DC Velocity - April 2019

newsworthy

After enduring a 2018 marked by tight capacity, rising freight costs, a
driver shortage, and trade wars, U.S. shippers are anticipating a slump
in freight movements in 2019, an industry study shows.

While supply chain operations last year were generally boosted by a consumer recovery that began in 2017, they were also hindered as the trucking industry adjusted to the electronic logging device (ELD) mandate that took effect in late 2017, according to the fourth annual “State of the North American Supply Chain Survey,” produced by Cookeville, Tenn.-based freight transportation company Averitt Express. With a more subdued market outlook for 2019, fewer shippers said they expect to move more freight this year than last compared with the previous year’s survey, the study showed.

The survey, which was conducted among more than 2,300 shippers
across North America, was designed to gauge the challenges faced by
shippers in 2018 and learn more about what they expect for 2019,
Averitt said.

Not unexpectedly, the results showed that one of the top concerns of shippers in 2018 was diminishing long-haul freight capacity, triggered by a continuing shortage of professional over-the-road drivers and increasing regulations within the transportation industry. More than a quarter of shippers surveyed encountered issues with capacity, a nearly 7-percentage-point increase over the previous year’s results. Under the pressure of insufficient supply, shipping rates increased, with nearly half of respondents saying rate increases were an issue in 2018—a 7.5-per- centage-point increase over the previous year.

The study showed that capacity pressures also contributed to a service decline for full-load shipments. Nearly 42 percent of respondents reported that they encountered problems with on-time deliveries in 2018—a 6.6-percent increase over last year. In response, an increasing number of shippers turned to non-standard services—such as expedited delivery—to move their freight.

With no long-term solution to those challenges in sight, shippers are
looking at 2019 with wary eyes, Averitt said, adding that much of the
business anxiety is being driven by short-term uncertainty over the state
of trade relations.

Survey: Shippers expect freight slump in 2019

Less-than-truckload (LTL) carrier New England Motor Freight Inc. (NEMF) has filed for bankruptcy, citing persistent rises in overhead costs and a crippling driver shortage, the firm said in February.

At an industry conference in May 2018, NEMF President Thomas Connery said the Elizabeth, N.J.-based carrier was feeling the pinch of market pressures that included tight capacity, rising costs, and driver shortages. He told attendees at NASSTRAC’s annual shipper’s conference that even if the economy softened and freight demand slumped, carriers would remain ham-strung by the challenges of recruiting and retaining qualified drivers.

In its bankruptcy announcement, NEMF cited those same challenges in explaining why it and 10 related trucking lines had voluntarily filed for relief under Chapter 11 of the bankruptcy code.

“We have worked hard to explore options for New England Motor Freight, but the macroeconomic factors confronting this industry are significant,” Vincent Colistra, a senior managing director with Phoenix Management Services LLC, said in a statement. Phoenix, a Chadds Ford, Pa.-based management consulting firm, is serving as NEMF’s restructuring adviser. “Following two years of losses, and with continuing and unsustainable rises in overhead as well as a severe industry shortage of drivers, we have concluded that the company has no choice but to proceed with an orderly wind-down of operations in a Chapter 11 proceeding,” said Colistra, who now serves as chief restructuring officer (CRO) for NEMF.