As reported in LogisticsViewpoints, both Schneider and Werner have, on queue and somewhat coordinated, put out press releases and statements saying there is a big problem with capacity, productivity is down and the big bad regulations are making it hard to run their business. This will, I predict, be echoed by many others over the next few days. All while earnings at the best run trucking companies are better than they have ever been and OR rates are at record levels (the REAL data in their annual reports).
These statements, of course, are designed to create the fear trade and to get the shippers to buy into a "fear premium" as they go into bid season. Now, for the real data:
Using CASS data from the October report we see that both expenditures and shipments are down year over year. In fact in 7 months of 2013 we have seen shipments down year over year which indicates, as CASS rightfully points out, that the economy is slowing and the shippers are finding alternative ways to deal with transportation problems (i.e., network redesigns, packaging, better inventory management etc.). During these turbulent times it appears shippers have rolled up their sleeves to find innovative ways to solve transportation problems and it appears the transportation industry is issuing press releases. The graphs below tell the story:
Another interesting statement out of the CASS reporting was that for the first time since 2008 the National Retail Foundation is forecasting a decrease in holiday sales by 2.5% and this is supported by the less than robust holiday stocking.
For sure I am not saying to ignore capacity - if you claim the world is going to end and you live long enough, sooner or later you will be right. However what I am saying is three-fold:
1. Let the data speak. Don't get wrapped up in the fear trade. Watch this blog, watch the CASS information, watch macro economics and, of course, watch your own sales as a shipper. These are the most telling indicators.
2. Look at your network and understand your network relative to freight flows. I have said it many times that transportation is not a homogeneous network. There are specific lanes (Northbound out of Mexico as an example) that are always under stress. However, if you ship westbound you should be getting great deals almost always.
3. Understand that there is another side of the equation and that is demand. Shippers have done an incredible job of productivity enhancements through packaging, product design, loadability studies, and network design which has allowed them to service their customers with higher quality goods at lower costs and lower transportation requirements. There is no reason to think this will stop.
So, in conclusion, do not get caught up in the fear trade. Do not think you need to pay a premium now as an insurance policy against future capacity. One thing is for sure, capacity will flow to where the margins are and even if you pay more now it will not ensure future capacity. If you pay a premium now you will be in a "Pay me now AND Pay me later" scenario.
Stay calm, stay focused and keep reading the data.
And now, enjoy the Who and Won't Get Fooled Again: