Monday, June 26, 2017
But then I re-read an article I posted in March of 2013 titled, "The Battle for Retail is Really The Battle of Supply Chains". In this article I opined that the big retailers are all essentially selling the same products, many of which have been or very quickly are commoditized. This means the real value add of a retailer is in their supply chain.
I also concluded in this article that Wal-Mart should be able to kill Amazon as they already have the bricks and mortars along with the capability of great e-commerce. Finally, I concluded that due to the age old issue of The Innovators Dilemma which was created by Clayton Christensen in his seminal book of the same name. Unfortunately, for the last 4 years, and for Wal-Mart, my prediction came true.
The good news is Wal-Mart, like the sleeping giant, has now been awoken. With its purchase of Jet.com it admitted it needed great e-commerce and, in the same transaction, admitted it could not do this on its own. The big behemoth could not innovate so it had to buy. That is OK as it is at least now on the path to competing with Amazon.
But then a funny thing happened. Amazon admitted it could not grow bricks and mortars fast enough in the grocery space to compete so it made a bold purchase. In this purchase, Bezos is essentially admitting he wants to move a little more towards a Wal-Mart model and also showed, in this purchase, the only reason Wal-Mart has not crushed Amazon is due to lack of execution and lack of strategic foresight.
Well, no more. I believe Wal-Mart truly has awoke and they are starting to adjust their supply chain very quickly to mirror a "be where ever the customer is" retailer. This means if you are out and need something quickly, you can pull into your Wal-Mart and get it. If you want to order on line and have it shipped, you can do that. If you want to avoid shipping charges, you can buy on line and pick it up in the store. Basically, any configuration of how the consumer wants to interact to get the products she needs, Wal-Mart will be there. Wal-Mart can ship from DCs or from any of its 4,177 stores of which 3,275 are super centers. Wow! Wouldn't Amazon love to have that footprint.
If Wal-Mart executes they have a chance of beating Amazon. I recently used Wal-Mart on line to buy a UPS for my computer. It was a great experience, shipped fast and was less expensive than Amazon.
I do think the speciality retailer is dead. Consumers want the "endless aisle" that Amazon and Wal-Mart provide. They do not want to bounce around to 100 different websites to find what they want.
Wal-Mart can do everything Amazon can do (or they should be able to do it) yet Amazon cannot come close to all the capabilities of a Wal-Mart. If I were investing, the only stock I would buy in the retail space is Wal-Mart. I would then go to their shareholders meeting and scream two phrases: "Wake Up" and "Execute"!
Welcome back Wal-Mart - I missed you!
Monday, June 5, 2017
I am sitting on a plane right now, on the Tarmac, moving nowhere. This reminds me of another aspect of a truly customer centric supply chain: Define terms as your customer sees them and not for your own internal metrics.
So, the airline app says I have "departed" and in their mind, I am sure I have. But in my mind, I am sitting in a tube, on a tarmac, going nowhere. I, the customer, consider departed to mean I am up in the air and heading to my destination.
Lesson:. Define terms from a customer lens, not from an internal lens. When you do this, you will be on your path to customer centricity.
Friday, June 2, 2017
As I work with companies I continue to emphasize that it is important for our supply chain to drive revenue. Great supply chains (Read: Walmart and Amazon for example) are core to the company's revenue strategy and not just an evil cost to reduce.
But, there is this pesky thing called "profit" that also has to exist to make a world class supply chain complete. The question really is what do you do first? My view is you take care of the customer then figure out the cost. If you are designing supply chains you are in a war with your competitors and the weapons of that war are speed and availability. Customers, whether they be industrial, commercial or consumer are asking for the same thing: They want what they want, when they want it, in the right quantity at the right price. Those who figure all this out will win. Those who do not will perish. What are some things you should do now to get on the path to figure this out? A few ideas below:
- Start with the Customer: Don't lift a finger to design a supply chain until you have personally interviewed, visited with, surveyed and embedded yourself into the customer. This does not mean asking sales their opinion. Sales is a first derivative source. Go right to the customer.
- One Size Does Not Fit All: Design with the idea of multiple supply chains to service specific groups of customers.
- Use Pricing to Give The Customer Options: You need to probe what customers are willing to pay for and what they are not willing to pay for. Amazon is a master at this. Do you get next day delivery? Yes... Do you pay for it (through Prime)? Yes... Do most people spend more on Prime fees then they get back in avoidance of shipping costs? Most likely. The key here is to not say no to the customer, just provide options.
