Intro/Outro (00:00:03):
Welcome to Supply Chain Now, the voice of global supply chain. Supply Chain Now focuses on the best in the business for our worldwide audience, the people, the technologies, the best practices, and today’s critical issues, the challenges, and opportunities. Stay tuned to hear from those making global business happen right here on Supply Chain Now.
Scott Luton (00:00:33):
Hey. Hey. Good afternoon. Scott Luton and Greg White with you here live on Supply Chain Now. Welcome to today’s livestream. Gregory, how are we doing?
Greg White (00:00:41):
We’re doing quite well. I’m looking forward to this. This is going to be an interesting discussion of this freight data, isn’t it?
Scott Luton (00:00:49):
Agreed. Absolutely agreed. And who knows? We may be talking some football chat at some point throughout the next hour as well. But as Greg said, on this episode, we’re going to be sharing key insights from one of the leading transportation industry resources. You heard it here before, the U.S. Bank Freight Payment Index, this time for Q4 2021. Greg, we’re going to be gaining key takeaways from all of our panel, but including two business leaders with extensive experience. Legendary, we’ll call it, in the transportation markets.
Scott Luton (00:01:18):
And, Greg, before we introduce our esteemed guests, you know, we enjoyed our collaboration now with U.S. Bank going back a few years. It’s one of the leading financial institutions as our ecosystem knows, involved in empowering the transportation industry forward. And, gosh, we’ve needed that by the truckload here in recent years. Because transportation, it is a backbone. The backbone, as we all know, of the global supply chain community.
Greg White (00:01:43):
Yeah. No doubt. I mean, what they’re doing and the data they’re collecting is pretty incredible. It’s $37 billion worth of transactions last year, and all the data that comes along with it. And I think as important as the data is for people to recognize the intensive analysis/analytics that go into assessing what it says and what it means. And then, discovering the underlying impact or the underlying cause of these data points, because it’s important for us to understand why things happen, not just in what measure they happened. And, you know, it’s truly a stock market quality analysis. And, actually, we have somebody with us today who can probably verify that. So, I won’t let the cat out of the bag. I mean, yeah, it’s really, really powerful information.
Greg White (00:02:41):
Hey, just one more thing, this is really interesting – at least to me, it is – so U.S. Bank is the bank behind my REI membership credit card. I did not know that until I just got it in the mail. And I was like, “Wow. They’re everywhere.”
Scott Luton (00:02:56):
Really? So, I got to ask you a quick follow up – and we’re going to say hello to a couple folks in just a second – so what’s the coolest thing have you gotten from REI lately?
Greg White (00:03:06):
A kayak.
Scott Luton (00:03:08):
Really? Have you used it? I didn’t expect that answer, Greg.
Greg White (00:03:10):
Not yet. Not yet. It hasn’t arrived – supply chain issues – but it’s on the way.
Scott Luton (00:03:18):
Love it. All right. We got to get lots of pictures. We got to get you a GoPro on that kayak, man. That’d make for some must see TV.
Greg White (00:03:26):
I’ll add that to my list at REI. I mean, it’s a pretty cool card. And, you know, U.S. Bank helps contribute to sustainability for every transaction. I might be the only person who reads through the actual document that comes with your card. Probably, the dial 1-800-XXX to activate it.
Scott Luton (00:03:53):
The fine print. The fine print. All right. So, Greg and a kayak, folks, tune in maybe next week on a livestream for that exciting action. We’ll say hello to a few folks before we bring on our guests here today. Samuel is tuned in via LinkedIn from Panama. Samuel, great to see you. Looking forward to your contributions here today. And, hey, on that note, folks that are tuned in via the cheap seats or skyboxes in the comments section, we’d love to hear from you throughout the hour as we talk freight and logistics with our panel here. Daniel is tuned in from New York City – maybe New York City, but New York State, at least – via LinkedIn. Great to see you here today.
Greg White (00:04:32):
Everybody assumes New York City when they see New York [inaudible]. So, Daniel, if you’re from the upstate, shout it out.
Scott Luton (00:04:38):
When’s the last time you went to New York, Greg?
Greg White (00:04:41):
Gosh, that’s a great question. It’s been a minute. Probably 2019, I guess. I mean, it might have been even earlier than that. I just realized this week how many things have escaped my calendar for two years. You know, I went to the dentist, and the last time I had gone to the dentist was September of 2019. Which, if I go every six months would’ve made my next visit March of 2020. So, of course, I didn’t go then, and then couldn’t go in the following September, and it’s been impossible to get an appointment ever since anyway. That’s way too much information, but it is funny how so much of the calendar has kind of slipped away. So, really I’d have to tell you, it’s probably been at least two-and-a-half, maybe up to three years.
Scott Luton (00:05:35):
Ask and you shall receive from Greg White.
