MercuryGate Logistics Landscape

Q3 Transportation Trends Shaping Global Supply Chains in 2H 2023

U.S. Logistics costs reached record levels in a 2022 transportation marketplace that put shippers in control through the first half of 2023. For Q3 and the year’s second half, expect to navigate transportation trends influenced by labor challenges, increasing costs, uncertainty in customer demand, and capacity volatility that could put power back in the hands of service providers.

Now is the time to fine-tune. Strategies to survive the pandemic may no longer be sustainable, according to the 2023 State of Logistics Report from CSCMP, which reported that U.S. Business Logistics Costs reached a record $2.3 trillion last year, representing 9.1% of the GDP. Solutions that leverage automation to reduce costs and protect profit continue to provide value in this environment.

Meanwhile, the U.S. economy grew 2.4% during Q2. The quarterly increase in Gross Domestic Product comes after a 2% increase was projected during Q1.

U.S. Business Logistics Costs as a Percentage of GDP

U.S. Business Logistics costs from 2012 until 2022, including revised figures (R). Sources: Kearney Analysis, Logistics Management

As supply chain costs spiral, logistics is no longer a side function for modern businesses. Instead, according to the State of Logistics report, it is “widely seen as a core determinant of service and revenue outcomes and a strategic differentiator.”

That’s driving continued success for supply chain service providers that deliver 4PL capabilities, illustrated by MercuryGate resellers fortifying their global modern 4PL service with Redwood Logistics’ Acquisition of Rockfarm Supply Chain Solutions.

Transportation Labor Challenges Drive Uncertainty

High-profile labor disputes and business bankruptcies threaten significant supply chain disruption. Logistics companies cut payrolls heading into 2H, with freight and parcel carriers eliminating more than 14,000 jobs. Warehousing and storage employment fell for the eighth straight month in June, with companies cutting payrolls by 6,900 jobs.

Yellow’s bankruptcy filing expected on July 30 puts 30,000 jobs at stake within the nation’s third-largest less-than-truckload carrier. A Yellow bankruptcy would be the largest for a trucking firm in U.S. history, according to experts. The LTL carrier reported $5.2 billion in revenue last year, but laid off much of the Yellow workforce ahead of bankruptcy filing.

UPS and the Teamsters reached a tentative agreement before a July 31 contract deadline, appearing to avert a strike for 340,000 parcel delivery drivers and package sorters. According to some estimates, only 10-20% of the company’s shipments could be picked up by other carriers in the event of a UPS strike. FedEx is accepting parcel volume for a limited time as part of a plan to manage a capacity spike that would accompany a UPS labor shutdown. Volume during July 17-21 will be the baseline measurement for capacity in the company’s network.

Labor negotiations for East Coast ports in the U.S. and Canada’s West Coast ports create additional jeopardy for international supply chains, even though a June labor agreement between the International Longshore and Warehouse Union and the Pacific Maritime Association keeps 22,000 workers on the job in 29 West Coast ports. Port Tracker estimates that import volumes for 12 U.S. ports will reach 2.03 million TEU in August, the first month to exceed 2 million TEU since September 2022.

The U.S. international trade deficit in goods and services decreased to $69 billion in May from $74.4 billion in April (revised), as imports decreased more than exports. May exports were $247.1 billion, or $2.1 billion less than April exports. May imports were $316.1 billion, or $7.5 billion less than April imports. Year-to-date, the goods and services deficit decreased $101.7 billion, or 22.8%, from the same period in 2022.

The advance international trade deficit in goods decreased to $87.8 billion in June, down form $91.9 billion in May as exports increased and imports decreased.

Transportation Costs Trend Up for Shippers

From the smallest letter to the largest shipment, transportation costs are climbing.

The U.S. Postal Service raised stamp prices 3 cents to 66 cents on July 9. The 4.8% increase is the second this year and the third uptick for domestic letters in the past 12 months. Other rate increases apply to mailing a letter outside the U.S., mailing a postcard in the U.S., and sending metered letters.

At the same time, while FedEx and UPS are expected to announce General Rate Increases later in the year, the postal service launched USPS Ground Advantage. The move aims to take business from the two dominant parcel players who have increased costs consistently since 2015, including a 6.9% average rate hike in 2023.

