John’s Blog 7-19-11

Dear Friends,

It looks like the fighting in the media over the national budget and debt ceiling, coupled with continued high unemployment, may be taking a toll on consumer attitudes. Several key indicators are showing signs of weakness. It’s not bad news across the board, however, and at Wagner, we remain optimistic about a sustained recovery.

First, the bad news. The preliminary consumer index produced by Thompson Reuters/University of Michigan fell to a reading of 63.8 in July, for the lowest reading in almost two years.

The Commerce Department said that the import-export gap widened in May by 15%.  Much of the blame goes to imported oil but exports slipped 0.5%. This should put further pressure to adopt free trade agreements on the White House and Congress, which would be a positive step.

In other news from the Commerce Department last week, business inventories increased by 1% in May after a 1% increase in April. Wholesale inventories were up 1.8% while factory inventories increased 0.8%. The cause for this is simple: slower sales.

On the positive side, the industrial real estate market just may be starting to firm up. In Atlanta positive absorption was felt in the second quarter after eleven straight months of decline, with 1,707,652 sq ft of positive net absorption. A total of 11,927,253 sq. ft. were leased or sold in that period, reversing the trend.

Companies specializing in the LTL freight market are raising their rates.  UPS Freight and ABF Freight are going after a 6.9% price increase effective August 1^st.  This should give others the confidence they need to seek similar increases. If you are operating under a contract with these carriers you will be unaffected for now, but watch out when your contracts are renegotiated. Pay particular attention to the accessorial charges too.

The DOT’s measure of freight transportation services is the Transportation Services Index, and this measure dipped by 1.8% from April to May.  While shipments are trending down the volume is still up from the depths of the recession.

Truckload traffic has slowed somewhat according to the Morgan Stanley report, with their freight index coming in lower for the last two weeks after being strong in June. The second quarter of this year is viewed as being the best for pricing in the truckload segment.

Forrest products drove increases in rail traffic but overall those numbers are off, while intermodal traffic has dipped 0.2% according to the American Association of Railroads.

At Wagner we continue to experience strong transportation load counts and high levels of occupancy in our distribution centers. While concerned by the recent slip in the economy we continue to be bullish about the remainder of 2011.

The rollout of RedPrairie technology across our enterprise has been completed and clients can now experience real time visibility of receipts, orders, and inventory through our WagLink portal. Having one platform will increase efficiency and simplify training of our associates.

If you have any supply chain challenges, we are eager to visit with you.  Please feel free to bring us your problems and let us see if we can create opportunity.  Bring it!

Have a great day!

John Wagner Jr

John’s Blog 7-12-11

Dear Friends,

No shortage of news these days in the supply chain world. Concerns about the slowing economy and the lack of job creation abound. As the President and Congress grapple with the debt ceiling, lets talk about what we do know.

Retailers had their best June sales in ten years, with major retailers seeing a 6.5% year-over-year increase in sales. Many were rewarded with a rise in their stock price, as it appears that after a disappointing May, consumers found their collective wallets. Luxury retailers did particularly well. Optimists are now looking at a good back-to-school season.

On the other hand, job growth is at a near standstill. Employers only added 18,000 net jobs in June. The government cut 39,000 jobs so the net effect is a 9.2% unemployment rate . With population growth, we need 125,000 new jobs per month just to stay even, so the employment situation has a ways to go to see any improvement.

In transportation, the Surface Transportation Board held hearings in late June on railroad competitiveness to explore the service levels provided to captive shippers versus shippers who have access to more than one railroad. From a railroad perspective the Staggers Act has been a huge success, allowing for more open competition and a resulting better return on assets and capital. From a shipper’s perspective they perceive a “take it or leave it” mentality and would like to see mandatory reciprocal switching and other remedies. It remains to be seen what the STB will do, so stay tuned.

The Institute for Supply Management index for service companies fell in June to 53.3 from 54.6 in May, indicating that while the index still shows expansion (anything over 50), the rate of growth has slowed. This measure counts companies involved in retail, health, construction and financial services. The index has steadily fallen since it hit 59.7 in February for a five-year high.

In trucking, the battle between Teamsters carriers YRC Worldwide and ABF continues, with ABF winning a ruling that the Teamsters concessions to YRC are a violation of the National Master Freight Agreement. The Federal court has sent the matter back to District court for further consideration. ABF is seeking the same concessions in addition to $750 million from YRC.  In that YRC just received financing for $400 million, an adverse ruling would have dire consequences for YRC’s survival.

At Wagner we continue to be very busy as the holiday retail season begins to ramp up.  We have a number of packaging projects and are preparing to assemble thousands of floor-ready display pallets to be available for retailers this holiday season. Producing complex displays for distribution to U.S. retailers is a real strength at Wagner.

Wagner’s distribution center operations are very active but we do have some capacity.  Now is a good time to lock in real estate costs, as the price for space will not be this low forever. We are encouraging clients to sign up for long-term agreements (3-5 years) to take advantage of the situation so they will have the space they need at current market prices.

The Wagner transportation logistics group continues to expand as shippers seek carriers for their loads.  We are adding people and shopping for state-of-the-art technology to stay ahead of the pack in our capability to optimize carriers, routes and rates while enhancing visibility.

Please let me know if there is a reason for us to visit about a particular supply chain challenge you are experiencing.  Bring It!

Have a great day!

John Wagner Jr

John's Blog 6-15-11

Dear Friends,

Cars may be down, but chicken dinners are up, so the overall economic scene isn’t as bleak as a superficial scan might indicate.

The economy has slowed in the last several weeks, with inventories trending upward and sales moving in the opposite direction. The Commerce Department reported that wholesale inventories increased 0.8% in April after a 0.3% rise in March. Wholesale inventories make up 25 percent of total business inventory, while factory inventories account for another 20 percent. Factory inventories increased 1.3% in April after a 1.1% increase in March.

Retail sales were down 0.2% in May, the first time in 11 months consumers cut overall spending. But if you break those numbers out into categories, a somewhat more positive picture emerges.

A big drop in auto sales – 2.9% – pulled down the overall May numbers. Consumers produced gains in other areas, such as clothing (+0.2%), internet retailing (+1.2%), building material/lawn & garden (+1.2%) and, perhaps most significantly, dining out (+0.6%). Some economic gurus like that last statistic; they say that as long as the U.S. consumer is going out to dinner then things are not so bleak, as this is usually the first area where families cut back when under financial stress.

Another good sign is improvement in the U.S. trade balance. U.S. trade was up 6.7% with a decline in oil and auto imports resulting in a trade gap of $43.7 billion in April.  This is the smallest gap since last December.  U.S. exports were up 1.3% with imports down 0.4%.

In transportation, the railroads are still seeing their traffic rise.  In the week ending June 4^th there were 273,584 carloads originated, for 1.1% year-over-year increase for the week.  Intermodal saw 205,565 loads for a 7.2% increase in the same period according to the Association of American Railroads (AAR).

Year to date as of June 4, North American railroads handled 8.3 million carloads, up 2.9 percent, and 6.1 million containers and trailers, up 7.6 percent, compared with volumes from the same period in 2010.

The Department of Transportation’s Bureau of Trade Statistics reported that its Freight Transportation Index increased 3.7% in April’s year-over-year comparison, and dropped 1% from March.

The Cass Freight Index was up 9.6% in May year over year, but down slightly (0.2%) from April.  This mostly truck-based index measures freight bills paid.

At Wagner we are continuing to see heavy freight volume and opportunities for growth.  As vendors seek better ways of shipping to their retailers, and manufacturers look for better ways to make their supply chains lean, Wagner is delivering the value they seek.

Please let us know about the trouble spots in your supply chain. As we say at Wagner, Bring It!

Have a great day!

John Wagner Jr

John's Blog 6-7-11

Dear Friends,

The economy undeniably has stalled a bit, but as we review the data there is some good news to counterbalance the bad. 

Let’s start with the negative news in the U.S.

The Commerce Department reports factory orders declined 1.2% in April for the largest decrease in a year, following a 3.8% increase in March. Durable goods orders fell 3.6% in April, with declines spread across all sectors. 

The Credit Managers Index for May, released by the National Association for Credit Management , conveys a sharp drop in sales and cash flow. The CMI dropped to a reading of 59.4 in May, the lowest reading since September 2010.

The ISM Manufacturing Index, released by the Institute for Supply Management , likewise reflects a decrease: down 6.9 percent to a 53.5 reading. 

While both readings are still over 50, which is the line between expansion and contraction, they are moving in the wrong direction, indicating that U.S. manufacturing has stalled.

On top of this cheery news we learn from the Labor Department that the economy added just 54,000 jobs in May, taking the unemployment rate for the month up to 9.1%.

The transportation capacity fears some have voiced may be overstated if this pattern continues, as less components and finished goods flow in manufacturers’ supply chains.

But that’s a big “if”. There are positive signs as well to balance the negative tide.

On the positive side of the ledger we have the Bureau of Economic Analysis reporting that private industry wages increased 0.5%.  Personal consumption was up 0.4% for the month of April and year over year it is up 4.8%, according to the BEA.

Another positive is that the Thomson Reuters/University of Michigan consumer sentiment index improved in May to 74.3, up from 69.8 in April.

Counterbalancing the negative news in manufacturing is the ISM Services index. It rose to a 54.6 reading in May from 52.8 in April, exceeding analyst expectations.

The bottom line is that the economy is still getting better but is stalling a bit due to international issues (concerns about Greek debt and continuing problems in Japan), as well as higher gas, food, and commodity prices domestically.

Truck tonnage rose 4.8% year over year in April according to the American Trucking Association.  The seasonally adjusted ATA tonnage index came in at a 114.9 reading, down 0.7% from March.

The Association of American Railroads reports that intermodal traffic rose 4.2% for the week ending May 28th from a year ago, led by a 4.9% increase in container traffic.  Railroads handled 201,349 containers along with 33,319 trailers.  Carload traffic was up 0.7% for the same week.

At Wagner we continue to see robust activity and have added 180,000 square feet in Kansas City for additional dedicated business.  The holiday season is shaping up nicely for the summer and fall as we see sustained growth in our own business.

In transportation the Wagner team continues to match up capacity for customers and we are moving a lot of freight.

If you are looking at any projects requiring distribution warehousing, e-fulfillment, packaging or transportation, feel free to reach out to Wagner.  Let’s collaborate on a cost effective solution.

Have a great day!

John Wagner Jr