Greg White (00:05:37):
That was a lot more information than you asked for, isn’t it?
Scott Luton (00:05:40):
A look into a day and the life of Greg White. Well, Dan, welcome.
Greg White (00:05:44):
Or three years in the life.
Scott Luton (00:05:47):
Maria tuned in, PH, Philippines I believe, via LinkedIn. Great to see you here, Maria. Of course, we can’t do a livestream without our dear friend Mohib from Wichita, Kansas. He says, “Good morning all. Greg, we went to your favorite Kansas City and had some world famous barbecue ribs in Jack Stack Barbecue.” I guess that’s the name of the restaurant.
Greg White (00:06:13):
Yeah. My favorite really is Jack Stack.
Scott Luton (00:06:15):
Okay. And Daniel is responding.
Greg White (00:06:12):
Long Island. Okay.
Scott Luton (00:06:14):
Long Island. Long Island. Yes. Well, great to have everybody. We couldn’t get to a few folks. We want to hear from you today as we get through this next hour. So, with no further ado, Greg, let’s welcome in our featured guests here today. Back by popular demand, Bobby Holland, Director, Freight Data Solutions at U.S. Bank, and another repeat guest, our dear friend Logistics Lee Klaskow, Senior Analysts, Transportation and Logistics with Bloomberg Intelligence. Bobby, Lee, good afternoon. How are you doing?
Bobby Holland (00:06:48):
Doing well. Doing well. How are you?
Lee Klaskow (00:06:48):
I’m doing great. Thanks.
Scott Luton (00:06:48):
We’re doing wonderful. Great to see you both. I have enjoyed our conversations in the lead up to this livestream. Greg, we had a little bit of NFL network in today’s pre-show, didn’t we?
Greg White (00:07:01):
We did. And we talked a little bit about snowfall and snow removal, which is, you know, an impact on the supply chain and we’ll be so more in the coming days, I believe.
Scott Luton (00:07:11):
Agreed. But not everybody.
Greg White (00:07:13):
I have to ask you, Lee, Logistics Lee, is that your new moniker or is that something Scott just handed out just today?
Lee Klaskow (00:07:21):
No. It’s something that I’ve been using for quite some time. Actually, I signed up for Twitter a couple years ago and I’ve actually started just posting, you know, being a little more active there. So, people can find me at @logisticslee, with an S between the logistic and the Lee. Yeah, it’s kind of cheesy, which for those that know me, it’s kind of me they think.
Scott Luton (00:07:44):
Par for the course. Hey, we love cheesy.
Greg White (00:07:46):
Not only one of the most talented, but one of the funniest guys in supply chain, Lee Klaskow. No kidding. So, I like it actually. I thought maybe Scott had coined that for you. I’ll be right back guys. I’ve going to follow Lee.
Scott Luton (00:07:58):
I’m not that quick. But we’ve got Lee, we’ve got Bobby Holland, we’ve got one heck of a one-two punch here today. And our listeners are familiar with both of them, so let’s start there. Let’s just refresh everyone’s memory. So, Bobby, we’ve been collaborating now for a couple years. I always walk away with my 17 pages of notes when you make your appearances here. I love talking freight and supply chain. But just refresh our listener’s memory of who Bobby Holland is. So, tell us a little about what you do.
Bobby Holland (00:08:28):
As you pointed out, I’m the Vice-President and Director of Freight Data Solutions in our Freight Division at U.S. Bank. And I’m a Product Manager, and we’re responsible for creating data products that add value to our customers. And the Freight Payment Index was our first product, if you will, basically, to demonstrate our perspective on the marketplace.
Scott Luton (00:08:53):
And I learned a little tidbit about Bobby and his family earlier today. Greg, you might have missed it. He’s got a Yorkie name, Malcolm. Is that right, Bobby?
Bobby Holland (00:09:02):
My wife does, yeah.
Scott Luton (00:09:05):
We talked about that, that’s right. How can I leave that important detail out? Well, Bobby, welcome back. Great to have you back. I really enjoyed our conversations here. And, Lee, we’ve had interviews dating back to in-person events – imagine that – in Austin, here in Atlanta, and you name it. Just refresh our listeners a little bit about yourself, Lee.
Lee Klaskow (00:09:25):
Sure. So, I work for Bloomberg Intelligence. For those that don’t know, Bloomberg Intelligence is Bloomberg, the big media company, it’s the research arm. So, my research goes across the terminal. We do share snippets of some of our insights on social media, so, like I’d mentioned earlier, Twitter or LinkedIn. I cover freight transportation and logistics, so that really includes all modes. So, whether it’s on the water, in the air, on the land, I’m covering it. I cover about 23 individual companies as well as to the industries. And right now for an analyst, it’s kind of a busy time because it’s earning seasons when companies report their fourth quarter results. This week and next or two pretty big weeks.