Those parcel delivery cost increases prompt some retailers to set higher thresholds for what shoppers must spend to qualify for free delivery. In a recent survey, 47% of merchants said they spend more than 10% of an order’s total value on shipping.

Cost trends continue to increase across other transportation modes, especially compared to pre-pandemic levels, according to CSCMP’s 2023 State of Logistics.

  • Trucking costs rose 6.1% year over year to $896 billion, a 29.3% increase compared to 2020.
    • Full Truckload up 6.2% YoY and 28.8% from 2020.
  • Rail costs increased 17.6% to $99.2 billion, up 33.1% from 2020.
  • Parcel costs climbed 4.7% to $217 billion, up 20.1% from 2020.
  • Air freight costs were flat in 2022, as global air cargo is projected at $150 billion this year, 25% below last year. Air cargo demand was down for the 15th straight month in May.

on-highway Diesel Fuel Costs Climbing

For the first time since July 3, the U.S. average for on-highway diesel prices decreased in the Sept. 25 report from the Entergy Information Administration. The 4.7-cent decline brings the cost to $4.586 per gallon after nine straight weeks of increases that drove the price up 82.7 cents. The U.S. average on Sept. 25 is 30.3 cents below this time last year.

While the national average declines, on-highway diesel price averages went down in seven of the EIA’s 10 reporting regions. The average price increased in California, the Central Atlantic and New England, where the 2-cent increase is the report’s highest. The largest price decline occurred in the Gulf Coast Region where the on-highway diesel average dropped 7.1 cents to $4.281.

For regular gasoline, the U.S. average of $3.837 is down 4.1 cents from the prior week, and up 12.6 cents from last year.

The U.S. average for on-highway diesel fuel on Sept. 25 ($4.586) is down 4.7 cents compared to the prior week and 30.3 cents below last year. The decline in average price on in the EIA’s Sept. 25 concludes a nine-week period of consecutive price increases.  The comparable average price for regular gasoline in the U.S. is $3.837.

Soft Transportation Demand Persists, Limits Rate Growth

Expectations are muted for a 2023 peak season.

Despite a freight volume uptick that increased spot rates at the end of June, the load count is still down significantly, based on 1.6 million loads posted to the DAT Freight & Analytics DAT One Load Board. By comparison, 3.2 million loads were posted during the same period in 2022. Truck posts on DAT were about 350,000 during the same timeframe, the lowest total since June 2018.

For the week of July 17-23, spot load posts decreased 9.9%, week over week. June’s spot load posts are 54.4% below last year according to DAT.

National spot rates for the week of July 17-23 on the DAT One Load Board for Van, Flatbed, and Reefer Transportation. Compared to the prior week, spot rates decreased for Dry Van, Flatbed and Reefer transportation modes. Dry van decreased 0.3% to $2.07. Spot rates declined 0.9% to $2.54 for flat bed. Reefer spot rates declined 0.6% to $2.44. 

In tandem with soft spot rates, contract trucking rates continue to adjust down, driving an ongoing decline in the Truckload Linehaul Index, according to Cass Information Systems. Compared to May 2022, the index is down 15.3%.

Cass Information Systems Truckload Linehaul Index includes both spot and contract freight. The 142.8 index reading reflects a 2.6% decline from April until May, and it is down 15.3% from May 2022.

As a result of freight transportation trends in the market, new motor carrier registrations are declining to pre-pandemic levels. New registrations spiked following a pandemic dip, but with rates going down, smaller carriers who previously benefitted from a volatile spot market were forced to decide between switching to contract freight, joining a larger carrier, or leaving the market, according to the State of Logistics.

Fewer new capacity providers may allow tightening in the market to continue as 2023 progresses, especially as new trailer orders continue to sag.
New motor carrier registrations increased in recent years but dropped sharply to pre-pandemic levels at the end of 2022.

Economic Indicators Hint at 2H Transportation Trends

Industry-wide sales of new autos in the U.S. jumped an estimated 13% in the first half of the year, according to the WSJ, with about 1.9 million vehicles on dealership lots or being shipped to stores in June, a 52% increase from last year. As a result, shipments of motor vehicles and auto parts on U.S. railroads rose 21.1% from last year.

Total U.S. business applications in June were up 6.2% compared to May. Those applications included the following (with month-over-month comparison to May):

  • 75,320 in the Retail Trade (up 3.2%).
  • 59,595 in Professional Services (up 0.8%).
  • 48,739 in Construction (up 12%).
  • 34,278 in Transportation & Warehousing (up 7.4%)

In the Business Formation Statistics report for June, the U.S. Census Bureau projects a 4% increase in the formation of businesses with tax liabilities during the next four quarters.

U.S. Monthly Business Applications in June 2023 increased to 465,906, including 48,126 created by Corporations, according to the U.S. Census Bureau. Of all June applications, 32,148 are expected to become businesses with payroll tax liabilities during the next four quarters.

Meanwhile, new orders for manufactured goods increased $1.6 billion or 0.3% during May. However, the Institute of Supply Management reports that economic activity in the manufacturing sector contracted for the eighth consecutive month in June. In an ISM Purchasing Manager’s Index registering a 12-month low, transportation equipment was the only category to register growth among the nation’s six largest manufacturing sectors.

Monthly wholesale inventories for May ($913.7 billion) were unchanged from April and up 3.7% from May 2022. May 2023 monthly sales of merchant wholesalers, except manufacturers, were $650.2 billion (seasonally adjusted), down 0.2% from April’s revised number and down 4% from the revised May 2022 level.

Total construction activity in May was also relatively flat, with a 0.9% change (+/-0.5%) above the revised April 2023 total.
Monthly sales for wholesalers in May were down 0.2% from April and down 4% compared to last year.

Transportation Industry Trends to Watch

Hopes are high for electric vehicles, but plenty of EV myths remain. Amazon plans to put 100,000 electric vehicles on the road by 2030, and more than 5,000 hit the streets in the past 12 months.

The Digital Freight Marketplace benefits shippers and carriers who streamline procurement with seamless connections between freight and spot and contract capacity.

Education, training services, and task automation empower organizations to sustain the value of their TMS tools in a global labor shortage.

Advances in artificial intelligence open the door to new supply chain applications, but there are perils. How will supply chain strategists combine human know-how with AI power to maximize both?

Transportation Trends Affecting Your Supply Chain Cost and Service in Q2 2023

Transportation trends in Q2 and heading into mid-year continue to be a bellwether for the global business climate.

At the same time, as consumers’ desire for digital commerce and anytime/anywhere delivery fuels the same level of service expectations in the B2B environment, brand loyalty continues to dwindle for businesses that cannot respond effectively. That’s creating gaps in Final Mile service for many businesses.

Find out what “good” looks like in Final Mile and learn how to apply the same technology-enabled strategies deployed by industry leaders. Watch this webinar with MercuryGate Founder Steve Blough and Final Mile Solution Architect Travis Schmidt.

latest Industry Trend Developments affecting Transportation

Seasonally adjusted after-tax profits for retail corporations with assets of $50 million+ were $36.6 billion for first quarter 2023, up 5.6 billion compared to fourth quarter 2022 and up $1.7 billion from the same period last year. Some of those retailers are reinvesting that profit into their supply chain processes, including new technology and analytical tools, according to the Wall Street Journal

U.S. retail and food services sales for May 2023 were $686.6 billion, up 0.3% from the previous month and up 1.6% above May 2022, according to the U.S. Census Bureau’s economic report on June 15. 

Transportation and warehouse revenue for the first quarter of 2023, adjusted for seasonal variation but not price changes, declined 2% from Q4 2022. First quarter revenue, $346.2 billion is up 1.2% year-over-year.

U.S. Total business end-of-month inventories for April 2023 were $2,543.8 billion, up 0.2% from last month. U.S. total business sales were $1,821.6 billion, up 0.1% from March.

Seasonally adjusted monthly sales for U.S. Retail and Food Services from January 2016 until May 2023.

Manufacturing businesses’ after-tax profits (seasonally adjusted) were $230.5 billion for first quarter 2023, down 4.1 billion from fourth quarter 2022.

The U.S. Census Bureau on June 5 announced the April full report on manufacturers’ shipments, inventories, and orders.

  • New orders for manufactured goods, up four of the past five months increased $2.6 billion to $5.77 billion.
  • Shipments, down five of the past six months, decreased $2.5 billion to $572.3 billion.
  • Unfilled orders, up four of the past five months, increased $10.4 billion to $1,291.3 billion.
  • Inventories, up following two consecutive monthly decreases, increased $4.2 billion to $856.7 billion.

