Hi Friends,

While it’s been unseasonably hot here, the economy continues to roll on despite parts/chip shortages, labor tightness/cost escalation, rising cost of commodities, as well as a continual shortage of motor carrier capacity.

E-Commerce isn’t slowing down either as Amazon’s Prime Day shows. Delays are happening as parcel and LTL carriers’ networks are overflowing.   

Let’s look at the numbers.

Prime Day sets records

Day one of Amazon Prime Day on Monday resulted in record sales, with online sales jumping 8.7 percent to $5.6 billion according to early data compiled by Adobe Analytics.

Walmart, Target and others also offered special discounts this week to combat Amazon, retailers that earn more than $1 billion in revenue annually saw a 28 percent jump in sales on Monday compared to a year ago. Even smaller retailers saw a 22 percent increase in sales on Monday.

Supply chain disruptions have led to longer lead times for items this year, and that may mean some items could take multiple days or even weeks to arrive on customers’ doorsteps.

U.S. e-commerce sales rose 42 percent last year to $813 billion from 2019, according to Adobe Analytics, which tracks activity on thousands of websites.

Sales in April at non-store retailers, a category that includes online merchants, fell to $87.72 billion, a 0.6 percent drop from March on an adjusted basis, but were 14.5 percent above year-ago levels, according to the most recent estimates from the U.S. Commerce Department.

E-commerce accounted for 13.6 percent of total retail sales in the U.S. in the first quarter, the same share as during the holiday shopping peak in the fourth quarter of 2020, but down from last year’s quarterly high of 15.7 percent of retail sales in the second quarter.

Low inventories at retailers

Retailers, facing a particularly low inventory to sales ratio, are building up stock and replenishing stores as they aim to match supply with demand. Still, the total ratio fell to an all-time low in April of 1.25, as high sales met relatively flat demand, according to the latest figures from the Census Bureau.

Overall, sales were up 40 percent year-over-year in April while inventories were up 1 percent in the same period. Retailers have a particularly low inventory to sales ratio of 1.07. Retail has seen its inventory shrink 5 percent as it tries to keep up with sales that are up 48 percent, the Census figures show.

Commodity prices slipping

In time for the summer months, prices for copper, which is being seen as an important component of the world's green energy shift, fell to the lowest level in eight weeks. The metal's price has been hammered by concerns that China might gradually release some of its stockpiles of copper over the coming months to counter rising prices. Lumber prices have lost ground, too, with futures for July delivery down 42 percent from their record high in early May. 

Consumers step back in May

The Commerce Department reports that combined sales at stores, restaurants and online fell by 1.3 percent last month from April, a steeper drop than the 0.6 percent decline economists expected. The weakness was broad-based, with sales declining at auto dealers, hardware stores, furniture sellers and general merchandise stores, among others. Sales at restaurants and bars bucked the trend, rising 1.8 percent, but given the easing of the Covid-19 crisis, one might have hoped for more.

The April sales figures were revised significantly higher, however, and March sales figures were also bumped up. The Commerce Department now says overall sales in April were up 0.9 percent from March compared with its earlier reading showing they were flat, with most retail categories showing higher sales. Indeed, after taking the revisions into the account, the level of retail sales last month was higher than economists’ May sales estimates indicated.

CEO optimism declines

According to the publication, Chief Executive, CEO optimism about the economy continued to fade in June on concerns over soaring materials and labor costs, supply-chain snarls, and increasing taxes and regulations, which CEOs say they expect will stall the recovery—and growth in their businesses.

After 5 months of expansion, our CEO Confidence Index reading of conditions 12 months from now declined for the second month in a row in June, to 6.9 out of 10. The Index peaked in April at 7.3/10 and is now back to where it was in December, before vaccination efforts began.

Holidays in jeopardy?

Container lines and their shipping customers are already starting to sweat over the holidays. The bottleneck on the waters around the Yantian port in Southern China is starting to ease, but tens of thousands of containers remain stacked up at the port and clearing the backlog could take weeks.

That would push the latest shock to global trade flows into the peak shipping season, threatening to add delays and higher costs during the period leading up to Christmas.

Yantian cargo handling is now operating at 70 percent of capacity after a shutdown last month in the wake of a coronavirus outbreak. The flotilla of ships waiting offshore at Southern California’s ports also is thinning out, but the Pacific Merchant Shipping Association says it still takes days for containers to be moved from the docks for inland transportation.

Some retailers are considering leasing their own ships to make sure they can restock inventory in time for the holidays.

FedEx Freight hands out pink slips

Approximately 1,400 customers of FedEx Freight received notice that their business wasn’t needed. FedEx Freight is inundated with freight at its less-than-truckload terminals. To keep shipments flowing without delay it is weeding out many customers until it can better manage the throughput. This is an effort to reduce terminal bottlenecks and shipping delays as unprecedented amounts of tonnage pour into the sector.

As shipments pile up, it will become more difficult to manage workflows in distribution centers and truck yards.

Freight is coming to LTL carriers from both ends of the shipment size spectrum and carriers can be more discriminating on price and freight selection. Freight networks remain out of balance, augmenting the need for high-service, episodic, smaller-batch capacity.

Current truckload market

As May unfolded, the capacity shortage in the trucking market continued as spot load posts were up 290 percent year-over-year and truck postings were down nearly 15 percent in the same period according to the latest figures from DAT.

This dynamic kept the load-to-truck ratio elevated, increasing almost 220 percent year-over-year for vans, 674 percent YoY for flatbeds and 324 percent YoY for reefers.

Strong demand resulted in rates continuing to rise.

Southern states are in the middle of peak produce season while those further north are on the cusp of it. Retailers are gearing up for summer and back-to-school shopping.

Entering June, the national average van spot rate was 93 cents higher compared to the same period last year and 55 cents higher than in 2018, the last time there was a typical summer freight cycle. The reefer rate was 89 cents higher year over year and up 54 cents compared to the same period in 2018.

Domestic total truckload volumes of produce entered June down 22 percent year over year (7,600 fewer loads per week). Expect volumes to make a big comeback this summer as restaurants reopen and regulations around social gatherings are relaxed.

The national average price of on-highway diesel was $3.22 a gallon in May, the highest since December 2018. Spot rates include a calculated surcharge that fluctuates with the price of fuel.

In the week ending June 20th DAT reports that Americans tend to kick-start “grilling season” in the four weeks between Memorial Day and Independence Day. Normally one would see capacity tighten during this time, but spot rates for all three equipment types remained unchanged. It is becoming more likely any seasonal July 4 peak in reefer and dry van rates will be a temporary upward burst in a downward trend.

The national average rate per mile for that week was $2.67 while the Van-to-truck ratio increased +15.1 week over week.

Railroad volume surges

For the week ending June 12th, total U.S. weekly rail traffic was 529,635 carloads and intermodal units, up 17.9 percent compared with the same week last year, according to Association of American Railroads (AAR) data.

Total carloads for the week were up 21.8 percent, while intermodal volume was up 14.8 percent.

For some rail traffic categories, comparisons with the same week in 2020 are inflated because of the widespread shutdowns and subsequent large reduction in rail volumes that impacted many economic sectors last year at this time, AAR officials said in a press release.

At Wagner Logistics

As we wrap up the month of June, Wagner continues to work on many projects fine-tuning operations while mindful that the pandemic isn’t over yet. Safety protocols remain in force as we continue to service customers.

Looking back at the past six months, we have established two new distribution centers and my hat is off to the HR team as we fill open positions with quality people.

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 really appreciate 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!