Lee Klaskow (00:10:12):
I’ve been doing this for Bloomberg for about 11 years. Prior to that, I worked for a couple banks for about five-and-a-half years also covering transport. So, I call it 17 years experience looking at the transport markets from the lens of an investor. We don’t give buy, hold, sell recommendations. But we do let people know at Bloomberg Intelligence where we think companies are headed, kind of the challenge and opportunities that they have in front of them
Scott Luton (00:10:39):
Very well said. I’m buying that. Greg, how about you? I’m buying that.
Greg White (00:10:42):
Yeah. And I think, it’s particularly important now because understanding a company’s supply chain has always been a big part of how they earn and how they create revenue. And it’s been largely ignored, Lee, as I’m sure you know. And, now, it’s right up there with sales and earnings. The condition of the supply chain is right at the top of the list even for the stock market. So, I think it’s cool that you’re providing that kind of information because those insights, I think, they’re indicative of the future of a lot of companies.
Lee Klaskow (00:11:18):
Yeah. And if companies aren’t executing right now, usually the problem is one of two things. It’s their supply chains are messed up or they’re dealing with too much labor inflation or not enough workers. And those are the two main areas, if you will, that Corporate America is suffering right now, you know, kind of trying to navigate through this pandemic.
Scott Luton (00:11:39):
So much to get to, so little time. Great to have Bobby and Lee with us here. Greg is smiling because he knows that is always true. Greg, where are we going next with our esteemed duo?
Greg White (00:11:50):
Yeah. I think before we dive right into what the report says, maybe, Bobby, you can go through a little bit, obviously, you do billions of dollars in transactions, and I don’t know the exact number of transactions, but it’s a whole lot. I mean, your methodology, the data that you use, or how you use it, what else help make this such a valuable resource for folks from your standpoint?
Bobby Holland (00:12:18):
Well, as you stated, it’s the quantity of data. That $37 billion in spend is approximately, around, 31 million transactions annually. And so, as you can imagine, from managing that many invoices and payments, we collect a lot of data. And it’s that big data perspective that enables us to, again, put together our perspective on the marketplace with our truckload and less than truckload data, which is about 70 to 80 percent of that spend in our system.
Bobby Holland (00:12:54):
And so, basically what we do is, you know, we measure the velocity deltas in the marketplace. We look at a quarter-to-quarter comparison. Our year zero was 2010 and we’ve calculated forward, even though the index hasn’t been around until 2010, that’s our starting point for the majority of the data that we have in our freight out and payment system. The majority of good data, let’s put it that way. So, from 2010 forward, we calculate, like I said, the deltas, compare. We have algorithms that, basically, pair out all of the seasonality, pair out all of the discrepancies, kind of normalize the data, if you will. And it enables us to make fairly accurate year-over-year and quarter-over-quarter comparisons. And that’s, basically, what we present along with economic commentary. We work with American Trucking Association, their economist, Bob Costello. So, put all that together and we think we’ve got a pretty good perspective, especially with our regional perspective in the marketplace.
Greg White (00:14:03):
So, 2010 is your baseline, right? So, whenever we talk about these numbers, it’s all relative to that. So, can you explain a little bit about how you use that baseline? Because we talk about year-over-year numbers, of course. And then, we’re going to talk about quarter-over-quarter numbers. So, can you relate that back to that baseline so folks can understand.
Bobby Holland (00:14:23):
Well, basically it’s the starting point, but we have a chain-based index. Which means, you start with 2010, and every quarter, you compare the current quarter or the previous quarter to its previous quarter. So, that’s why we’re in January and we’re talking about Q4 because, basically, we wrap up our data processing for the fourth quarter at the end of December, beginning of January. And then, basically, we calculate forward each quarter compared to the previous quarter.
Bobby Holland (00:14:54):
And we feel that because we want it to reflect not U.S. Bank’s business, but we want it to reflect the marketplace, and so that’s why we do a chain-base. We also call it something similar to same store sales algorithm, where you basically make sure the previous quarter looks like the quarter you’re comparing. So, you take out the seasonality, you take out any attrition, and add in customers that have been in both buckets, if you will, so that you’re making an accurate comparison as you move forward.
Bobby Holland (00:15:28):
And given the fact that we have to do that balancing act and make sure that the buckets are straight, that’s why it’s better for us to do a chain-based rather than everything reflected off of 2010 as year zero. It’s year zero for us from the starting point, but it’s not relative to year zero, like a lot of other straight indexes are.
Greg White (00:15:52):
But having done comp store sales reports, I totally get that. And I’m glad I didn’t actually do the reports. I just reported the reports. So, I’m glad there are people like you that make sure that the reports – because, I mean, that’s no small task. We have to consider, like you said, the attrition of carriers and whomever else, shippers, in the marketplace that impact that. So, it is an apples to apples kind of comparison quarter-over-quarter.
Bobby Holland (00:16:20):
Otherwise, we’re just measuring U.S. Bank’s business. And we may be doing better than the market, we may be doing worse, but we want to, again, represent the marketplace and not ourselves.
Greg White (00:16:31):
Yeah. Got it. So, Lee, tell us a little bit about how you, or maybe your clients, or you’ve seen other supply chain professionals use this thing. Give us kind of a practical perspective on how it’s –
Lee Klaskow (00:16:43):
Yeah. Sure. So, I think that it’s useful when you’re trying to figure out where we are in the cycle. That’s obviously an important aspect. Any transportation market that we’re talking about, they’re all cyclical, so there’s peaks and lulls within every cycle. And a lot of people right now are trying to figure out where we are, especially with truck rates, where we are in the trucking cycle. It seems like the cycle has some legs from our standpoint to go through 2022. Knight-Swift, which is a large trucking company, on their earnings release they mentioned that they thought that the contractual rates could increase around double digits this year. Obviously, they’re catching up to the huge run and spot rates that we’ve seen.
Lee Klaskow (00:17:32):
But all in all, I think these sort of indexes are really a good place to start when you’re trying to figure out where we are in the cycle. And, again, our call is for a really elongated rate cycle. And unless something tragic were to happen from the demand side, you know, we see the strength going into next year.
Scott Luton (00:17:55):
So, with all of that – that is very important from Bobby, and Greg, and Lee there, some level setting – let’s jump into the data. So, again, this is for Q4 2021. And, Bobby, I’m going to come back to you here. Before we go re region-by-region, let’s start with just that bigger picture, that national point of view. So, tell us what did you see in Q4 in the bigger picture?
Bobby Holland (00:18:16):
Well, overall, we saw that the spin index increased while the shipments index contracted slightly. And, again, the same pressures that we’ve had throughout this process, they’ve been intensified to a certain extent. But it’s, basically, the driver shortage, the capacity shortage, and then just other regional areas, manufacturing, in some cases, housing. All these have impacts on individual areas. But, basically, while there’s that labor crunch that Lee had mentioned, while they’re still now a growing capacity shortage – and in its capacity shortage from the standpoint that fleets are not able to expand as they need to. And so, technically they’re making due in some is with less – all of these are impacting, that’s why the spending growth has outpaced the volume. So, we’re paying, basically, more to ship less. And you can see that in the chart that you have up there, that the growth and spending has far outpaced the shipment volumes.
Scott Luton (00:19:32):
Agreed. And, folks, really quick before we go a little deeper – we’re about to go region-by-region with our panel here – you can sign up for the Freight Payment Index for free. Now, we’ve got the link in the show notes. And big thanks to Amanda, Chantelle, Clay, and Catherine behind the scenes helping make production happen, I bet they’ll drop it in the comments as well. So, let’s jump in. Let’s go region-by-region as we typically do. And we’re going to get Bobby to kind of layout what all this reporting, again from $37 billion worth of transactions is telling us. And then, we’re going to get here with Lee and Greg – maybe next time in Greg’s kayak – what some of their commentaries, some things they’re seeing out there in these regions.
Scott Luton (00:20:14):
So, Bobby –
Bobby Holland (00:20:14):
[Inaudible].
Scott Luton (00:20:15):
Yeah. Sure. So, while you get that straight, really quick, Greg – while Bobby finishes that – nationally, what was one of your takeaways nationally from the Q4 Freight Payment Index, Greg?
Greg White (00:20:29):
Well, the I word – inflation. You know, it’s impossible to ignore it. Even though the rate of increase in spend has tailed a little bit, it’s still much higher. And, yet, the number of shipments is going down. And the last time we did this, we talked about the possibility that there might be shippers pulling out of the market just because they can’t get capacity. We don’t know if we saw that to be interesting. I’m not sure the data necessarily reflects that. But clearly that, and yet the year-over-year spend change, it’s actually coming down, to Lee’s point earlier, we’re seeing the trend. Hopefully, it’s a trend. It’s at least trending that way now. And I’m really interested to understand what that means, obviously, it’s something Bobby can affirm that we’ve seen in the past. I’d be interested to see, Lee, what you think that might portend for the future.
Scott Luton (00:21:34):
All right. So, I think we’re ready to go region-by-region. Thank you for that, Greg. And we’re going to circle back and get Lee’s commentary. As we start, Bobby, with the Northeast Region, what is all the data telling us from the Northeast Region?