U.S. Manufacturers New Orders 2022-2023

Month-to-month percentage changes for new orders of manufacturing goods from May 2022 until April 2023. Up four of the past five months, new orders in April increased $2.6 billion, a change of 0.4%.

U.S. Construction Expenditures

Privately-owned housing starts in May 2023 were 21.7% above the revised April estimate. During May, a seasonally-adjusted annual rate of 1,631,000 starts was reported by the U.S. Census Bureau and Department of Housing and Urban Development.  The May 2023 rate is 5.7% above prior year.

Total construction spending activity for April 2023 was 1.2% higher than the revised March total of $1,885 billion. The April estimated annual rate of $1,908.4 billion continued the ongoing increase since the start of the year. Construction spending of $566.7 billion is 6.1% above the $533.9 billion spend for the same period in 2022.

Construction expenditures at a seasonally adjusted annual rate from 1993 through the April 2023 annual rate of $1,908.4 billion.

New business applications in March increased 4.5% compared to February, reflecting a monthly gain of 451,752. Projected business formations (within four quarters) for March increased 5.4% month-over-month to 33,663.

State of Surface Transportation

An increase in on-highway diesel price averages was short-lived following two months of decline. The June 19 average price of $3.815 increased compared to prior week, but the June 26 average dipped again. The U.S. Energy Information Administration’s average for on-highway diesel on June 26, $3.801, is down 1.4 cents compared to the prior week and $1.982 from this time last year.

Average costs decreased in every U.S. region, with the largest decline of 2.4 cents to $4.102 in the Central Atlantic. The highest on-highway diesel price average is in California, $4.751. The lowest is in the Gulf Coast, $3.510. 

At the same time, U.S. regular gasoline price averages declined .06 cents in the June 26 Gasoline and Diesel Fuel Update.  The U.S. average of $3.571 per gallon on June 26 is down $1.361 compared to the same week in 2022.

The U.S. average for on-highway diesel fuel on June 26 ($3.801 per gallon) is 1.4 cents below prior week, when prices climbed for the fifth time during 2023.

last Mile Transportation Trends

Amazon Vice President of Last Mile Delivery and Technology Beryl Tomay recently shared her favorite tips after 18 years with the Amazon organization

What could a UPS strike mean for your packages? The current contract between the UPS and Teamsters union expires August 1.

And what does FedEx’s expanded investment in e-commerce solutions provider Floship mean for cross-border e-commerce? FedEx customers will access Floship’s global network of warehouses and e-commerce fulfillment, while Floship customers will enter FedEx’s transportation network and all its options.


over the Road Trucking Influences

The May Logistics Managers’ Index marked the third consecutive month of record lows, and for the first time in the past 6.5 years, it moved into contraction territory. Transportation utilization declined during May, while transportation prices were down sharply. Combined, according to the report, “it would appear the glut of available capacity has driven down utilization and prices.”

Inventory glut for wholesalers and retailers reduced freight demand and rates in Q1, as reflected by a 6% decline in the Cass Truckload Linehaul Index compiling spot and contract freight rates.

April 2023 end-of-month advance retail inventories were $772.3 billion, up 0.2% from March and up 7.7% over prior year, according to the U.S. Census Bureau.

April end-of-month advance wholesale inventories were $919.4 billion, down 0.2 percent from last month and up 6.2% from April 2022, according to the U.S. Census Bureau.

The national average for all-in truckload rates for the week ending April 2 is 8 cents down from prior month for dry van, and 9 cents down from prior month for reefer capacity. At the end of March, average flatbed rates rose 1 cent compared to February. The bottom for spot rates is uncertain in the current mix of capacity and weak demand.

During the same March 27-April 2 period, spot load posts increased 2% and climbed 8% compared to February. March load posts are down 68% compared to last year. Spot truck spots are up 5.9% (y/y)

National Truckload Spot Rates

In the DAT Trendlines weekly snapshot for the week of May 29 – June 4, spot load posts decreased 7.7% week-over-week, while overall spot truck posts dropped 13.7%. Although load-to-truck ratios continue to improve for all three equipment types, rates hold steady.