- When In Doubt, Provide The Service Then Figure Out The Cost: Many times there just is not enough time to ensure everything is perfect before you decide which direction to go. But, once you are confident you are "close enough" to figure out the cost, launch! There is no better way to ensure you have pressure to lower costs. This is not a "ready, shoot, aim" strategy but rather it is one that avoids a supply chain being stuck in a conference room for years.
- Constantly Reevaluate: The industry is moving too fast to design a supply chain every 10 years. You must constantly reevaluate where you stand relative to customer demands and competitive forces.
Tuesday, May 2, 2017
Then you need rail networks, highway networks (Jax joins I-10 and I-95 - two may corridors with 10 being East - West and 95 being North - South), good employment and space for warehousing. All of this has to be wrapped around a good business climate.
Jacksonville Florida has it all and more! What is the more? Jacksonville is the gateway to one of the most populous states and fastest growing states. What better place to be for logistics then to be where the people live.
It truly is a great logistics hub. Congratulations to all who have helped make it the true "Gateway to Florida".
Sunday, April 30, 2017
This feedback has been around for ages on 3PLs and I always wondered why it has not been addressed. In fact, I would say the industry has really run away from what was true 3PL work and the brokerage industry has co-opted the term 3PL for itself. 3PLs today are mostly just brokerage houses.
So, why all this talk of "partnerships" yet bidding still happens at a torrid pace to reduce costs. A consumer of 3PL services should ask themselves the following questions when looking for cost reduction:
- How will value truly be created? Remember, taking money out of one pocket and putting it in another does not add value to the extended supply chain. This activity will just merely reallocate the value which is already there.
- Is the value truly sustainable? For example, building cost reduction from paying below market wages is simply not sustainable. Something will give. Yet, I hear consumers of services say things such as " I don't care how they do it, just do it".
- Are the governance structures supporting the relationship aligned with the overall goals of the program? Too many times I hear the terms "partnership" and "vested relationships" yet when you look deeply at the contracts and the governance structure, it becomes clear the relationship does not support overall value creation.
- Make contracts long enough for the 3PL to recover investments. We ask the 3PL to invest in huge amounts of capital (technology, buildings, automation) yet we write the contract for 3 years. Imagine how expensive this is if the 3PL has to recover this investment in 3 years!
- Build a payment structure that allows the 3PL to gain from applying innovation. If the payments are fixed, why would the 3PL invest in innovation? They need to benefit from this and there are payment structures which allow that to happen.
- Build a management governance structure which ensures the 3PL can survive. For example, in fast growing wage environments, do you really want the 3PL to keep wages low and thus attract the not so best employees? That is what they will be forced to do if you do not have a structure which allows for real business decisions such as raising wages and everyone sharing in that cost.
Sunday, March 26, 2017
- The family remains firmly in control - in fact the company will still be considered a "closely held" company.
- Family will net about $230M
- $359M to the company of which roughly half is used to pay down debt and 1/2 to buy chassis.
While there is optimism, February retail sales at .1% definitely slowed this movement.
There is also the wild card of autos. Ford has already warned on inventory and slow sales which means a lot of capacity becomes available as the automotive industry adjusts (read: idles plants).
More to come but let's call this a "good sign" if you are on the capacity side and an "early warning" if you are on the shipper side.
|Inventories to Sales Ratio|
The Stay at Home Economy (SAHE for now on) is something that has huge impact on how our supply chains work. First, lets explore why this is growing:
- Technology: I have written a lot about how technology miniaturized or digitized just about everything and it continues at a rapid pace. My music, my video and my books are all digitized so I get them on demand and in digital devices. No need to shop or go to a central place to watch or listen. In fact, my home theater and home audio equipment rivals that of professional locations.
- Customization: Because virtually everything is available with the touch of a button, I essentially customize my experience to an audience of one - me. Before, I would have to compromise and listen, watch or do some activity that perhaps was not exactly what I wanted to do. Now, I do exactly what I want to do.
- Control of the Temporal Aspect of Activity: I do what I want (see #2 above) when I want. I no longer have to worry about "start" times or what day of week I am doing something. I do what I want and when I want to do it.
- Food Delivery: This is the last bastion of home delivery e-commerce and it is coming. It is far more complex but with companies building "Meals ready to eat" (No, not the MRE's from the Army days but companies such as Blueapron) and with your local supermarket delivering, the last "big" reason to go out is starting to go away.