Bobby Holland (00:21:50):
The Northeast Region saw, like, almost 2 percent drop over third quarter, and it was down 1.2 percent from a year earlier, in shipments. And then, on spend, it was up 8 percent over Q3 and almost 24 percent year-over-year. So, a lot was going on in the Northeast. Again, we always talk in the index about the density of the population, basically, being able to show big swings on consumption. So, we saw that consumption was buoying things up. We saw that housing starts while dropping sales of houses. And I can attest to that personally, sales of houses, you know, big turnover up here, so a lot of activity there. And so, there’s some downstream aspects of that that keep things moving. But, basically, like I said, we saw it consistent with others. We saw big jumps over last year, which is, obviously, what everyone was hoping for, because now we’re well into the pandemic and possibly starting to come out of it, so you would expect to see some of those things happen.
Scott Luton (00:23:04):
Excellent point. And permitting, generally speaking, as you pointed to up across the country, including in the Northeast. We’re fortunate because Bobby’s Northeast and Lee’s Northeast and, not only are they experts but they’re living it too. So, Lee, some of what was going on in the Northeast Region, your take?
Lee Klaskow (00:23:23):
Right. Well, I mean, I don’t know how much anecdotal evidence I have. I barely leave this room.
Greg White (00:23:31):
You and Bobby, both, are room-bound, not just homebound.
Lee Klaskow (00:23:35):
When you think about the Northeast – obviously, somebody mentioned the density of the area – so congestion is always an issue. Also, some of the tougher COVID protocols that we had here in the Northeast made it a region that maybe some truckers didn’t want to go to. So, that probably propped up rates and kept things tight. So, Northeast, you got to be a special kind of trucker if you want to drive an 18-wheeler up and down Lexington Avenue in Manhattan, not an easy task. But there’s just a lot of different other things that come along with that density. And, you know, even though a lot of people are not working in the office full-time yet – I say some of us have gone back to working from home over the last 30 days – there’s still congestion on the highways. So, even though people aren’t going to work, people are still doing things.
Scott Luton (00:24:31):
Really quick, and going back to your trucker statement, you got to be a special trucker to get up and down Lexington Avenue, I think, you said. And Lee knows a little bit from his experience driving a truck, which one of the logistics companies out there afforded you to do. We’ll have to see if we can find that wonderful footage and drop that in the comments.
Greg White (00:24:53):
Backing a trailer, if I recall right, Lee? Right?
Lee Klaskow (00:24:53):
Backing up a trailer, driving to two pops around a yard in an XPO facility.
Scott Luton (00:25:04):
I love it. I hope I can do that at some point. I bet that was a really cool experience. And I loved the footage that came out of it. I want to share a couple of quick hellos we’ve got. Lucy is tuned in from Dubai. Lucy and her friend Kim Winter says hello. Great to see you there. Mohib, he’s in a Colorado state of mind. He’s wishing their flat heartland Kansas had some snow covered hills. Got to be careful what you wish for, Mohib. We were just talking about all this snow pre-show.
Greg White (00:25:30):
Well, first we need the hills in Kansas.
Scott Luton (00:25:32):
Good point. Fair point. Fair point.
Greg White (00:25:37):
He’ll get snow cover, let me assure you.
Scott Luton (00:25:39):
Right. And, Mohib, we’re coming to the Midwest here in just a few minutes. Memory is back with us. She’s been on fire. Memory, great to have you back. I’m looking forward to your perspective. Jonathan is tuned in from California – we’re going to cover the West Region, too, here soon – tuned in via LinkedIn. It’s great see you. And, finally, as y’all saw the graphic a second ago, we’ve dropped the link to sign up for free to get your copy of the Freight Payment Index each quarter. Okay.
Scott Luton (00:26:03):
So, Bobby, we’ve spoken to the Northeast. Let’s get to the Southeast, where Greg and I happen to live. So, Bobby, your thoughts there.
Bobby Holland (00:26:13):
Southeast spend index was up 8.4 percent over Q3 2021. The shipments index dropped almost 2 percent. Again, when we talked in the beginning, there were fairly moderate drops or slowdowns, if you will. And, again, it’s mainly the capacity thing. The fact that fleets aren’t able to expand like they need to. And diesel prices is also a big factor, even though prices started to moderate, they’re still high. And if you go through the index, you’ll see some of the numbers, particularly over last year. In some places, it’s up almost 50 percent over last year. It went up, you know, almost 10 percent in a quarter. And all these things are driving spend because those costs get passed on. They don’t get absorbed. Southeast is no different.
Scott Luton (00:27:09):
So, really quick about those diesel prices, let’s see here. I’ve got them up across the U.S., on average about a dollar per gallon from this time last year. And the biggest is in the West Coast, which we’re going to touch on here soon. And, of course, as Bobby just mentioned, diesel goes up, more surcharges, but that’s outside of any additional service charges just for the state of the market that logistics companies have to pass on. Bobby, any final thoughts related to Southeast before we bring Lee and Greg in?
Bobby Holland (00:27:42):
Just that there’s automotive impact, so states or regions that have automobile manufacturing, basically, have their freight impacted. And one of the things of note is that it’s across all areas of the supply chain. It’s not just the chips manufacturing. It’s raw materials, even the ability to move raw materials. And so, it’s kind of a contest between having the capacity to move what’s needed and the availability from other areas. So, the fact that the Southeast still has a significant automotive manufacturing capability just shows why they’re having some impacts as well.
Scott Luton (00:28:20):
Excellent point. And on that note, Greg, I can’t remember the name of the automotive company that had made the announcement – I think it’s formal now – bringing a new plant to Georgia. In fact, not too far from where we are home. So, automotive industry is alive and well in the Southeast, and certainly in Georgia. Lee, your commentary? And I’m coming to you, Greg. Lee, your take on what you’re seeing in the Southeast.
Lee Klaskow (00:28:43):
Yeah. You know, I would echo what Bobby talked about. Obviously, automotives are pretty important for the overall economy. I think there was also some colder than normal weather that happened in the Southeast that folks down there aren’t used to, and that kind of added to congestion issues and impacting the supply chain.
Lee Klaskow (00:29:04):
And then, I would also mention that on the fuel side, OPEC+ kind of said they were going to increase supply a couple weeks ago, that should be a good thing for prices. Also, as oil remains high, that could increase some more fracking here in the U.S. which will obviously increase the supply and help bring back prices. But, obviously, a lot of people are looking on what’s going on between Russia and Ukraine given how any knock on effect, any turmoil there, could have on the energy rates. Because, obviously, Europe depends a lot on Russia for some of its natural gas to heat themselves during the winter.
Scott Luton (00:29:48):
A lot of good stuff there, Lee. Greg?
Greg White (00:29:51):
Yeah. Well, I think one thing we don’t hear about as much because it’s become so matter of fact, but the truth is the ports continue to be jammed. And, I mean, I have a great view of ships waiting outside the port of Savannah now. So, I’ve been making somewhat of an amateur study of that, and it is not insignificant that the East Coast ports, particularly the Southeast ports – Jacksonville, Charleston, and Savannah – are really jammed up and they’re holding ships offshore just like they are in Long Beach in LA. So, that’s probably had some impact on both the need for chassis and for tractors, and drivers, of course, but, also, the delays around that are impacting the actual shipment volume.
Scott Luton (00:30:43):
Right. So, you’ve just earned a new assignment, Greg. Since you’re doing that amateur study, as you call it, man, we got to get you and footage of touring the Port of Savannah. Who knows? Getting your boots on the ground reporting, Greg.
Greg White (00:30:59):
Yeah. Yeah. That’s no doubt. I mean, it really is an interesting study to see. And just a side note, it’s interesting also, of course, Los Angeles and Long Beach have ships now anchoring 150 miles offshore because of the pollution effect. And in the few days around Savannah that I saw that were not incredibly windy in the last couple weeks, you can see out over the ocean the haze from the diesel exhaust out there. So, it’s not an insignificant impact, because the ships still have to run to their systems. But, yes, you can see them going into the port.
Scott Luton (00:31:45):
It’s truly fascinating. It is fascinating what goes on in our ports. Okay. So, we’ve just went through the Northeast and the Southeast. And, Bobby, that brings us to the Midwest – home of Mohib there in Wichita, Kansas. So, tell us what the data told you and the team in the Midwest.
Bobby Holland (00:32:07):
Midwest was down quarter-to-quarter on shipments about 3 percent – roughly 3 percent, 2.9 percent -but was up 6.7 percent in spend. And then, year-over-year was up almost 16 percent in spend and down 12 percent from last year in shipments. Again, the Midwest has big auto production capability. And some of our data from the Federal Reserve says that auto production was off by 10 to 15 percent. And, again, one of the big areas where it’s impacted up and down the supply chain, you can see that that big drop is going to affect, like I said, all areas of the supply chain. So, it’s why it had one of the larger slowdowns in shipment volume, we feel because of that.
Scott Luton (00:33:04):
Speaking of Midwest, y’all might have seen – Bobby mentioned chips earlier in some of his analysis – Intel made, I think, a $20 billion commitment to Ohio building a huge site there to produce semiconductors and chips. So, we’ll see, maybe a 27 year ramp up period. But, nevertheless, massive investment. Lee, when you look at the Midwest – again, home of A.A. Mohib and Wichita State University, which we have a famous alum right here on this panel, Greg White. But, Lee, what are you seeing in the Midwest?
Lee Klaskow (00:33:36):
I mean, not to be an echo chamber here, but, really, it’s the things that Bobby pointed out as it relates to the automotive industry. Obviously, the semiconductor chip shortage has really royalled that industry. And things are slowly getting back to “normal.” The Fed came out with some commentary yesterday where Powell said that the chip shortage – I believe this is what he said so don’t quote me quoting him – that it probably won’t be resolved until next year. So, that’s going to be a pressure. That’s going to impact the Midwest and also the Southeast way on volumes. And, also, it could also add to shippers looking for more expedited ways to ship stuff around, because maybe in the past, they might have waited for a pallet full of widgets or a trailer full of widgets. Now, they just might be wanting just to send stuff out as soon as it is available to help the manufacturers or the distributors with their own inventory issues.
Lee Klaskow (00:34:45):
So, the supply chain shortage probably has led to a lot of people increasing their spend by trading up. So, instead of doing rail, maybe doing truck. Instead of doing truck, maybe do more LTL. Instead of doing LTL, maybe do expedited. So, we are seeing that in the marketplace as shippers scramble to have either a product on the shelves or a product in the warehouse, so they can do their manufacturing or assembly and keep up with demand.
Scott Luton (00:35:20):
Good stuff there, Lee. Class Cow Greg, your quick thought.
Greg White (00:35:23):
Two quick things about the Midwest, used car sales are at an all time high. So, even as new cars are being produced or, in some cases, they are effectively old cars waiting for chips still, that has buffered sales, which has probably some portion of the big impact on shipment volume. But the other is that some of the Japanese makers, like Honda and Acura together, virtually skipped the 2021 model year and our shipping 2022s, and basically gave up on trying to produce those vehicles or import those vehicles to the states. So, instead of trying to keep two model years going, they effectively gave up early on 2021 and moved on to 2022. So, they don’t have the same amount of vehicle production backlog that needs chips.
Greg White (00:36:24):
So, I only know that anecdotally, because my daughter just got an Acura SUV of some sort. And she couldn’t buy a 2021. They didn’t even have them. So, we learned that Honda and Acura and others have done virtually the same thing. I’m not sure what other automakers have. That’s a really interesting strategy to get beyond that rather than try to fill two model years with semiconductors, just basically skip one.
Scott Luton (00:36:54):
Go ahead, Bobby.
Bobby Holland (00:36:54):
I was going to say, on top of that – you know, because my kids are buying cars, too, for a variety of reasons – anecdotally, one of the things that appears to be happening as well is, even heavier concentration on shipping loaded vehicles, so that if you have a limited set of vehicles, you want to ship the most loaded –
Greg White (00:37:16):
Profitable models.
Bobby Holland (00:37:17):
– profitable models with everything in it. My daughter had to replace her car after an accident and trying to find the vehicle that she had before. I think she got close, but she ended up paying a little more for it than what she paid previously. And then, my son was looking to replace his vehicle and ended up having to buy one that was extremely loaded, because he checked all the dealers in Colorado around where he lives, they had one or two vehicles and it was either take it or somebody else will.
Bobby Holland (00:37:57):
You know, I haven’t bought a car in a couple years, so I hear and read about these things. But, to me, when I drive by the dealerships here, they look like they have cars. I mean, they’re a little sparse on some of them, but some of them look like they have cars. But until you actually go to try to get one that you want, and then you find out there’s a labyrinth that you have to go through or you’re going to pay an inventory fee, which basically means they jack the price up, it’s just crazy times for buying a car.
Greg White (00:38:22):
And there is no negotiating. So, Bobby, just to paraphrase what you’re saying is, you, like I and probably many other parents, your kids are driving a nicer car than you are because they were forced to buy a car that was loaded.
Bobby Holland (00:38:37):
Yeah. My son is now. But [inaudible].
Scott Luton (00:38:43):
I was going to add, Bobby, hopefully your daughter and son brought in the negotiating talent, Bobby “The Hammer” Holland, to make sure they got the best deal.
Greg White (00:38:53):
There is no deal on a new car. That’s no joke. [Inaudible].
Bobby Holland (00:38:55):
And they’re like, “Hey, look.”
Scott Luton (00:39:01):
It is what it is, right?
Greg White (00:39:02):
If you don’t buy, literally, literally, someone else will.
Scott Luton (00:39:06):
Fascinating times. Fascinating times. I want to add Mohib says that, “Business jet sales -” which is Wichita is the air capital of the world “-is up.” He says, “The rich and famous has figured out that life is too short. Live it up while you’re still young.” Memory thinks it’s a really interesting practice that Greg just talked about the cancellation of 2021 models. And Memory says, “Mohib, I need a masterclass on economics from you,” referencing some of his thoughts around inflation that we’ll to try to get to.
Scott Luton (00:39:36):
But before we do that, we’ve got two more regions to get around to. The Southwest Region, Bobby, is the next one on our list. Tell us what the data told us about the Southwest Region.