Truckload demand continues to soften. Restaurant industry operators expect lower summer traffic for reefer capacity. Falloff in oil and gas drilling activity in Texas creates concern for flatbed equipment demand.

Load-to-truck ratios for the week starting May 24. During the period DAT reported 2.7 loads per truck for dry van, 3.7 loads per truck for reefer, and 12.4 loads per truck for flatbed.

U.S. Class 8 retail sales in April increased 19.4% compared to last year, but declined 8.4% compared to prior month. Class 8 sales in April reached 22,741 units, up from 19,052 sold in April. Meanwhile, preliminary trailer orders dropped 26% to 21,338 units in March. Compared to last years, trailer orders are down 41%.

Businesses moving goods internationally are reaping significant savings on ocean transportation trends in costs – spot rates are down 90% from pandemic-era highs. U.S. imports in February were down 25% (y/y), and international demand drops are sharpest for West Coast ports, where supply chain participants urge the White House to intervene in West Coast port labor talks underway since May 2022. Ongoing labor disputes, including a brief work stoppage at the port complex of Los Angeles and Long Beach on April 6, raise fears for import disruptions ahead of back-to-school and holiday shopping peaks.

Center Stage: Security

By 2025, Gartner projects that 60% of supply chain organizations will use cybersecurity risk as a significant determinant in conducting third-party transactions. One-third of supply chain orgs will use industry cloud platforms by 2026.

And third parties’ role increases steadily, with global 3PL market revenue reaching $1.47 trillion last year, a 14.5% increase over 2021, and nearly double the 2016 level.

Security concerns apply to freight shipments, too, and food & beverage cargo theft surged up nearly 50% through February. According to the FBI, cargo theft costs trucking companies and retailers $15-$30 billion a year, and it is adding to supply chain disruptions that have fueled inflation.

Areas for Optimism?

Slower capacity growth in March offers hope that an end may be approaching for the freight downcycle. The National Retail Federation’s prediction for 4-6% growth in retail sales during 2023 would help turn the tide.

Ongoing e-commerce demand will play a role, too, even after parcel carriers saw a 2.2% drop in volumes (and a 6.5% increase in revenue). Slowdown in volume growth is expected to continue, even thought transportation trends in 2022 saw U.S. e-commerce reach $1 trillion for the first time, making up 14.6% of total retail sales.

And while weaker freight demand also affects diesel fuel prices, 10 straight weeks of price drops may be economic danger signs.

What else deserves attention in Q2 2023?

Transportation Trends and Supply Chain News in Q1 2023

Your logistics landscape is ever-changing. That’s why MercuryGate monitors the transportation trends and supply chain news affecting your service to customers and your ability to control costs. What’s in? What’s out? And how should you respond?

MercuryGate thought leaders shared insight and advice during our Logistics Landscape Founders Edition webinar. Watch it now! Hear Steve Blough, Pete Celestina, Don Mabry, and Bobby Darroll explain how autonomous logistics and visibility tools across MercuryGate’s technology platform support every stage of your freight shipment’s lifecycle. 

Transportation Trends: What’s In?

Retail e-commerce sales for Q4 2022 reflected a decrease compared to Q3. Total U.S. retail sales were estimated at $1,785.8 billion, a decrease of 0.3% from Q3. Retail sales in Q4 2022 are up 5.7% compared to 2021. Meanwhile, Q4 e-commerce sales decreased 0.1% compared to Q3. E-commerce sales of $262.0 billion in Q4 were up 6.5% compared to 2021.

Supply chain operations continue to take a central focus for the world’s largest organizations – especially when it comes to last-mile efficiency. Target plans to invest $100 million to improve its U.S. sortation network. The move adds six sortation centers across North America and solidifies the retailer’s growing “stores-as-hubs” strategy for fulfilling online orders. 

Falling trucking rates allow shippers an opportunity to find new efficiencies in theIr supply chain networks. However, as freight volumes begin to rebound – especially in the LTL sector, there’s not much time to act. Will dynamic pricing finally gain LTL adoption?

Contraction continues for transportation rates, declining at a record rate during February, and narrowing the gap between spot and contract rates. Earlier in the year forecasters expected spot rates to bottom out in February-March.

