Hi Friends,

It’s April and the leaves are popping, the economy continues to improve, and the Masters tourney is underway. I love this time of year for its sense of renewal.

Meanwhile, freight volumes are surging throughout the country with many sectors of the economy in recovery mode, and the spring produce season has not yet begun.

Transportation rates are near all-time highs and capacity is difficult to secure with the Outbound Tender Reject Index above 25 percent according to DAT Solution’s Sonar. Likewise, driver wages continue to rise.

Let’s look at the numbers.

Two steps forward, one step back

Worker filings for jobless claims rose to 744,000 last week, pausing a downward trend amid other signs of recent labor-market improvement.

The four-week average, which smooths out volatility in the figures, rose slightly to 723,750 from 721,250. Despite the increase, claims remain close to the lowest point since mid-March of last year, when the pandemic triggered millions of layoffs. Claims are still well above the weekly average of around 220,000 in the year before Covid-19’s arrival.

The Labor Department reports U.S. employers added a seasonally adjusted 916,000 jobs in March, the best gain since August. The unemployment rate, determined by a separate survey, fell to 6.0 percent, a pandemic low. Still, as of March, there are 8.4 million fewer jobs than in February 2020 before the pandemic hit.

LMI surges

If you are not paying attention to the LMI, you should. The Logistics Manager’s Index (LMI) is a joint project between researchers from Arizona State University, Colorado State University, University of Nevada, Reno, Rochester Institute of Technology and Rutgers University, supported by CSCMP.

The March 2021 Logistics Managers Index shows sustained record increases in most all prices and a decrease in available capacity.  The LMI score is the 3rd highest in the last five years. Logistics components are clearly being stretched.  There is a lot of optimism right now and it appears that at the end of the first quarter, business is thriving as we continue emerging from the pandemic. 

The LMI score is a combination of eight unique components that make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. As seen for most of the last year, March’s LMI displays continued, expansion in the logistics industry. Overall, the LMI is up (+0.8) from February’s reading of 71.4. March’s score is the third highest in the history of the index. This high score is largely fueled by increasing costs, and tightening capacities across the board.

Warehouse Prices are up (+2.5) to 81.5, the highest level they have reached in the history of the index. This is notable as, of the price metrics we measure, Warehousing Prices have been the steadiest and least prone to high-high’s and low-low’s. This is at least partially because many warehouse contracts are multiyear agreements, and do not shift as dynamically as inventory or transportation costs.

This high reading indicates two things: 1) Warehouse capacity has been steadily constrained for most of the last year, and the lack of supply is catching up to pricing; 2) Because of increased demand for last-mile delivery and similar services, firms are continually seeking more warehouse space, and may be forced to pursue space at higher, spot-market prices. Warehousing Capacity continues to contract, although at a slightly slower (+0.9) rate of 43.4. Warehousing Utilization also remains high, up (+2.5) to a rate of 72.1.

Inventory Costs are also rising, up (3.2) to a reading of 76.8. These increased costs are likely more driven by restricted capacity and expensive storage costs than they are by a massive uptick in inventory levels. Inventory levels grew in March, but at a 61.5, a lower rate (-2.5) then what has been observed over the last two months. Taken together, these metrics suggest a continuation of an observation from the February report that due to the constrained space, smaller increases in the amount of inventory being held is leading to price increases of a greater magnitude due to the marginal increasing cost of holding additional inventory.

Transportation metrics continue to fluctuate. Transportation Prices are up (+2.6) to 90.6, the first reading in the 90’s since May/June 2018 and the fifth-highest reading in the history of the index. This is driven largely by the continue restriction of Transportation Capacity, down (-7.7) to 30.4, the lowest reading since last September and the third-lowest reading in the history of the index. Finally, Transportation Utilization is down (-7.5) to 66.0. This still indicates significant levels of growth but are also somewhat out of step with expectations and what we see elsewhere regarding transportation.

Manufacturing shows strength

March manufacturing output turned in its strongest performance in years, on multiple fronts, according to data issued by the Institute for Supply Management (ISM).

In its monthly Manufacturing Report on Business, ISM said that the report’s key metric, the PMI, came in at 64.7 (a reading of 50 or higher indicates growth), which topped February’s 60.8 by 3.9 percent. This marked the tenth consecutive of PMI growth, coupled with March representing the tenth consecutive month of growth for the overall economy.

ISM reported that 17 of the 18 manufacturing sectors it tracks saw growth in March, including: Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; and Petroleum & Coal Products. No industries reported contraction in March, ISM said.

Each of the report’s key manufacturing metrics saw gains in February.

Services sector recovers

A survey of business leaders at service-oriented firms such as banks, retailers and restaurants jumped to 63.7 percent last month from 55.3 percent in February, the Institute for Supply Management (ISM) reports.

That’s the highest level on record since the ISM began the survey in 1997. It doesn’t mean service-oriented companies are doing better than ever, just that the improvement between February and March was especially strong.

Readings above 50 percent signal that businesses are expanding, and numbers above 55 percent are a sign of broad strength.

The reading for the report’s key indicator—the Services PMI (formerly the Non-Manufacturing PMI)—came in at 63.7 (a reading of 50 or higher indicates growth is occurring) in March, an 8.4 percent increase over February’s 55.3.

ISM reported that all of the 18 sectors it tracks saw gains in March, including: Arts, Entertainment & Recreation; Wholesale Trade; Mining; Management of Companies & Support Services; Construction; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Real Estate, Rental & Leasing; Transportation & Warehousing; Public Administration; Finance & Insurance; Utilities; Health Care & Social Assistance; Professional, Scientific & Technical Services; Information; Retail Trade; Educational Services; and Other Services.

Demurrage relief?

The Surface Transportation Board (STB) has adopted a final rule that establishes certain minimum information requirements for demurrage bills from Class I railroads.

Requirements under the final rule will include billing cycle, shipment, car replacement and credit and debit information.

The minimum-information requirement represents what the board determined will have the greatest impact on the ability of rail users to review and verify the accuracy of demurrage charges and facilitate the resolution of disputes between railroads and their customers, STB officials said in a press release.

In its decision, the board reiterated its expectation that all carriers take reasonable action to ensure the accuracy of their invoicing processes and that their demurrage charges are warranted.

The rule takes effect on Oct. 6.

Current truck market

In the week ending April 4th, DAT reports the capacity crunch caused by extreme weather in February pushed spot rates above contract rates in March, but spot market van rates have dipped back below contract rates in April. Capacity remains tight for reefer and flatbed. For reefer, spot rates have been higher than contract since August, while in flatbed spot rates are now higher than contract for the first time since June 2018.

Railroads back on track

U.S. railroads logged 2,586,489 carloads and intermodal units in March, a 14.2 percent increase from traffic levels in the same month a year ago, according to Association of American Railroads (AAR) data.

Railroads last month hauled 1,156,158 carloads, up 4.1 percent, and 1,430,331 containers and trailers, up 24 percent from the same month a year ago.

For the first three months of 2021, U.S. railroads moved 2,911,097 carloads, down 2.6 percent, and 3,619,546 intermodal units, up 13.2 percent compared with the same period a year ago.

At Wagner Logistics

We continue to grow as we just opened a facility in the Detroit area. Alabama is next and business is robust across all our services.

Our robotics project is in final testing and will help us compete in our ecommerce services offering. Our freight volumes are surging, and the transportation team is working diligently to secure capacity for our customers.

As Wagner continues to work its many projects, we would love to work with you. If you are issuing a transportation RFP or have a distribution/fulfillment project, let’s schedule a call.

We are celebrating our 75th year of history of service to our customers and would relish the opportunity to collaborate with you.

As we say every day, Bring it!

Have a great day!

John Wagner Jr. 

About Wagner Logistics

Wagner Logistics was founded in 1946 on the principle that every customer is a big deal and that continues to pervade our mentality, producing a superior customer experience. The company began in trucking and remains dynamic offering top-notch transportation, dedicated warehousing and robust fulfillment services. We strive to produce innovative solutions, in addition to our superior onboarding process which makes transitions seamless, and have been honored 20 years in a row by Inbound Logistics as a Top 100 3PL. Our customers drive our entry into new geographic markets, technological advances and ever-changing distribution challenges. Where do you want to be? Wagner says, Bring It!