- Security: This is an unfortunate part of life these days but it is a fact - the more the aggregation of people occur at events, the more risk there is. Why take that risk? When I am at home I feel far more secure.
"When Domino's Pizza (NYSE:DPZ) crushed earnings and Target (NYSE:TGT) got hammered, Cramer is convinced that the stay-at-home economy is getting strong.
The comparisons between these two stocks are perfect metaphors for the current environment. Stocks such as Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Domino's allow people to stay at home and save money as well. Domino's delivers pizzas to you at home while Target requires you to leave the house.
The bricks and mortars are losing in a world where consumers see stay-at-home as an advantage. This also means that companies like Home Depot (NYSE:HD) and TJX Companies (NYSE:TJX) are rallying as they make the home better.
Netflix, Amazon and the likes have made entertainment reach home, when you want, how you want it. Gaming companies create engaging video games which people play at home. With social media, consumers are aware what's going on and do not need to leave the house. It's just that things are different now compared to how they were 10 years ago. The stay-at-home economy is touching every aspect of people's lives and it's not going to change soon."I think it is clear the SAHE is here to stay and it is dramatically changing how people behave and shop. My next entry will be on the implications of your supply chain - Hint: If you are not working to support the SAHE you are quickly becoming obsolete.
Note: I am not making any value judgment pro or con on the SAHE - that is for social scientists and psychologists to develop. I am merely reporting what is clearly happening and the impact on supply chains.
Sunday, January 15, 2017
The proposals being made would fundamentally change the economics on a lot of business decisions relative to the development and build out of supply chains. One example is the proposed "Border Tax" which could be as much as 35% on imports. As the Wall Street Journal pointed out, President Elect Trump is even threatening a foreign company, BMW, with a "border tax" if they move production to Mexico. The Wall Street Journal reports toy manufacturers are struggling with what should they do in this age of the popular uprising against global supply chains. And, even Constellation Brands is "bracing themselves" for this tax.
For those deeply involved in global supply chains the question being asked is just exactly what should they do in 2017? Do they develop supply chains as if this is not happening? Do they retreat and prepare for this tax by re-shoring? Do they automate (keep plants in the US but eliminate people? All of these questions are up in the air and the uncertainty of whether the threats are real or just political positioning will cause supply chain investment to slow down.
Companies can do one of three things:
- Stop major investment and wait for more certainty.
- Continue to invest and "take a bet" where this will land
- Ignore it and fight it - risking one morning that the CEO wakes up one morning and finds their stock down 10% due to a pointed tweet.
- Global supply chains are here to stay and no one can stop them or revert them. How can toy manufacturers all of a sudden make affordable toys in the US? The infrastructure for the global supply chains have already been built. They are not changing.
- Any time you introduce economic distortion (i.e. a border tax or favoring one industry over another) you risk abnormal behavior in investment. Eventually this falls apart and a collapse occurs.
- When you threaten major disruption you force things to get put on hold until clarity emerges.
Sunday, December 11, 2016
Sunday, November 27, 2016
In this chapter, Professor Christensen discusses how one should look at their careers and subsequently how someone should look at hiring talent. The old model of climbing a ladder is no longer useful in a "flat" world (using Thomas Friedman's analogy and applying to corporate America). Most organizations are extremely flat - especially relative to years ago - and this means it is a collection of experiences which will both drive your career and should drive your selection of talent. He has many examples but let me provide two from my own career:
Transition from the Military:
The military was a fantastic place to both give back to the Country and also to accumulate many experiences: Leadership, operating in stressful environments, fast decision making, and I could go on. Truly, I cannot imagine any civilian business giving better experiences at those situations than the military.
However, the military does not provide a lot of financial experience, profit and loss experience or business competition experience (There is, after all, only one Pentagon!). So, when the opportunity presented itself, I moved into the business world. In that world I have experienced all the items I mention above. Was it a "promotion"? If measured by wages, true cost of living, or titles it could have actually been considered a demotion. If measured by gathering huge experiences which I could not get in the military, it was a huge promotion!
Transition from "Big Company" to Entrepreneurial Company:
The skills required to work in a big company with large well established processes are completely different than those required in the small and entrepreneurial world. So, using the theory of "experiences" I decided I wanted that small experience even though I was in a well established executive position at a great company.
Using supply chain metrics, was it a promotion? I went from managing 14M square feet of warehouse space to 6M square feet. I went from $300M+ of transportation spend to $80M. To the stereotypical person, this could be seen as a "lesser role". Trust me, it was not!
I quickly learned the skills used in a large company are close to useless in a small, everyone does the work, entrepreneurial and "scrappy" company. The experiences I gained at this smaller company could never have been attained in the larger, well established company. And, if I were to just do what I did in the large company in the entrepreneurial company, I would have failed. I had to adapt, learn, gather new experiences and apply them to the unique issues.
What does this mean for talent acquisition:
Even today with the sophisticated human resources (HR) departments I still find people rely on the "ladder" model versus the "experiences" model. For example, if you were hiring for a start up company would it matter that someone become a SVP in a multi-billion dollar company? That person has incredible experience (and has been successful) in delegation, building staff, using sophisticated ERP such as SAP etc.
What this person lacks is start up skills. Can they do a lot of the work themselves? How will they perform without "staff"? Etc. The "ladder" model shows that this person is a great pick but the "experiences" model shows the person to be lacking in a number of major areas.
We can use the "experiences" model to guide both our careers (choose experiences over perceived promotions) and we can use it in talent selection. It tells a different story when this is applied versus the "ladder" model. My advice for those starting their careers is to work to get many different experiences and work to stitch together a set of skills, acquired by experiences, that will serve in you in a multitude of settings. This will ultimately serve you better than "climbing the ladder".
Friday, November 25, 2016
However, it is bigger than that from a nationwide perspective and I had the privilege of listening to a very insightful presentation given by Eric Johnson (Twtr: @AmShipEric), research director and IT editor at American Shipper at the Jacksonville CSCMP roundtable event in October.
He had some very good insight into what Amazon is trying to become and what they are not trying to do. My conclusion, after listening to Eric, is Amazon wants to "own the customer". Now, of course the key question is what does this mean?
If you think about "owning the customer", it really covers about 5 major touch points:
- Own the order experience (The first point to gain loyalty for any product). This drives all sorts of information technology.
- Own the delivery experience (Appointments, delivery, right to how the customer is greeted).
- Own the post delivery experience (solve issues etc)
- Own the payment experience (whether they sell it to you or not).
- Own the customer ecosystem (Alexa app, ECHO and DOT).
The Intermodal index rose, YoY for the first time since 2014 by 0.4%. This, I would call a "rounding error". Let's call it flat.
|Source: CASS Transportation|
|Source: CASS Transportation|
- Miniaturization of product
- E-Commerce (reduction of movement of product to stores
- Digitization of product - more product delivered electronically (Books, newspapers, inserts, music etc.).
- Localization of suppliers - This is very interesting because it is a function of transportation costs getting out of control a few years ago. As more finished goods / component mfgs localize, transportation requirements decrease dramatically (Better cube utilization when shipping raw materials v. shipping finished goods or components).
- The Borrowing Economy: I will write more about this and the impact to supply chains but this is real and it is impacting how much we buy. Think about how many items you have that sit and do nothing most of the time. If people start aggregating this in a borrowing economy, the total amount of product bought and shipped will be reduced dramatically.
Tuesday, October 25, 2016
Monday, October 24, 2016
On To the Numbers:
- Shipments were down 3.1% YoY
- Expenditures were down 3.8% YoY
|Destocking takes bps out of GDP|
- If you have not bid freight in a while - do it now.
- Lock in rates for two years if you can - a nice hedge
- Move to a market based fuel system to take out any fuel fluctuations in the rating structure
- Watch tender turn down rates. This will act as a great "early warning" telling when / if the tide turns (don't expect this until 2018)
Sunday, October 2, 2016
Two updates to report. First, at the CSCMP Annual Conference I was able to attend the "Educators Conference" and watched a great presentation by Professor Dr. James Campbell, Professor and Chair, Logistics & Operations Management Department, College of Business Administration, University of Missouri - St. Louis. He discussed the use of the "Truck - Drone" hybrid which entails trucks moving to central locations with product. At that location, the drones would be launched and conduct deliveries. A fascinating topic which made more sense as things such as battery life and laws about flying out of vision will make launching them from central DCs almost impossible for the near term.
He also had a nice graph showing the cost per delivery and Amazon can get this cost down to $1.00 per package. That is amazing. There was a lot more in the presentation and it is clear thought leaders such as Dr. Campbell are making large strides.
Second, I checked in on Missy Cummings who, in 2013 was the star of the Nova episode. Remember, she was one of the first F/18 pilots for the US Navy and a graduate of the US Naval Academy. She now runs HAL - The Human Autonomy Lab at Duke. She continues to study the use of bigger and bigger drones and believes these will be used for delivery. She also has an interesting twist (See video below) on the human interaction of drones. That is becoming the topic as the technology is no longer "futuristic" but rather it is known and can be implemented. The question is how will we interact with drones.
If you have not seen the original NOVA episode, even though it is 3 years old, you really should watch it (Below). I have also included a recent speech Missy made. She is truly brilliant in this field.
Sunday, September 18, 2016
Usually the press out of this conference is designed to scare the shippers into paying higher rates than they need to but, at least within this summary, it appears they are becoming more realistic. Here are some key points:
- 2% GDP growth for the next two to three years (A number I have used for many years now). This is significant because virtually all the transportation executives I know say the real capacity crunch comes at 3% GDP growth.
- Eric Starks states the industry will flat in the foreseeable future. Flat means leaders tend not to know what action to take; what bet to make.
- Mark Rourke, President of Schneider claims they have a 4% to 5% productivity decline due to electronic logging devices (ELD) and they have not recovered from this since. This I will never understand and wish someone would explain. How can ELD's cause a productivity decline unless you are not already following the Hours of Service (HOS) laws. I would think this would make them more competitive as it will ensure everyone follows the laws.
Saturday, September 17, 2016
Tuesday, August 30, 2016
In an article today titled "At Ports, A Sign of Altered Supply Chains", they discuss the muted growth (or at least not shrink) of the trucking and ocean business. The cause? You guessed it - the fact that inventories are high, the consumer is moving to on line purchasing, and the more disciplined approach to inventory management. There are some key shifts happening:
- Demand Sensing Supply Chains: These have finally come into their own. Companies are much better at identifying the purchase trends and immediately shifting inventory purchases to adjust. If the consumer slows (or moves from apparel to electronics for example), Demand Sensing Supply Chains adjust almost in real time. Gone are the days of huge inventory buys "just in case".
- On Line Purchases and The Death of Excess Inventory: Anyone who has managed inventory knows these key tenets of inventory management: As you move inventory out and disperse it among stores or other storage points, your forecast accuracy decreases, your errors increase and the likelihood you will "orphan" inventory in the network increases dramatically.
To solve these gaps in information, you generally overbuy inventory to keep "in stocks" high.The inventory benefits of on line are clear: Far fewer inventory points (probably 4 at most) result in much higher accuracy which translates into far fewer inventory dollars to service the same consumer base. This, of course, translates into much less transportation needed. Those who say it does not matter, we are selling the same amount of stuff, do not know how the "laws of inventory" work.
- The Growth of The Supply Chain Data Scientist: This is an entirely new field in supply chain and is different than just being an analyst. This is deep diving into data, pulling "fuzzy" data points together and identifying trends. These people see changes in buying patterns far earlier than ever before and provide that information to management which responds far faster than ever before. Inventory buys can be shut off in a nano second.
Wednesday, August 24, 2016
Let's review some key technologies being developed or deployed now:
- Electronic logging
- In cab cameras that go beyond just filming but rather sends signals to centralized managers who make real time decisions.
- "Uber" type applications for booking, managing, and tracking freight
- Autonomous vehicles and the "Otto" type technologies.
- On line immediate economy (hour type delivery)
All of these questions are great questions and I have always said that all the answer to these questions are simple: Yes, it will be messy during the transition; Yes, these issues will all be solved; and Yes, the ultimate solution will not look exactly like we think today but we will move more towards "Uber" than we will stay where we are.
I think this is generally the conclusion of the author however I disagree with him in one major aspect: He still thinks of logistics in isolation of everything else that is involved in getting products to market. He says:
" But for all the speed and mobility an evolving new model like this brings, there are tried-and-true, iron-clad laws of physics, geography and time that need to be respected by newcomers to the industry."This hints that the author thinks of the final delivery in isolation but in reality this is just one part of the overall cost. For example, what if the lack of retail space, the lack of moving product between nodes in a distribution network saves significant dollars. Some of those dollars are reinvested in a higher cost "final mile" solution and some are retained: The net new cost is less than the old cost.
Think of the significant advantage in cost/sqft on line retailers have relative to those who have to get high cost real estate in commercial locations. The bottom line is there is a total cost to deliver product from the raw materials, through manufacturing, through distribution and the finally, delivered to the customer. This cost has to be looked at in its entirety and you cannot just look at one element and say something will not work due to the cost of that one element. If other costs are reduced or eliminated then perhaps that final mile cost can go up a bit.
Well, along comes Uber buying Otto. And, that, as they say, changes everything!
