Freight Forward - Losing Ground and Making Changes

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through?JOC.com ?articles and additional sources and also what to expect for the week ahead.

I’m Cathy Roberson, a supply chain writer and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.

It's just days into the new year, and changes are already underway in supply chains – The hunt for a new CEO, the potential rise of a Middle East port, US truck tonnage, and its slippery slope, and the FMC rejecting a petition from ocean carriers and terminal operators.

Happy Monday, and welcome to the Freight Forward.

The hunt is on for a new CEO at C.H. Robinson. Robert C. Biesterfeld Jr.'s departure was an "involuntary termination without cause," according to a company filing Tuesday with the US Securities and Exchange Commission (SEC), entitling him to severance pay.

JOC editor Bill Cassidy writes that the change in leadership will likely accelerate strategic changes in planning and capital spending at C.H. Robinson that have been underway since last March at the urging of Ancora Catalyst Institutional and other investors. Ancora and C.H. Robinson signed a cooperation agreement last February that reshaped the company's board and established a committee to advise the board on capital spending and strategic planning.?

The question facing C.H. Robinson is where to go to grow. "Can they penetrate the domestic transportation market any further, and if not, where does their future growth come from?" Satish Jindel, president of SJ Consulting Group, said. "As a broker, there is only so much you can take on. Will they take business from other brokers or use technology to reduce costs?"?

As the largest US truck broker, C.H. Robinson faces a slowing trucking market. Manufacturing purchasing managers indices (PMIs) declined for two consecutive months at the end of 2022, signaling an end to more than two years of US industrial expansion that helped lift truck tonnage.

The decrease is important because US manufacturing accounts for 58% to 59% of for-hire truck ton-miles, based on the 2017 US Commodity Flow Survey from the US Census Bureau, said Jason Miller, associate professor of logistics at Michigan State University and a Journal of Commerce analyst. Wholesale retailers account for about 30% of truck ton-miles. Manufacturing's share of truck tonnage may have shifted between 2017 and 2022, but factory output also increased from 2020 into 2022.?

"I would expect tonnage in the first half of the year to be a couple of percentage points below the first half of last year," Miller told the Journal of Commerce. "What feels like a freight recession for some is really an overall decline of trucking demand by just a couple of percentage points." In other words, nothing similar to the double-digit plunge in truck demand during the 2020 recession.

The Last Mile

However, the last mile witnessed strong employment growth for December, a 13.6% increase in real jobs on a month-to-month basis. The increase was the second-largest November-to-December increase for courier and messenger firms tracked by the US Bureau of Labor Statistics in the past ten years but lower than last year's gain of 174,600 jobs during last mile's busiest season.

In other last-mile news, FedEx's 2023 GRI went into effect on Jan 2.

And, in not exactly last-mile news, because supply chains tend to be more circular versus linear, John Deere signed a memorandum of understanding with the American Farm Bureau Federation to ensure that farmers can repair their farm equipment or take it to independent repair shops.

What's the big deal, you may ask? Deere and other manufacturers have been accused of using proprietary software on their equipment to restrict repair work to the manufacturers' dealers. Some farmers have said it has increased their costs by forcing them to call in technicians from dealerships for repairs they could handle themselves if the equipment companies would give them greater access to the software.

Several US states have passed some form of 'right to repair' laws. For more on this issue, WSJ has a good article on the pros and cons .

Losing altitude

2022 ended with global airfreight volumes down 8% year over year, marking the 10th consecutive month of lower demand.

Looking to 2023, the market remains unpredictable, and an earlier Lunar New Year and rising COVID-19 levels in China could impact manufacturing exports in the first quarter, CLIVE reported.

"We don't see demand recovering quickly because of what is happening around the world, but we expect to see supply continuing to come back into the market," ?Niall van de Wouw, Xeneta’s chief airfreight officer, said in the release. "So, we struggle to see where the tailwinds will come from, but looking at the broader perspective, we still see a very efficient air cargo market."

Ocean carriers looking for growth

Container carriers active in Indian trades increasingly see Saudi Arabia's Jeddah Port as a potential intermediate point that could help them consolidate regional shipments into larger volumes for their long-haul services in a challenging market environment, writes Bency Mathew, Special Correspondent for JOC.

In September , MSC added Jeddah to the port rotation of its Himalaya Express Service between India and Europe. ?

Hapag-Lloyd and CMA CGM opened the Indamex 2 in September 2021 as a complementary string to their long-time, premier Indamex network on the same route to take advantage of pandemic-linked demand swings.?

The new port rotation is Port Qasim, Mundra, Nhava Sheva (JNPT), Jeddah, Norfolk, Charleston, Savannah, and back to Port Qasim.?The first vessel under the updated schedule is the?MV Swansea, which departed from Port Qasim on Jan. 1 and is due to sail from Jeddah on Jan. 11.?

FMC says no

The US Federal Maritime Commission (FMC) has unanimously rejected a petition from ocean carriers and terminal operators that argued that limiting the scope of who is liable for per diem charges on containers would worsen air pollution at ports by creating more congestion.?

The ruling, published last Friday, furthers the agency's goal of getting truckers and other intermediaries off the hook for detention and demurrage when they move a container off ports.?

FMC Chairman Daniel Maffei issued a statement accompanying the order, saying the petition aimed to use federal environmental rules to "subvert" the proposed per diem rule, which is part of the Ocean Shipping Reform Act of 2022 (OSRA-22).??

"I feel I must call it out when I see an attempt to subvert the regulatory process by filing a petition," Maffei said in the statement. "I see such dilatory tactics as wholly inconsistent with the individual statements of cooperation with the FMC's broad efforts to implement OSRA that I have received from many members of the WSC board."?

He added that challenging the FMC's environmental assessment of the proposed rule "fails the eye-roll test."?

Finally, JOC's Peter Tirschwell's column addresses' free time' at ports, how it's determined, and what changes to expect from the FMC. According to US Federal Maritime Commissioner Carl Bentzel, free time privately negotiated between carriers and shippers contributed to the lengthy dwelling of containers on terminals in 2021 and 2022.

In a LinkedIn post , Stephanie K. Loomis noted, "Let's get something straight: the port and rail terminals are not warehouses or temporary storage yards for containers. Full stop." It's not fair to small shippers. "If large importers were told and penalized painfully enough, they would adjust, and the entire supply chain would be better for it."

Economic Outlook

• Tuesday, Jan 10 – NFIB Small Business Index – The December index is expected to inch up to 91.5 from November's 91.3 .
• Thursday, Jan 12 – Dec CPI – A slight increase of 0.3% is anticipated. In November, it increased 0.2%.
• Friday, Jan 13 – Import Price Index – A further decrease of 0.9% is expected for December. In November, it fell 0.6%.

For Journal of Commerce subscribers, the 2023 Review and 2023 Outlook is out. Check out some of the articles on the?website .

That’s it for this week. Please be sure to hit the subscribe button to receive the latest updates.

For readers interested in reading more JOC stories, click on?CATHYR20 ?to receive a 20% discount (Note this is for first-time subscribers.).

What did I miss? Have a question? Let me know in the comments. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.

In the meantime, here’s wishing everyone a good freight week ahead!

-Cathy