Truck Movement Declines Across US After July 4th, Businesses Close Again

Beginning after the close of the July 4th holiday, truck movement “is down in nearly all 50 states over a two-week moving average,” according to TransportDive and U.S. DAT data. This downturn coincides with record-breaking COVID-19 positive-test cases and businesses closing again in hot spots such as Arizona, Florida, Georgia, and Texas. However, this downturn is not universal across industries, and in some markets where businesses remain open, trucking companies are facing capacity challenges and meeting demand.

The eShipping team is tracking industry-specific shifts in the market and helping our customers plan accordingly for the continued volatility. While the week-to-week uncertainty creates unique challenges, we will continue to proactively manage our customers’ freight programs and support with a full menu of services, from technology to procurement to financial and recovery services.

Brief of Article:

• Truck movement is down in nearly all 50 states over a two-week moving average, according to data from FourKites. "We are seeing the residual effect of coming off a quarter end and the July 4th holiday," Glenn Koepke, VP of network enablement at FourKites, told Transport Dive.

• Inbound movement was particularly lower in several of the Great Lakes states. Movement in Michigan was down nearly 30% compared to its two-week moving average.

• The downturn coincides with states closing businesses again after a resurgence in COVID-19 cases. States witnessing a spike in positive cases, such as Arizona, Florida, Georgia and Texas, faced decreases in truck movement ranging from 10% to 12%.

Full Article:

Shades of red represent a decline in inbound truck movement against a two-week moving average.

Screenshot from FourKites

After volume growth in May following a floor in late April, trucking movement is again trending down across the U.S. DAT data revealed similar trends in the demand slowdown. Load-to-truck ratios fell in van, flatbed and reefer the week of June 29 compared to the week before, though in all three modes the ratios were significantly higher in June compared to May. FTR and Truckstop.com reported a 16% week-over-week dip in load volume the last week of June.

The up-down, up-down again pattern of trucking movement makes the market unpredictable and uncertain, and makes planning and forecasting difficult for trucking executives. "The world is tougher and tougher to predict these days," Joe Boyle, CEO at Truce Software, told Transport Dive.

Part of the volume downturn can be attributed to seasonal trends. "Produce volumes from Mexico typically tail off quickly this time of year, and are now down 27% week over week," DAT wrote in an email. The U.S. Department of Agriculture found seasonal truckloads of produce fell 17% week over week June 28 as a result of fewer imports.

Many retailers and grocers stocked up ahead of the Fourth of July, which created a demand increase over the last two to four weeks, Koepke said. "In the weeks right after a quarter end or holiday, volume typically declines," he said.

Volume downturns are not universal across industries. FourKites' customer base has a strong presence in food and beverage, grocery, and CPG, so its data reflects movement in those industries. Agriculture, construction and manufacturing restarted in New York in mid-May, making June the "first full month where the state’s main manufacturing freight markets were fully active," Dean Croke, principal analyst for DAT, wrote in a Wednesday blog post. Month over month, dry van volumes rose 26% in June in markets in upstate New York.

Tight capacity may also contribute to the nationwide downturn of trucking movement. Boyle said trucking firms are facing the challenge of meeting demand and expanding capacity. FTR data showed an 11% decline in the supply of trucks the last week of June. DAT said capacity was tighter in the majority of southern markets, many of which were first to reopen businesses.

As a result, rates remain elevated. "The holiday might have even contributed to rate increases given decreased truck capacity in all segments," FTR wrote. Spot rates are up across modes, according to DAT, though the firm said its model shows early July as the peak for rates.

Shefali Kapadia / Transport Dive, data from DAT

The near-term future holds continued uncertainty for the trucking market. "The market is in a significant state of flux," Koepke said. "Shipment volumes are fluctuating significantly week-to-week, [and] states and cities opening up at different paces causes imbalances in supply and demand within a market."

The upcoming back-to-school season is typically busy for supply chains, but not all school systems will move forward with normal reopening plans. New York City Mayor Bill de Blasio announced public schools will limit classroom attendance to one to three days per week, a move that would reduce the need for services such as school lunches, creating a knock-on effect on the industry transporting supplies.

