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Recon Market Update - April 23, 2021

Posted by Hank Newman on Apr 23, 2021 7:55:02 AM

How many Amazon or FedEx, UPS, USPS packages have you received at your door in the last 6 months or so?  Not sure about you, but I'm thinking it's more than the sum of all packages you've received in your life prior to 6-8 months ago.  Unless, of course, you've been a professional online shopper for many years now.  And have you seen a new Amazon DC near you lately?  Probably.

The Amazon-Effect.  We've all heard about it, but did you know that Amazon has literally doubled in size in the past year?  And they were huge before that right?  E-Commerce is one of those permanent post-COVID changes to our world.
 
So who cares?  If you're shipping product then you should because Amazon and others are simply choking the capacity in the freight world and it's not going away soon.
Update hand writing with a blue mark on a transparent board
 
A couple of interesting charts to view below.  Cass released their monthly indexes and I find the volume indicator fascinating.  Our graph goes back to 2007 and you can clearly see the impact of the financial meltdown as well as the longest, albeit anemic, economic recovery in our history.  In 2017, volumes accelerated as the economy surged before getting hit hard by COVID.
 
We got hit, then came roaring back and shipment volumes are meandering around the highest levels of the post-2008/2009 recession.  Pricing (Cass LH Index) is setting new records after a dip and since the Cass Index is a longer-term trend, new records will continue to be set which shouldn't be a surprise to anyone right now.  We can hope spot rates are easing (see chart), but we will see.
 
Here's the twist - LTL performance has always bounced around between 85% and 95%, but the new range is terrible at 70% to 80%.  What gives?  Volumes were high in all of 2018 and 2019 and LTL carrier performance stayed within the higher bands but now they can't even sniff those levels?  AHHH - the Amazon-Effect!!
 
Our LTL industry resources are telling us that Amazon is killing the LTL world with all this new E-Commerce volume.  LTL carriers are used to Amazon turning dropped trailers in around 2 days and now it's 10-14 days.  THAT's what's happening in the LTL world!  E-Commerce volume is flooding the networks and with varyingly restrictive COVID rules still in place - guess what?  They are all suffering!
 
Eventually, this should play out and adjustments made, but we don't see LTL performance climbing back to the upper performance bands anytime soon.
 
How about a solution to all of this?  Well, you can do your part and stop ordering and going back to your local stores (but dang it's easy to order online isn't it?).  Or, you can use higher-performing carriers who are listed in Recon's TMS on every shipment.  The problem is that you may just blow your budget.  That's why this is so tricky - the classic price/service trade-off!  Still - all of that information to make the right decisions on each and every shipment is at your fingertips in real time!
 
Enjoy!
 
Bonus thought--- Before you check out the charts below...
I just happened to come across a business cartoon poking fun at a container-ship captain joking about having shorter waits at the DMV.
 
Any of you living near a port city know what I mean.  A few weeks ago, I was in Long Beach and had a chance to view the Pacific past the port.  I was shocked at how many vessels were anchored off the coast waiting forever to get unloaded.  And it keeps on coming (unless, of course, a boat gets stuck somewhere strategic... 🤔
 
The Amazon-Effect isn't slowing down anytime soon - especially with all the free money out there - so expect capacity to be constrained for some time.
 Cass Linehaul Volume Index since 2007
 LTL Performance
****LTL Performanceis based on metrics captured daily by the Recon Operations Teams including damages, late deliveries, missed pickups, etc. These metrics are inclusive of Regional and National LTL carriers.
 
Spot Truckload Rates
Spot Rate is the national average cost per mile being quoted by carriers at a given point in time.
 

Tags: Freight Class, Accessorials, LTL, Freight Rates, LTL Carrier Cost, Rules Tariff, Logistics, LTL Service, Limited Access, Freight Technology, TMS, Freight Insurance, Freight Claims, Freight News, Freight Update

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