Monday, August 22, 2016
If you are not focusing on how to develop and retain your great talent, you will be forever out in the market trying to recruit new talent. And that, most often, is a loser's game. It is much easier to develop what you have then try to assess and acquire what you do not have. Here are some of my ideas on how to deal with what is becoming a hyper competitive market for talent:
- Cater to Millennials while at the same time ensuring the "gray hairs" experience is utilized. I hear a lot about the catering to millennials so I will not rehash this. I do think though companies have to ensure the more experienced workers have a place. These people carry years of ideas, experiences and knowledge. Combine that with the skills of the millennials and you have an unstoppable force.
- Be customer centric and dare I say - Customer Obsessed. People love working on customer focused ideas and activities. People want to grow businesses. People hate cutting and they hate shrinking. Be customer obsessed.
- Make if fun. I once had a boss who on day one showed me the company values and he actually went out of his way to tell me that "fun" is no where to be found. "This is a business", he said. it was that moment, day one, that I started to think this was not going to end well. People have to enjoy what they are doing. When you hear people say they are "passionate" what they are really saying is they love the blending of their skills and they are having fun using those skills.
- Invest in your people. If you do not, someone else will and they will be gone. Yes, you will have the few times where you send someone to training and they promptly leverage that into a better job somewhere else. But, don't make everyone who is left pay for that. Invest, invest and invest.
- Embrace the "boomerangs". This is a unique and interesting idea. Many companies will not entertain bringing a person back who leaves. I say you should embrace them. Think of it as an opportunity to say they looked, the grass was not greener and we are welcoming you home. That will go a long way for your current employees, who probably still have a loyalty to this person and I believe you will have gained an employee for life. They will have left, learned a lot and now come home. What great way to acquire talent!
Adding to this is an article by Tisha Danehl titled How to Recruit Top Supply Chain and Logistics Professionals. She has all the right ideas!!
Sunday, August 21, 2016
But, again, I must say the article totally misses the point of Customer Centric Supply Chains. You do not design your network to cut costs! You design your network to provide incredible service to your customers. Once that is done, you figure out how to do it at the most optimal cost.
Most of the work in network design is working cross functionally with sales and strategy to identify not only what customer needs are today but where will they be in 10 years. Where is the ball going.. not where is it today.
This is why Amazon is so brilliant in their supply chain strategy - they focus solely on the customer needs, they design to those needs and then they drive out cost. Further, they are not looking at the needs today but rather the needs 5 and 10 years from now. How do I know this? Easy: Everything Amazon does is first met with disdain, "no one can make money doing that" type statements etc. When I hear that, I know they are on to something.
Sunday, August 14, 2016
Monday, August 1, 2016
For the last three months, the truckload index has decreased 2.3%, 1.2% and 1.8% respectively and the graph shows how difficult this market has become. We now are looking into 2017 before there is any tightening of capacity and pricing. I believe capacity will need to exit the market as not only is there too much today but the economy will start slowing and that means just the normal cycle would require removal of capacity.
Interestingly, this comes at a time where trucking costs are rising and as we saw in the Swift 2Q reporting, OR rates are starting to increase (SWFT 2Q2016 OR rate was 92.7% - highest in the last three years). JB Hunt sees margin erosion in the latter half of the year for both trucking and intermodal. Great if you are a shipper as soon trucking companies will start working to get any contribution to fix but bad if you are an investor or a trucking company itself.
Suffice to say, Intermodal is following the same trends.
So, what is going on here? Why do we continually get told that "this is the year" and yet for the last 3 years at least, the tightening has never arrived? I attribute it to three main items:
1. The Economy is not nearly as robust as you may think watching the markets. Remember, finance (which requires no trucking) has grown to be a substantial part of our economy. In the past when you said GDP went up x% you could correlate that directly to an increase in the need for transportation of goods. Today, that is untrue.
2. Inventory levels remain elevated. Think of it this way, when inventory levels are as high as they are this essentially means you shipped the product in previous quarters. This is like "borrowing" against the future. Made those quarters look good but because there was not enough sell through, the product just sat and now when sales tick up, the inventory has already been shipped.
3. Miniaturization, packaging and digitization of products. I have always said the shippers would not sit idly by and just watch rates go up. They have figured out ways to streamline packaging, digitize what they can (including the growth of 3d printing, and make things smaller. This means less transportation capacity needed.
Overall, given the way the economy is headed, I would be shocked if 2017 was anything different. Hunker down, we are in for a bit of a ride here.