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Wednesday November 19, 2014


NITL shippers warned to expect ‘significant’ US rate increases in all modes

William B. Cassidy, Senior Editor | Nov 19, 2014 1:54PM EST

FORT LAUDERDALE, Florida — Shippers who came to the National Industrial Transportation League’s annual conference here hoping to hear U.S. freight rates would moderate after rising significantly in 2014 are heading home disappointed.

Surface freight rates in North America are only moving in one direction, analysts and economists told shippers at the NITL conference and TransComp Exhibition. The question is how high they will go and what businesses can do to soften the blow.

“As we head into 2015 and beyond, be prepared for significant rate increases across all modes,” said Justin Long, transportation and research analyst at equity research firm Stephens.

“We expect truck pricing to rise for multiple years,” said Ken Hoexter, senior air freight, surface and marine transportation analyst at Bank of America/Merrill Lynch.

Less-than-truckload carriers instituted a second round of general rate increases this year for only the third time in the past 20 years, Hoexter said. “The one guaranteed is that you’re going to see price increases. The unknown is how high those increases will be.”

Even on the rails, where shippers at NITL say service remains “degraded,” prices are moving inexorably upward, Long said. “One of the rails is seeing 5 percent increases on recent contract renewals, and they expect mid-single-digit increases next year,” he said.

The surge in pricing is directly tied to supply and demand — higher demand, and tighter surface transportation capacity on the roads and on the rails, the analysts said.

“We are heading toward a capacity crisis, and I think it’s going to get much worse,” said John Larkin, managing director and head of transportation capital markets research at Stifel. “The only questions are timing, severity and the impact on spot rates.”

Truck safety regulations in the pipeline at the Department of Transportation will take another 10 to 15 percent of capacity out of the trucking market, Larkin said. He doesn’t have much hope for near-term improvement in rail capacity, either. Railroads have been working hard to add locomotives and train crews, Larkin said, “but that’s akin to throwing more traffic cabs onto Fifth Avenue when there’s a traffic jam there already.”

Logistics companies and shippers at the NITL conference are looking for ways to ease the pain, especially greater collaboration.

“I haven’t met a shipper yet who hasn’t had a rate increase this year,” said Paul Newbourne, senior vice president for operations at Armada Supply Chain Solutions, which works with restaurant and foodservice companies.

Most of the truck rate increases have been in the mid- to high-single-digit percentage range, Newbourne said, “which is high compared with what we’ve seen in the past couple of years.”

He has known shippers to accept rate hikes as high as 40 percent to secure capacity.

“We see lots of inflationary pressure” on rates, he said. “We’re going to work to minimize the increases as much as possible, but the harsh reality is the inflationary environment.”

Contact William B. Cassidy at and follow him on Twitter: @wbcassidy_joc


US retailers worry West Coast port delays will hurt post-Black Friday restocking

Corianne Egan, Associate Editor | Nov 19, 2014 3:01PM EST

Retailers hope West Coast port congestion won’t impact impact their holiday sales.

Major U.S. retailers don’t expect U.S. West Coast port congestion to hamper getting Black Friday products on the shelves, but they’re far less confident on their ability to keep stores stocked through the entire holiday season.

Home Depot doesn’t expect supply chain trouble leading up to Black Friday, but the retailer is “concerned over the long-haul here the West Coast ports, the rail situation, the driver shortage, all look to create uncertainty in terms of transportation rates going forward.

“That’s definitely a concern pretty hard to predict, given the fluidity of the situation that’s out there,” Mark Holifield, executive vice of supply chain and product development, told investors Tuesday during a third-quarter earnings call, according to a SeekingAlpha.

High volumes of merchandise are still coming into ports and being transported inland, less than two weeks before the holiday shopping season begins. Ports on the U.S. West Coast are suffering from crippling congestion and have been since August. Many shippers have blunted the impact through their acceleration of imports via West Coast ports before a labor contract expired July 1, and by diverting goods through western Canadian and U.S. East Coast ports.

