John’s Blog 2-1-12

Dear Friends,

Politics, the U.S. economy and Europe’s woes all collide to bring us today’s snapshot of what is influencing supply chain issues.

The trucking industry is trying to obtain an increase in truck weight and length in conjunction with the highway reauthorization bill making its way through Congress. The railroads are using all of the political capital they have to keep these trucking improvements from getting into the bill.  The Senate is inclined to keep size and weight out, so it looks like the railroads will prevail in this political battle, for now.

Both trucking and rail shipments remain in positive territory as the U.S. economy continues to show signs of its “slow track” recovery.  However, consumer spending helped drive strong freight results and there is concern this momentum was driven by  heavy December discounting and will not be sustainable.

Consumer spending increased two percent in the fourth quarter, up slightly from 1.7% in the third quarter and 0.7% in the second.  We need to keep a close eye on this trend.  It is apparent that if consumers have the cash or credit, they will spend. The Thomson Reuters/University of Michigan consumer sentiment survey showed consumer confidence rising significantly from December to January.

Manufacturers continue to keep a close eye on exports to Europe. The ongoing turmoil in the Eurozone over Greece and other countries like Portugal creates a drag on stronger economies such as Germany. This weakens the Euro and hurts U.S. manufacturers, who count on Europe for 25% of all exports.

The steady increase in freight costs from China, coupled with rising wages in the Chinese manufacturing sector, is helping U.S. manufacturers. Capacity issues affecting Chinese supply chain reliability also are causing manufacturers to look at re-shoring, or near-shoring in Mexico.

The U.S. housing market continues to fester. Tuesday’s S&P/Case-Shiller Index puts a damper on hope for a quicker recovery. The index slipped down 1.3% from October to November.  This 20-market index covers all housing prices including jumbo loans and those in creative mortgages, so hopes we have seen the bottom seem unfulfilled.

The National Association of Realtors said existing home sales increased five percent in January, so at least houses are selling.  It remains a buyer’s market as the median price was down 2.5% over January 2010.

The American Trucking Association’s seasonally adjusted truck tonnage index was up almost 7% month-to-month and 10.5% year-over-year at 124.5 for December. This dramatic increase was attributed to strong manufacturing activity coupled with retail restocking.

ACT Research said that Class 8 truck orders bounced up 68.6% in 2011 with 305,393 trucks ordered.  It appears that motor carriers are into the replacement mode in a big way.  The question is, how much of the increase was due to additional capacity and how much was companies taking advantage of an expiring depreciation benefit?

Intermodal traffic was up for the week ending January 14^th by 7.4% according to the Association of American Railroads.  Container volume increased 8.4% to 197,716 units while trailers on flatcar improved 1.3% to 31,375 units.  Excluding intermodal, other carloads rose 5.5% to 298,560 units.

At Wagner we are off to a good start.  The Leadership Team is out meeting with our associates across the U.S. sharing the Wagner mission and vision, explaining our key messages, and reviewing goals for 2012.

In transportation, Wagner continues to keep our promise to our associates to provide them with the best possible tools as we integrate the Mercury Gate transportation management technology.

We continue to work on many great opportunities while collaborating with clients to find a better way to take merchandise to market.  Are you doing a supply chain tune up and adding distribution locations?  Looking for a provider who can ship to a big box retailer meeting compliance requirements AND ship direct to consumer?  Want to repackage or kit to meet a club store requirement?  Provide materials management supporting a manufacturing plant?  Move loads when trucks are in short supply?  Call Wagner and Bring it!

Have a great day!

John Wagner Jr

John's Blog 1-18-12

Dear Friends,

With the New Year comes tempered optimism about the U.S. economy and its effect on the supply chain industry. Modest growth in economic indicators continues, and consumer confidence is surging. The tempering influence comes from a series of major “unknowns.” No one can accurately predict what will happen in Europe as they continue to struggle with their deficits. Additional major questions hang in the air regarding trends in manufacturing and exports in China, and the November elections here at home.

Barring any Black Swan events I believe that we will continue to see slow growth in the U.S. economy, at 2+% GDP. Consumers clearly are tired of the gloom and doom and are gaining optimism – more optimism, it seems, than the modest growth in key indicators would suggest. The evidence is in the retail sales numbers reflecting what consumers spent or ordered through e-commerce sites in December. The result is the biggest retail sales year in history last year, and the National Retail Federation is predicting another record, with sales growth of 3.4% in 2012.

Employment is improving – slowly – with ADP reporting that nonfarm private business jobs increased by 325,000 from November to December on a seasonally adjusted basis. ADP says further that the increase in December was the largest monthly gain since December 2010.

Manufacturing expanded, with industrial production up 0.4% in December according to the Federal Reserve. The metric used to describe plant capacity utilization was also up in December, moving to 78.1 from 77.8 in the previous month.

The Institute for Supply Management released their PM Index, which supports the notion that manufacturing continues to grow. A December reading of 53.9 is the second straight month of improvement. Any reading over 50 on that index indicates expansion and December marked the 29^th straight month on the growth side of 50.

With the robust retail sales one should expect manufacturing to continue to improve as restocking takes place.

In transportation, expect truckers and railroads to continue to do well, as drivers demand more money and the railroads settle their union contracts. In the end, expect continued upward pricing pressure as capacity remains tight.

Ocean and air cargo will continue to suffer financially as ocean freight fights over-capacity and lack of volume in air cargo.

With federal regulators keeping the 11-hour driving limit for truckers, expect a fight over the restart rule. Currently drivers must rest for 34 hours after a workweek. As now ruled, starting in July 2013, the 34 hours must include two rest periods from 1 a.m. to 5 a.m. In a move that will further impact truckload carrier capacity, the new provisions have the effect of limiting drivers to 70 hours of work within a seven-day period. The previous limit was 82 hours, so this is a real loss of productivity.

At Wagner we are excited about the New Year. We have a great team providing high-tech/high-touch service to a roster of first-rate clients, and several exciting projects in our pipeline.

We are now 100% enabled with RedPrairie warehouse management technology across our entire distribution center network. To support our growing transportation business, we are now implementing our new Mercury Gate transportation management technology. The system automates multiple touch points within a transportation transaction, boosting accuracy and timeliness.

As you think about your supply chain in 2012 feel free to reach out to me with your challenges.  As we say at Wagner, Bring it!

Have a great day!

John Wagner Jr

John’s Blog 11-28-11

Dear Friends,

It would make sense then that consumers would pull out their collective wallets and buy.

And buy they did, as a record 226 million shoppers hit the malls and websites for a long weekend of splurging on everything from electronics to apparel. The National Retail Federation said that the average holiday shopper spent $398.62, up from $365.54 in 2010.

Cyber Monday was just as hot, with online sales up 33% over 2010’s $1.03 billion. The average online order value was $198.26, up from last years $193.24. Notable was the expanded use of mobile devices, as orders placed via iPads and smart phones accounted for 6.6% of all web orders on Monday, up from 2.3% for Cyber Monday 2010.

In a “normal” economy, the consumer confidence level is at 90. With this kind of activity at a confidence level of 56, it makes one wonder what the holiday sales numbers would be like under normal conditions.

All of this good activity should translate to better GDP numbers. Earlier, the third quarter gross domestic product annual growth rate was revised down to 2.0. From what I am seeing it is possible that the fourth quarter may grow at 3.0. 

The employment picture is already looking brighter, as the unemployment rate fell to a 2-1/2-year low of 8.6% in November.

The Commerce Department said that new orders for manufactured goods fell 0.7% in October and shipments were up 1.3% while inventories were up 0.5%. Manufacturing continues to find its balance in this slow-growth situation, and is helped by the weak dollar driving export growth.

Still, the Federal Reserve Bank said that by their measure, industrial production increased by 0.7% in October, with manufacturers’ capacity utilization rising to 77.8%, the highest level since July 2008. 

Manufacturing is 1/8^th of the U.S. economy and consumer spending is 70%+, so these trends are encouraging.  When coupled with the consumer price index falling 0.1% in October calming inflation fears, the economy continues its slow climb forward.

The American Trucking Associations said that its October seasonally adjusted For-Hire Tonnage index increased 0.5% and was up 5.7% for the year. The question is, will retailers reorder and keep their shelves stocked? Or will they play it safe and tell customers, “When it’s gone, it’s gone”? These restocking decisions will drive the trucking numbers in December and in the gift card shopping season in January.  Welcome to the new normal of lean inventories.

Railroads continue to see good volume and intermodal shipments are gaining as motor carriers have a hard time finding drivers. The biggest threat facing the railroads, and the national economy, had been the threat of a nationwide strike. Two of the last three unions still wrangling with the railroads reached an agreement Dec. 2, and the third agreed to extend talks through Feb. 8, averting a holiday-season rail strike that could have cost the U.S. economy an estimated $2 billion a day.

UPS released its published rates for 2012 and they include a 4.9% net increase for UPS Ground and UPS Air Services. U.S. originated shipments for international destinations are included as well.

UPS Next Day and 2^nd Day Air Freight rates on shipments between the U.S., Canada and Puerto Rico will increase 5.9%. UPS 3-Day rates are unchanged.

At Wagner we have signed a letter of agreement with Mercury Gate and will be implementing this powerful transportation management system in the coming month. We are excited about adding this great tool as we seek best-in-class technology for all Wagner service products.

As you consider your distribution planning for 2012, feel free to reach out to Wagner with your supply chain challenges.  As our motto says, Bring it!

Have a great day!

John Wagner Jr.