Import volumes at U.S. seaports continue to decline, resulting in fewer loads for haulers. Preliminary June estimates predict a 6% year-over-year import volume decline. Imports shrank 9.3% year over year at the Port of Long Beach last month.

The National Retail Federation forecasts the lowest level of imports for peak season since 2014. Cass said it does not expect a return to pre-pandemic volumes until next year.

"There's such a lack of predictability right now," Boyle said. "The good news ... in the fleet segment is that this is essential work, so it's continued to be a very busy and demanding time."

Source: Truck movement declines across US after July 4th, businesses close again

House Lawmakers Vote to Raise FTL Carriers Mandatory Insurance Coverage to $2 million

John Gallagher is a Washington Correspondent writing for FreightWaves and makes two main points in his article:

• House of Representatives, Transportation and Infrastructure Committee approve amendment that more than doubles the amount FTL carriers are required to hold in insurance coverage

• The bill must still be approved by the full House before moving to negotiations in the Senate

Full Article:

“Lawmakers marking up the U.S. House of Representatives’ version of the surface transportation reauthorization bill have approved an amendment to more than double the required amount of insurance coverage for truck owners from $750,000 to $2 million.

The amendment, introduced this week by U.S. Rep. Chuy Garcia, D-Illinois, passed the House Transportation & Infrastructure Committee late Wednesday by a vote of 37-27.

Proponents of the amendment argue that the current insurance liability requirement does not adequately compensate victims of accidents involving large trucks. Opponents of the measure, including small-business truck owners represented by the Owner-Operator Independent Drivers Association, warn that raising the limits could put small-business truckers out of business.

“This amendment will do absolutely nothing to improve safety on our highways,” Todd Spencer, President and CEO of OOIDA, said in a statement. “What this proposal will do is destroy small trucking businesses in every corner of the country.”

OOIDA had initially supported several provisions in the House version of the reauthorization of the FAST Act, called the Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act, a five-year, $494 billion surface transportation bill unveiled earlier this month. Those provisions included increased funding for highway construction, funding for truck parking projects, and provisions to limit excessive detention time.

But Spencer said his group now opposes the bill with the inclusion of the provision to hike insurance coverage for truckers. “Small business truckers have been working around the clock to keep the country healthy, while risking their personal well-being and struggling to stay in business due to historically low freight rates caused by COVID-19. Unnecessarily increasing their insurance rates is not the way to thank them.”

The bill must be approved by the Democrat-controlled House, in a vote scheduled for late June, before moving to negotiations with the Republican-controlled Senate.”

Source: House lawmakers vote to raise mandatory insurance coverage to $2 million

Changes to the Hours of Service Regulations Offer Increased Flexibility For Drivers

The U.S. Department of Transportation has updated the truck drivers Hours of Service (HOS) regulations.

A summary of the changes:

• An adjustment to the sleeper-berth exception, allowing drivers to split their mandatory 10 hours of rest in two different ways (an 8-2 or 7-3) split, as opposed to being forced to take it all at once

• The ability to count time spent on activities such as waiting for the truck to be loaded as break time rather than having to be entirely off duty

• The extension of the maximum on-duty period for drivers hauling goods short distances to 14 hours from 12, and the distance limit to 150 air miles from 100 miles

• For the adverse driving conditions extension, the ability to drive more slowly or take a break if needed without exceeding the driving window by extending the maximum window that driving is permitted by two hours

The goal, according to the Federal Motor Carrier Safety Administration is to provide increased flexibility “without adversely affecting safety.”

These changes are scheduled to take effect on September 29, 2020 – pending any legal challenge.

The full HOS rules can be found here: FMCSA - Hours of Service Rules

5 Ways Amazon is Changing the Manufacturing Industry Forever (And What To Do About It)

Overview:

• Amazon has set online shopping customer experience standards for B2B companies

• B2B professionals want the came online shopping experience as B2C

• Manufacturers should invest in eCommerce and fulfillment solutions to stay ahead of the industry and customer needs

Procurement professionals and B2B buyers now expect high levels of customer service, shipment visibility, and an enjoyable checkout experience when purchasing products and materials from suppliers. In fact, companies are switching suppliers for a more consumer-like experience, with "free" shipping, instant order visibility and tracking, predictive shopping, and more.

