Tuesday, April 19, 2011

Trucking Economy Still Growing

The trucking economy of the US is still growing. Shipping managers have all known that it is harder to find trucks, but will this continue?

Below is an excerpt from the Institute for Supply Management and indicates that the ISM's index continues to grow.

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in March for the 20th consecutive month, and the overall economy grew for the 22nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The recent trend of rapid growth in the manufacturing sector continued in March, as the PMI registered above 60 percent for the third consecutive month. The component indexes of the PMI remain at very positive levels and signal strong sector performance in the first quarter. While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices. Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins."


Of the 18 manufacturing industries, 15 are reporting growth in March, in the following order: Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Machinery; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Printing & Related Support Activities. The two industries reporting contraction in March are: Wood Products and Primary Metals.

  • "Customer orders have picked up nicely. [This is] likely in anticipation of increasing prices due to commodity costs that will likely happen over next month." (Food, Beverage & Tobacco Products)
  • "New orders continue at a robust pace this month." (Miscellaneous Manufacturing)
  • "What will be the impact to the U.S. supply chain after the devastation caused by the Japan earthquake?" (Chemical Products)
  • "The building side of our business is mired with little hope of a rebound anytime soon." (Fabricated Metal Products)
  • "Steel and certain steel products causing concern over price increases and availability." (Machinery)
MARCH 2011



PMI 61.2 61.4 -0.2 Growing Slower 20
New Orders 63.3 68.0 -4.7 Growing Slower 21
Production 69.0 66.3 +2.7 Growing Faster 22
Employment 63.0 64.5 -1.5 Growing Slower 18
Supplier Deliveries 63.1 59.4 +3.7 Slowing Faster 22
Inventories 47.4 48.8 -1.4 Contracting Faster 2
Customers' Inventories 39.5 40.0 -0.5 Too Low Faster 24
Prices 85.0 82.0 +3.0 Increasing Faster 21
Backlog of Orders 52.5 59.0 -6.5 Growing Slower 3
Exports 56.0 62.5 -6.5 Growing Slower 21
Imports 56.5 55.0 +1.5 Growing Faster 19
OVERALL ECONOMY Growing Slower 22
Manufacturing Sector Growing Slower 20

*Number of months moving in current direction.

For a link to the actual article, click here.

Monday, April 4, 2011

Truckload Freight Rates

Truckload freight rates have been going up - quickly. Since transportation costs are a large portion of expenses for most manufacturers, many shippers are wondering if rates will continue to increase or will it level off?

According to Mark Montague, a pricing analyst for TransCore, "While the spot market reacts more severely, the contract market has a lot of room for recovery of rates."

He mentioned that spot market rates have increased 8.9 percent year over year in January. Contract rates were up 3.4%

David Schrader, senior vice president at TransCore Freight Solutions stated "We've seen a material increase in the load-to-truck ratio. In December 2009, we had three loads for every truck posted, and by November 2010, it was about five loads for every truck. January was the strongest January in quite some time."

Longbow Research states that rate recovery is already underway and they predict that contract rates may rise up to 10% in the first half of 2011 - and that trucking companies may still come back for more.

Another part of the capacity crunch is that carriers are not willing to add trucks to their fleets. "There are a lot of barriers to growing capacity at the rate of a potential recovery, which means spot market rates could really climb." states Montague. "It will be more difficult given the tight credit markets to create capacity.

How Can Shippers Attract Trucks?

According to Tom Schilli, CEO of Schilli Transportation Services, Inc., "Other than price or rate, there are two ways that shippers can attract trucks - making sure your facility is driver friendly and carrier cash flow."

On driver friendly facilities, Schilli states, "No dispatcher wants to argue with his drivers to go into a shipper that fails to treat them with respect. On the other hand, if a shipper treats drivers with respect, has a place to sit down while waiting to get loaded, and generally welcomes drivers, the dispatcher's job is much easier. Given equal rates, that shipper will receive trucks over the shipper who fails to respect drivers and waste drivers' time. Most contracts allow for two free hours to load or unload. Since drivers are paid by the mile, delaying a driver costs him valuable driving time and hits his pocket. However, if a shipper can get a driver in and out in only an hour, that driver has effectively made another $15. That driver is going to want to come back."

Schilli continues, "We encourage shippers to spend a little money to create good, driver friendly facilities. If they do, the drivers will be more apt to represent those shippers in a way that the shipper's customers will also appreciate."

Providing a place that is driver friendly is a great way to help to attract drivers, but it still comes down to the "boss" making a decision to send a truck in or not. Another way that shippers can attract carriers is to provide better payment terms. "A company that takes 45 days to pay a carrier is at a serious disadvantage to a shipper that pays in 7 days," states Schilli.

Schilli continues, "Many companies don't realize that smaller carriers are still feeling the credit crunch of the recent banking crisis. Large, publicly held trucking companies can borrow money the same as large manufacturers. The smaller, entrepreneurial companies, however, still have concerns over cash flow. If a shipper is willing to step up and make a quicker pay to those small and medium sized carriers, those carriers are much more likely to send their trucks to them versus another shipper. If companies can figure out a way in which to speed up their payments, carriers will respond."

We hope that this article will encourage shippers to help themselves as the trucking capacity crunch continues and is likely to worsen over the next few months.

Photo from TransCore - click here to visit TransCore site