“Obviously, to a great degree, we anticipated what happened, and so we did pull up a lot of receipts into the third quarter to accommodate it, but there were still further delays that impacted it,” Kohls CEO Kevin Mansell said during the company’s earnings call on Nov. 13. “I would say, overall, I don’t think it made a difference in traffic for the third quarter. There are going to be probably items that we will have planned to have had on hand and they will not be delivered on the time we thought. But on a broad basis, I don’t believe it’s going to have any big impact.”

Because the companies were able to get merchandise into distribution centers and onto the shelves successfully, they aren’t as impacted by the port congestion, rail delays and tightening truck capacity. Macy’s received the most important cargo by the first week of November, chief financial officer Karen Houguet told investors during the company’s earnings conference call on Nov. 12.TJ Maxx CEO Carol Meyrowitz also said Tuesday that the delays affected the company’s bottom line for the quarter, but could lead to a competitive advantage during the holiday season.

“We’re in great position,” Meyrowitz said during the earnings presentation, which was transcribed by Seeking Alpha. “I think later, we’re going to yield a great opportunity from the goods that haven’t gotten through for most vendors and retailers as of yet.”

Smaller retailers, however, with less complex supply chains, aren’t faring as well. Both Ann Taylor and New York & Company said their third-quarter performance was affected by shipping delays. Ann Taylor CEO Kay Krill said  the company had been forced to convert some shipments to air freight, costing it an estimated $5 million more than its traditional ocean shipping options. New York & Co. CEO Gregory Scott said he believes the labor unrest and shipping delays could impact his company’s holiday sales in the fourth-quarter.

Lowe’s received its holiday merchandise by bringing in goods early and using distribution centers as warehouses for storage until it was time to push it out to stores, Niblock said, but the ever-changing labor climate on the West Coast could affect the shipping of spring merchandise.

“Certainly with what’s going on at the ports on the West Coast, we’re keeping a close eye on it,” Niblock said in Lowe’s third-quarter earnings call today. “Our team is heavily focused on that and working to develop contingency plans based on how that situation unfolds going forward. We’ve been through this before, and so it may cost more to get the freight in but we’ll do what we need to as we think about looking ahead to spring.”

Home Depot was ranked third on JOC’s Top 100 U.S. ocean container importers in 2013, bringing in an estimated 325,000 TEUs. Lowe’s ranked fourth with 236,500 TEUs; JCPenney came in at 14th with 92,687 TEUs; Kohl’s ranked 26th with 51,600 TEUs; Macy’s was 54th with 29,000 TEUs; and TJ Maxx ranked 73rd with 21,000 TEUs. Some fashion retailers, especially those who carry high-fashion merchandise, also rely heavily on air cargo to move holiday and seasonal freight.

Contact Corianne Egan at and follow her on Twitter: @CEgan_JOC.


ILWU reiterates that its focus is on bargaining table

Bill Mongelluzzo, Senior Editor | Nov 19, 2014 5:35PM EST

The Pacific Maritime Association said work slowdowns continued in the northern ports, while the International Longshore and Warehouse Union was not dispatching sufficient skilled labor to handle cargo volumes in Los Angeles-Long Beach.

The ILWU said its focus is on the bargaining table in San Francisco. Negotiations continued Wednesday for a new contract to replace one that expired on July 1, the ILWU stated.

President Obama says he is confident the two parties can reach agreement, and has not encouraged them to seek an arbitrator to help in the talks.

The Marine Exchange of Los Angeles-Long Beach reported that eight container ships were at anchor, the same number as Tuesday, but the mix of ships changed as some vessels left berth and were replaced by others that had been at anchor. Cargo continues to move at the largest U.S. port complex, but the pace has not picked up enough to reduce the container backlog that has congested the marine terminals for weeks.

The Teamsters union, which is attempting to organize owner-operator truck drivers, shifted its focus Wednesday to the Port of Long Beach from Los Angeles. Protests by drivers who seek to be organized by the Teamsters is not interfering with cargo-handling, the ports stated.

Contact Bill Mongelluzzo at and follow him on Twitter: @billmongelluzzo.


Southern California port truckers expand strike

Truckers accuse those firms and others of improperly classifying them as contractors, not full-time employees, to minimize wages and benefits.      

The Associated Press 11/19/2014

LOS ANGELES — A strike by some truckers at the ports of Los Angeles and Long Beach is being expanded, with protest organizers targeting three more companies they accuse of unfair labor practices.

Barb Maynard, a spokeswoman for the Teamsters Union, which is backing the drivers, says drivers from QTS, LACA Express and WinWin Logistics joined the ongoing labor action on Monday.

Truckers accuse those firms and others of improperly classifying them as contractors, not full-time employees, to minimize wages and benefits.

Representatives for LACA Express and WinWin declined to comment Tuesday. QTS could not immediately be reached for comment.

The truckers’ action comes as the powerful dockworkers union and multinational shipping lines are negotiating a new contract for about 20,000 workers on the West Coast.

The Trucker staff can be reached to comment on this article at

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Logistics Spending on an Upward Trend

More Companies Outsourcing Transportation Management

By Daniel P. Bearth

Senior Features Writer

This story appears in the Nov. 17 print edition of Transport Topics.

Spending on logistics services is expected to accelerate in 2014 as the economy in the United States continues to expand and more companies outsource transportation management to third-party logistics companies.

Gross revenue for U.S.-based 3PLs increased 3.2% to $146.4 billion in 2013 from $141.8 billion in 2012. It is projected to reach $154 billion in 2014, an increase of 5.2%, according to a report by market research firm Armstrong & Associates in Stoughton, Wisconsin.

Domestic transportation management, which consists primarily of freight brokerage, is the fastest-growing segment of logistics spending, reflecting continued expansion in the number of customers and additional service offerings, said Richard Armstrong, chairman of Armstrong & Associates.

“It is common now for customers with as little as $3 million in transportation spending to use at least one 3PL,” Armstrong said.

The business of freight brokerage also has expanded beyond load matching to include transportation management and information systems, he noted.

“Systems-based enterprise accounts constitute a significant part of the business for all major domestic transportation managers,” Armstrong said.

International transportation management is projected to grow 4.5% to $48.3 billion in 2014 from $46.2 billion in 2013.

Growth will be hampered by a slowdown in U.S.-Asia trade, Armstrong said, with ocean-freight container movement growing by single digits and airfreight volumes generally flat.

Dedicated contract carriage continues to grow modestly. Gross revenue is projected to increase 4.1% to $12.5 billion in 2014 from $12 billion in 2013.

“Driver shortages are keeping demand solid,” Armstrong said. “A heat-up in the economy and consumer spending could lead to dramatic increases in dedicated contract carriage as shippers struggle to manage capacity.”

Spending on warehousing and distribution is projected to increase 3.6% to $37.2 billion in 2014 from $35.9 billion in 2013.

Retailing is the largest industry sector that uses logistics services, accounting for $28.7 billion in spending in 2013, based on an analysis of data on more than 6,300 3PL customer relationships in the United States by Armstrong & Associates.

Technology firms ranked second with $25.5 billion in spending, followed by automotive ($12.8 billion), food and groceries ($11 billion), elements ($10.5 billion), industrial ($9.3 billion), health care ($8.6 billion) and consumer goods ($5.8 billion).

The global market for logistics, according to Armstrong’s estimates, reached $703.8 billion in 2013, up 9.5% from $642.8 billion in 2012.

The Asia-Pacific region remains the largest market for logistics services, with spending estimated to be $255.6 billion in 2013, up 22.2% from $209.1 billion in 2012. China accounts for nearly half of all logistics spending in the region, followed by Japan, India and South Korea.

North America extended its lead over Europe as the second-largest market for logistics services. Spending rose to $176.2 billion in the United States, Canada and Mexico in 2013, up 5% from $167.8 billion in 2012. The United States accounts for 83% of logistics spending in North America.

In Europe, logistics spending rose a meager 1.2% to $158.1 billion in 2013 from $156.2 billion in 2012. Germany is the largest market, followed by France, the United Kingdom and Italy.

Spending on logistics in South America, while much smaller in size, is growing rapidly with revenue increasing 11.4% to $44.9 million in 2013 from $40.3 billion in 2012.