DAT measures the moving average for spot rates in dry van, reefer, and flatbed hauls. Transport Dive tracks and reports those rates including week-to-week trends. For the week ending Feb. 18 the national average for dry van spot rates decreased about 2 cents to $1.72 per mile compared to the previous week. The average rate for reefer shipments declined 5 cents to $2 per mile. Flatbed rates increased 3 cents to $2.08 per mile.

Cargo thefts are still in, after surging 15% in the U.S. and Canada during 2022. All total, CargoNet recorded 1,778 supply chain risk incidents from voluntarily reported cargo thefts totaling more than $223 million in stolen goods.

Last-mile delivery is in for 1) big items – a fertile field for 3PLs, especially brokers with last-mile relationships; and 2) smaller payloads moved by drones. However, when unit delivery costs for drone shipments average $13.50, this method is not yet competitive with electric vehicles, internal combustion engine vehicles completing a single delivery, or any vehicle executing multiple deliveries on a single route.

Residential sales on new single-family homes hit a 10-month high in January, a seasonally adjusted 670,000. January sales were up 7.2% above December’s revised rate.

Sales of new single-family homes in January 2023 were at a seasonally adjusted annual rate of 670,000, a 19.4% decline compared to the January 2022 estimate of 831,000.

Tight labor market signs are emerging as late January jobless claims decline, and November’s jobs report reflected 10.5 million job openings. Meanwhile, data from the American Trucking Associations reflects that the driver shortage declined in 2022. As more for-hire drivers return to larger trucking firms, the driver shortage is easing.

At the same time, trailer orders are up significantly.

Transportation Trends: What's Out?

Supply chain headaches are out, according to some analysts, as retailers and manufacturers expect fewer disruptions and lower freight rates. “Freight congestion has cleared and ocean shipping costs have fallen close to pre-pandemic levels, the Wall Street Journal reports.

New orders for manufactured durable goods continued to decline in January. Down two of the past three months, durable good orders decreased $13 billion or 4.5 percent, the U.S. Census Bureau announced Feb. 27.

Durable goods – New Orders declined 4.5% in January to $272.3 billion Excluding transportation, new orders increased 0.7%. January’s decrease in new orders follows a December increase of 5.1% to $285.2 billion. Shipments of manufactured durable goods decreased 0.1% in January after 16 consecutive monthly increases. Shipments of transportation equipment in January declined $1.6 billion or 1.7%.

Consumer spending decreased $41.6 billion in December 2022, in spite of gains in personal income and disposable personal income.

The decrease in consumer demand is reflected elsewhere across economic indicators. Demand and output for cardboard boxes dropped sharply in Q4 2022. According to the Fibre Box Association, production of U.S. box shipments fell by 8.4% during the period. Box operating rates fell to 80.9%. Likewise, supply for containerboard remains at historically high levels.

December’s decline in consumer demand drives down demand across the trucking marketplace and ocean transportation, despite container lines’ capacity control efforts, including the planned break-up of the 2M Alliance of MSC and Maersk. In the same vein, demand continues to wane at West Coast ports. Stalled labor talks are sending more cargo toward alternate locations along the East Coast and Gulf Coast.

Class 8 truck orders in North America are out – at least during December when they fell to 28,300.

News that all-electric domestic trucking fleets would consume 40% of the electricity generated in the U.S. tempered hopes for a wired solution to transportation. According to research from the American Transportation Research Institute, charging stations would require a $35 billion investment.

Factory jobs are out as signs of a tight labor market are emerging in the manufacturing sector. Manufacturers are struggling to fill more than 740,000 open jobs, a number that could rise to 2.1 million open positions by 2030.

More Economic Indicators to Monitor

U.S. total business end-of-month inventories for November 2022 were $2,476.5 billion, a gain of 0.4% over the prior month. U.S. total business sales were $1,838.2 billion, down 0.8% from the preceding month.

Privately owned housing starts in December 2022 were down 1.4% from November 2022 to a seasonally adjusted rate of 1,382,000. At the same time, the sale of new single-family houses in December increased 2.3% over November to 616,000.

Load-to-truck ratios increased slightly for most equipment types during the week ending Jan. 28, according to DAT. Reefer increased from 3 to 3.2 loads per truck. Flatbed increased from 11.2 to 11.4 loads per truck. Dry van decreased from 2.4 loads per truck to 2.2 loads.

What Else Deserves Your Attention?

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