Freight Forward - My Kingdom for Chassis

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week and what to expect for the week ahead. Just in case you’re wondering, I’m Cathy Roberson, 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.

Ocean and air continue to converge as ocean freight carriers utilize their profits to expand supply chain capabilities. The latest development finds MSC and Lufthansa bidding on the Italian airline ITA Airways. While the terms have not been disclosed, it is understood that MSC wants to acquire a 60% stake in the airline carrier with Lufthansa taking a 20% stake and the Italian government retaining a minority stake.

Meanwhile, ocean freight volumes continue to be strong year-to-date carrying over from a strong 2021. Total containerized trade in and out of the US was strong in 2021, up 7.8%, and led by import volumes which were up 13.1% according to PIERS, a sister product of JOC.com. However, US export volumes were down 3.1% due to port congestion that disrupted vessel schedules and resulted in capacity and container equipment shortages.

The annual JOC top 100 importers once more found that the top five US importers by ocean volume remained unchanged in 2021 from 2020 with Ashley Furniture and Lowe’s exchanging places.

The latest monthly reading of US imports from Asia is not showing a slowdown. Volumes rose 6.5% percent to 1.7 million TEU in April from a year ago and 40% compared with two years ago, according to IHS Markit data. Weekly orders for goods from mainland China tracked by E2open have been steadily rising aside from the first week of the Chinese lockdowns in the last week of March.

However, retailers’ strong imports led to higher inventories during the first quarter. End-of-quarter inventory levels rose 40% year over year at department store chain Kohl’s, 45% at clothing retailer Abercrombie & Fitch, and 125% at cooler and drinkware maker Yeti, the companies said during their respective first-quarter earnings calls.

Those higher-than-desired inventories are likely more reflective of buyers wrapping up post-pandemic home purchases such as couches and deck chairs. IHS Markit, the parent company of JOC.com and part of S&P Global, does not expect the current balance of spending between goods and services to return to pre-pandemic levels until 2025.

Shippers like Hasbro are ordering more as they expect their peak ordering season to come in the May–July period, rather than the historical August–December period. The toy manufacturer is “advancing deliveries of key items in our owned inventory so that we can ensure it’s on hand,” Hasbro CFO Deb Thomas said during a first-quarter earnings call Apr. 19.

While retailers are dealing with higher than normal inventories, they are also fine-tuning their middle and last-mile strategies to improve customer satisfaction and speed up their last mile. Some, like Costco and AEO, are taking more ownership of their supply chains by acquiring logistics capabilities.

Costco, for example, acquired Innovel Solutions in 2020. Innovel provided last-mile delivery, installation, and white-glove capabilities for 'big and bulky' products across the US and Puerto Rico. Innovel is now rebranded as Costco Logistics. For its fiscal third-quarter ending May 8, Costco Logistics averaged "more than" 58,000 stops a week. The company estimates that total deliveries will be up 23% and exceed $3 million for the full year.

Last year, American Eagle Outfitters (AEO) acquired the last-mile platform AirTerra and fulfillment provider Quiet Logistics.

"In the first quarter, we saw further reductions in our number of shipments per order and shipped our digital orders faster with a 13% reduction in delivery times," AEO COO Michael Rempell told investors on May 26.

As a result of the benefits AEO is achieving from its two logistics acquisitions, it is extending its services through its third-party Quiet platform business to customers through a shared supply chain services network. "We believe that edge fulfillment, share distribution, and shared logistics will be as transformative to retail as the shift to omnichannel was a few years ago," Rempell said. "We are clearly in a very disruptive supply chain environment… Clearly, positioning inventory closer to customers, being able to get supply chain efficiencies, being able to have fast and efficient delivery, it is the future."

Meanwhile, data from the US Bureau of Labor Statistics (BLS) shows a steady increase in long-distance truckload and less-than-truckload (LTL) pricing during the same period this spring that dry-van spot rates plunged.

The BLS long-haul truckload producer price index (PPI) rose 5.1% in April from March and was up 7% from February. From February through April, the DAT Freight & Analytics national average dry-van spot rate fell 19.4%, excluding fuel surcharges. With fuel, the drop was 10.7%.

“Contract rates have been going up, even as spot has declined,” said Tal Dickstein, a senior economist at S&P Global, the parent company of JOC.com. Dickstein, who tracks trucking pricing, said the BLS data reflects the strength of contract pricing as shippers shift freight away from the spot market.

