significant driver of freight demand. He also notes that fracking activity, which generated substantial freight in previous years, is unlikely to return to its former levels due to changed economic conditions.
Throughout the discussion, Dr. Miller emphasized the importance of data-driven analysis in understanding supply chain dynamics. He cautioned against relying on rules of thumb or industry folklore, instead advocating for a careful examination of underlying economic fundamentals. This approach allows for a more nuanced understanding of market conditions and helps to dispel common misconceptions.
Dr. Miller also addressed a frequent mischaracterization in media coverage of supply chain issues. He noted that many reports attributed the supply chain problems of 2021 solely to systemic breakdowns, without acknowledging the significant role played by the stimulus-driven surge in consumer demand. This oversight, he argues, leads to an incomplete understanding of the complex factors influencing supply chain performance.
Dr. Miller's insights offer a comprehensive view of the current state of supply chain management and logistics. His analysis highlights the industry's gradual recovery from the disruptions of 2021, while also pointing out ongoing challenges and potential future trends. By emphasizing the importance of data-driven decision-making and challenging common industry assumptions, Dr. Miller provides valuable guidance for professionals navigating the complex world of supply chain management. As the industry continues to evolve, such expert analysis will be crucial in helping companies adapt to changing market conditions and build more resilient supply chains.
Director of Intermodal Operations | Intermodal expert
7 个月Well done Matt, really enjoyed the pod cast and this summary. I have been following Dr. Miller and have found his work inciteful.
Piecing together the puzzle of business - one function at a time.
8 个月Thanks for doing what you do. As someone relatively new in the supply chain space, this content is invaluable. Know that you are having the type of impact that you so desire.
$2.7M Marketing Sourced Revenue with Zero Ad Spend | NO BS B2B Growth | US Logistics | Freight Forwarders | Supply Chain | RevOps | "Transforming Complex Supply Chain Business Problems to a Kids Game"
8 个月Fascinating read! How have Dr. Miller's insights influenced your supply chain strategies?