Tuesday, May 26, 2015

Independent Truckers Pick Up on Mobile Apps

Re-reading a great article from the Wall Street Journal called " Mobile Apps Get Picked Up By Independent Truckers for Better Routes" (Subscription May Be Required).  While I am not sure this rises to the level of "Where is Elon Musk in Logistics" (which I asked in my last posting), I do think it is very instructive to see the growth of Mobile Apps in routing trucks.  I can remember when people were wondering if they should write computer software for independent truckers because, after all, "how many truck drivers have a computer"?

As silly as that seemed, it is equally silly to believe that truckers will not use Mobile Apps.  One of the quotes from the article is from Bryan Beshore, founder of Keychain Logistics:
"I really don’t think that the brokerages serve a huge purpose anymore,” 
Using geotracking, the smart phone and some really good software it is becoming easier and easier for the independent trucker to cut the middleman (read broker) out of the equation.  While this was doable on laptops and regular computers it was just too clunky and hard.  With smartphones, and these types of services, an independent truck driver can get their next load in the time it takes to fuel up.  This could be real disruptive technology.

Here we have "silicon valley" meets the old stodgy trucking industry.  And just like every other industry it is the new upstarts who will "disrupt" the industry because the old guard (big brokers) will cater to the allusion of protecting their  somewhat bloated bureaucracies and infrastructures.

Look out trucking executives... here come the whiz kids from Silicon Valley!

Where is The Elon Musk of the Logistics World?

I am currently reading the book  Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future I highly encourage everyone to read it.  However the book gave me pause to think about our industry. An industry that at one time was filled with innovative giants such as Don Schneider and J.B. Hunt. Now, I have to ask, where have they all gone?

Where is the innovation in logistics and supply chain?  Think of it... with all the technology, education and advanced degrees, we still shut down the West Coast ports.  And when they shut down, supply chains came to a swift halt.

I consistently hear trucking and intermodal company executives talk about "supply and demand" as a driver of price.  They say "Watch out, capacity is low.. prices are going up and you need to be a shipper of choice".  Of course, this is nothing more than commodity pricing.  They are admitting they are out of ideas and they are pricing their service as a commodity.

In my early days in the industry I was able to see huge risk takers and innovators develop the use of satellite tracking for better routing (Don Schneider) and the proper use of trains and the overall development of intermodal (J.B. Hunt).  It was a thrilling time.  Lots of change, lots of risk, great growth and huge innovation.   Today, it appears innovation is either becoming a broker or buying a company.  In some cases, financial engineering has become the innovation of logistics.

I ask, where is our Elon Musk?  Where is our Steve Jobs?  The industry is screaming for someone to innovate.


Monday, May 25, 2015

Inventory to Sales Ratio is Not Showing a Pretty Picture - Macroeconomic Monday is Back!

All the data I am seeing is indicating some real softness in the economy. At first, people thought it was the weather and then we went to the port strike.  However, now we are starting to see some real convergence of data pointing to a slower economy:

Inventory to Sales Ratio:

As we can see by the FRED graph, this has been on a climb however the slope has increased.  Essentially, this is indicating that inventory is building in the supply chain and there is not adequate sell through.  Every time this indicator has turned this way, we have seen ultimate softness (as companies work to right size the inventory) and this means softness in the freight markets:

You can see that this is nothing like the spike during the "great recession" however you also clearly can see that when this goes up, recessions do follow (or this is just an indicator of the recession as it happens.

ATA Truck Tonnage Drops in April; Off 5.3% from High in January:

The ATA freight tonnage index peaked in January and has been struggling ever since.  While increasing 1% over prior year, it is down 5.9% against previous month, down 5.3% against high in January and indications are the freight index will stay soft.  This will drive lower expectations for GDP and, once again, our dream of a year above 3% GDP is starting to fizzle.

While the CASS freight index is still showing some healthy gains in pricing, I really attribute that to the successful "fear mongering" of the carrier base.  If buyers of freight truly were objective about the data, they would aggressively be seeking price decreases and not stand for any price increases.  This will utimately turn down once the shippers realize what is happening and once the buyers start getting pressured by their managers to adjust the cost basis to reflect what is really happening.

Manufacturer's Alliance for Productivity and Innovation (MAPI) Adjusts Manufacturing Growth to 2.5% From Previous Estimate of 3.5%.

This is a big movement and they attribute this to four key areas from their report:
  1. Oil and natural gas prices collapsed, causing a sudden contraction of the energy supply chain.
  2. The strong U.S. dollar reduced growth, a result of cheaper imports to the U.S. and U.S. exports becoming more expensive to foreign buyers, as well as deflation pressure on exports.
  3. Consumers spent some of their fuel savings in the fourth quarter of 2014.
  4. The inventory-to-sales ratio rose sharply in the first quarter, while the inventory runoff in the second quarter slowed production growth
The interesting item of all of this is in item #3 above.  Where is all the money gone that the consumer is saving due to low fuel prices?  I think it is has gone into the bank or the continued deleveraging of households - meaning people are still not buying.

Without some real big changes, I think we are in for another "sputter" and halt type economy - we are far to used to this now.