DC Velocity - July 2014

newsworthy

A “BANNER YEAR.” THE COUNCIL OF SUPPLY CHAIN Management Professionals’ 25th annual “State of Logistics Report,” sponsored by Penske Logistics, is overflowing with data points. But it is those two words—used by report author Rosalyn Wilson to describe the outlook for 2014—that are likely to get the most attention. That’s because Wilson has been anything but a wild-eyed optimist about the economy and the logistics business since the Great Recession ended in 2009.

Wilson’s bullishness about 2014 seems out of sync with her findings that 2013’s results were no better or worse than those for the previous less-than-stellar years. Transportation revenues—measured as “costs” in the report— rose just 2 percent year over year. Trucking revenues gained only 1. 6 percent, making

2013 one of the weakest years for the industry in recent history, the report said. Intercity truck revenues rose 1. 8 percent, while the local delivery segment gained 1. 2 percent.

Truck tonnage gained 6. 1 percent year-over-year, a misleading figure because it is skewed by the enormous number of shipments of heavy sand used to support hydraulic fracturing, or fracking, operations in the Northern Plains, Texas, and Pennsylvania.

Truck shippers continued in 2013 to resist rate increases, according to the report. Although carriers are operating at or near full capacity, shippers believe they have enough service options to hold the line on rate hikes, the report said. Rates were relatively flat, except for periods in the spot market when capacity was scarce. The competitive truck-rate market had a bleed-over effect on rail intermodal: Though volumes rose 10. 6 percent, strong price competition from truckers dampened intermodal rate growth, according to the report. Ocean volumes rose 4. 5 percent, while domestic and international airfreight volumes each increased by less than 1 percent.

SHIPMENTS “SPRING” FORWARD

What happened during the March-May time frame? Not
surprisingly, the industry struggled for much of the first
quarter due to bad weather across much of the country. But
as the elements abated in March, the economy and indus-
try began to revive. Volumes during that month rose 10
percent year over year, partly because businesses that had
held back due to the weather and the normal post-holiday
malaise got back in gear.
The big surprise came in April. Based on the pattern
of shipment activity over the past four years, April should
have seen a contraction. Instead, business took off. Freight
payments rose to their highest point in 15 years. Shipment
volumes hit their highest levels since June 2011, according
to the report.

The momentum continued in May. By the time the month ended, anyone who was moving freight for a living was sitting pretty. Shipments through the first five months were up 13. 1 percent over 2013 levels. Payments jumped 11 percent during that span. The surges in March, April, and May led to the strongest freight demand since the recession ended, the report said. More tellingly—given that she generally does not go out on a limb unless she’s sure p. 16