The Amazon Effect has already impacted companies across multiple industries and paved the way for a new way of thinking.

How can manufacturers, distributors, and suppliers improve their supply chain customer experience? What are practical examples and strategies to create an eCommerce buying experience like Amazon? How can we plan for and adapt to so we can stay ahead of the competition?

Watch the video below.

Uber ‘Re-Evaluating’ Non-Core Units Like Freight, WSJ Reports

Overview:

• Tech heavy freight management solutions under pressure to return profits

• Uber Freight lays off 6,700 employees and raise rates on several key customers by double-digit percentages

John Paul Hampstead, Director, Passport Research

Uber Technologies has laid off 3,000 more employees and closed 45 more offices, The Wall Street Journal reports, just after the first round of layoffs that totaled more than 3,700 employees.

CEO Dara Khosrowshahi wrote in an email to employees that Uber was “making really, really hard choices right now,” including re-evaluating non-core cash burning businesses like Uber Freight and autonomous driving. Khosrowshahi said that Uber was looking at “strategic alternatives” for its staffing business Uber Works, but did not use that language specifically for Freight.

“We remain committed to growing the Uber Freight business, innovating in the Freight industry, and supporting our partners – carriers and shippers alike,” an Uber Freight spokesperson told FreightWaves. “Today’s news does not impact our product roadmap, or our ability to provide best-in-class service to our customers.”

Uber Freight, Uber’s digital freight brokerage business, had already adjusted its growth strategy and the way it priced freight to customers as part of Uber’s new emphasis on driving toward profitability. As late as February 2020, Khosrowshahi said that Uber would be EBITDA-profitable by the end of 2020, but the coronavirus pandemic pushed that date back to 2021.

Uber’s financial reporting and channel checks across the freight brokerage industry confirmed that Uber Freight was adjusting its model earlier this year. Uber Freight raised contracted rates on several large customers by double-digit percentages. Multiple sources told FreightWaves that the digital brokerage gave back a multi-million dollar award to a Fortune 100 consumer packaged goods shipper earlier this year.

And the digital brokerage’s attitude toward growth changed – the first quarter of 2020 marked the second quarter in a row that Uber Freight’s gross revenue had declined sequentially. Still, the $199 million in gross revenue Uber Freight reported in the first quarter 2020 put it on a $796 million annual run rate, enough to place the business in the top 15 or 20 freight brokerages in the United States.

But Uber Freight is far from achieving profitability; the segment lost $64 million in ‘adjusted EBITDA’ in the first quarter of 2020, which was admittedly better than the $81 million loss in the fourth quarter of 2019. Uber’s financial reporting makes it impossible to reconstruct Freight’s gross margins – the typical measure of performance for non-asset third-party logistics providers reliant on purchased transportation – or its operating costs. Uber Freight’s operating costs are thought to be much higher than most freight brokerages because of its investments in technology, which allowed the business to move tens of thousands of touchless loads.

In January, the Chicago Tribune reported that Uber was offering some of its new Chicago space up for subleases; when FreightWaves questioned Uber Freight management earlier this month, they did not comment further on the subleasing.

The question around Uber Freight has always been how and why it fits into Uber’s overall business. Uber’s Rides business was unique because the company created capacity by convincing people to drive passengers in their own cars, but the Freight business cannot create Class 8 trucks out of thin air. That left Uber Freight subject to the supply-and-demand dynamics of a fragmented, highly competitive market with many tech-savvy brokerages already established. Freight brokerage revenue, it turns out, is more volatile – and so are its margins – unlike the B2C marketplaces for rides and food delivery that Uber has effectively been able to create and control.

Ultimately the difficulty of acquiring non-recurring freight revenue and managing volumes in a volatile, cyclical industry makes freight brokerage a fundamentally different kind of business than Rides. And the variable performance of a digital freight brokerage could ultimately be dilutive to Uber’s valuation, if it got big enough to matter.

In July 2018, FreightWaves wrote about Uber shuttering its autonomous trucking program, which had the potential to make its freight brokerage offering something truly revolutionary: “If Uber Freight loses the benefit of selling the concept of an autonomous trucking future, investors might prefer company executive attention on protecting and building out the core business.”