The BLS data shows an even steeper increase in LTL pricing, with the LTL PPI rising 5.2% in April from March and 14.2% from February. Year over year, the LTL PPI rose 23.9% ?in April. The majority of LTL freight moves under contract, and non-contract LTL rates are higher.

My kingdom for a chassis…

Average rail container dwell times in Los Angeles–Long Beach reached 9.6 days in April, up from 7.7 days in March and about three times higher than the level needed to maintain port fluidity, according to the Pacific Merchant Shipping Association. The average rail container dwell time in Oakland was about nine days for the month and was “double digits” at the Northwest Seaport Alliance (NWSA) of Seattle and Tacoma, according to officials at those ports.

“The rail idle times on the terminals and at the ramps are too high,” Bryan Brandes, Port of Oakland maritime director, told JOC.com Monday. “Local import times are not too bad.”

West Coast ports also continue to experience chassis shortages, with equipment carrying laden inbound containers stuck at shipper receiving facilities because of delays in unloading.

BNSF Railway struggled to move containers in three US inland markets, Chicago, Memphis and Kansas City, due to a shortage of chassis that’s forcing drivers to wait hours to get a load.

“We went from handling all the freight and all of our equipment being out early last year to all of a sudden we're storing equipment across our network at the end of last year, and then all of a sudden, without a good forecast, here it comes back,” said Brandon Unterbrink, BNSF’s assistant vice president of international intermodal, in an interview with JOC.com. “Before you know it, you're behind, because it takes time to get resources back now, it’s not done on a snap your finger. It’s not like we get these forecasts four to six weeks in advance. It was, ‘oh, here it is, it's on the terminal.’"

Meanwhile, Union Pacific Railroad is warning customers of a looming marine chassis shortage that will force them to stack containers near one port and four inland hubs. The railroad won’t allow truckers to use privately owned chassis to remove boxes but still charge rail demurrage, it said in an advisory. The notice urges beneficial cargo owners (BCOs), forwarders, and trucking companies to contact ocean carriers and lessors Consolidated Chassis Management, DCLI, TRAC Intermodal, and Flexi-Van Leasing to provide more chassis in Chicago, Dallas, Kansas City, Memphis, and Seattle. UP is also running short on 53-foot chassis in Seattle, according to trucking companies.

Not to be left out, Norfolk Southern Railway customers have been struggling to find chassis in a Philadelphia suburb in recent weeks, causing delays in delivering domestic containers. But the railroad told JOC.com that it’s repositioning 53-foot chassis from other markets and injecting new equipment into Pennsylvania to limit the disruption.

Economic Outlook

• Consumer Confidence for May will come out today, May 31st. April’s figure was slight decline from March. Expectations are another decline.
• Manufacturing PMI for May is out on June 1. A slight decline from April is expected.
• Services PMI for May is out on June 3. An increase from 53.4 in April to a forecasted 54.3 in May is anticipated.

Technology to the rescue

JOC's technology senior editor, Eric Johnson, highlighted a few supply chain technology offerings that will likely benefit carriers and shippers.

First up, airfreight booking platform WebCargo added an integrated payment function that allows forwarders to pay airlines through the same interface in which they book space. “Freight and payments are foundations of global trade, but both introduce friction,” Freightos Group CEO Zvi Schreiber said in the statement. “Until today, forwarders booked cargo on one platform and paid on another, which is like shopping on Amazon but paying on PayPal.”

Drayage transportation management software provider Envase acquired GPS tracking technology maker GeoStamp. ?Envase, the parent company of a group of widely used transportation management system (TMS) brands for dray carriers, said the acquisition will allow it to track more than 7,000 trucks nationwide and provide associated driver and asset performance metrics to its customers.

Startup, Draying.io, has built a marketplace designed to give shippers and forwarders access to drayage capacity and pricing indicators. “The benefit to the shipper is in sourcing capacity and getting a better sense of what an appropriate price is in the market,” CEO Gerard Bonell said in an interview with JOC.com.?“Shippers cannot source capacity and pricing easily, and that’s partly because, as a shipper, you don’t know if your container is convenient to the drayage carrier at that moment.”

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

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 hoping everyone has a good freight week ahead!

-Cathy