Bobby Holland (00:39:47):
The Southwest Region was the only region of the five that had an uptick, albeit a slight one, in shipment volume, up just under one percent. But in spend, it was up almost 8 percent. So, again, a pretty big jump. But it was up, you know, almost 21 percent over last year in spend and 2 percent over last year in shipment volume. So, again, Southwest is doing really well comparatively speaking. A lot of that can possibly be attributed to even greater freight volumes between Mexico and the United States. As well as cost of energy in that area as energy is picking up. I think Lee had made comments about that earlier about in some places energy capacity is coming up. So, again, the only region to have an uptick in shipments. So, that was interesting because it’s usually the opposite trend.
Scott Luton (00:40:53):
Right. And that’s the Southwest Region that you’re speaking to. Lee, what do you see in the Southwest?
Lee Klaskow (00:41:00):
Yeah. Again, echo, echo. You know, it’s really the energy infrastructure that’s going on in Texas, obviously a lot of fracking in Texas and Oklahoma area. And then, because the supply chains are so screwed up, you’ve been seeing people coming in through the border in the South to bring in products. So, again, I totally agree with what Bobby is seeing. It sounds like that’s really what’s driving things there.
Scott Luton (00:41:36):
And, Greg?
Greg White (00:41:38):
Again, Houston, another very active port as people avoid with a plum. The LA and New York and New Jersey ports, and, of course, the sweet, sweet taste of Texas crude has gone up pretty dramatically. And the production is up in Texas and across the Midwest because of the price of crude and wells continue to be dug at disproportionate rates to previous years. So, in fact, I was just talking to someone who intended to sink ten wells this year, and instead they sunk 35. I mean, it’s dramatic. And they expect the price to go much, much higher.
Greg White (00:42:25):
I’d be interested, Lee, I think you probably disagree with that. But, of course, if I was an oil guy, I’d probably expect or hope to expect that it was going higher anyway. I was just going to say, the moving in and out of those kind of resources and natural gas, which is at a fairly high level as well and, of course, it’s winter, so it’s a natural for that region to see what they’re seeing, in my opinion.
Scott Luton (00:42:52):
So, Lee, I want to get you to respond. But really quick, I got to add this, every time I hear Texas crude, which Greg mentioned a couple times, I instantly think of swimming pools and movie stars. Anyone else? Is it just me? Anyone else? Anyone else?
Bobby Holland (00:43:06):
It’s just you.
Greg White (00:43:08):
Because the Beverly hillbillies are from Arkansas, just so you know.
Scott Luton (00:43:11):
You know. All right. So, Lee, respond really quick. Greg talked about a lot about the energy market there. Any commentary?
Lee Klaskow (00:43:19):
Yeah. You know, I think that most people believe that oil prices will remain relatively high in the short term. What tends to happen with fracking is that, when the price gets to a certain point where it’s above breakeven, that’s when a lot of the pumping begins. But those cycles tend to be very short lived because when they’re bringing up all the supply back online, that obviously dilutes the price. And then, if it happens too quickly without demand increasing, we’re not supposed to get to pre-pandemic levels. It might be this year for global oil demand, but it might not. It’s kind of like on the cusp of whether we’re going to get to pre-pandemic levels from a demand standpoint. So, the demand is slowly getting back to normal. And on the pricing side, it’s really going to be on the supply, what OPEC+ is doing, and what the frackers are doing.
Greg White (00:44:19):
And as sweet crude goes up and the U.S. produces more, OPEC will release more stocks to drive oil stocks, to drive the value down, to keep that from accelerating the price too much.
Scott Luton (00:44:34):
It’s fascinating. Fascinating
Greg White (00:44:36):
Allowing the U.S. to succeed.
Scott Luton (00:44:38):
In those markets. All right. So, coming down to home stretch, we’ve gone through Northeast, Southeast Midwest, Southwest, and all of that, Bobby, brings us to the Wild Wild West. So, in that fifth region –
Greg White (00:44:51):
It is wild, yeah.
Scott Luton (00:44:53):
– what do you see out there?
Bobby Holland (00:44:53):
Well, the shipments volume slowed 6.4 percent and spend, though, was up 12 percent. So, the largest amount of quarterly spend increase, but it’s also the biggest drop or slow down in shipments. A lot of things going on, and a lot of them we’ve seen in the news with port volumes. And, usually, the west is buoyed up by port volumes, but that’s assuming that they can actually move the stuff out of the ports. Obviously, they’ve had a big issue in getting things out of the ports, getting things into the ports. And one of the other things – and Greg alluded to it earlier – there’s always been some trickle of West Coast port volumes over to the East Coast. But it seems, perhaps, that in the fourth quarter, there was a huge push to do that because of the fact that they’re backed up. I read that it was practically backed up offshore in California, all the way down to the Mexican border.
Greg White (00:46:03):
I mean, I don’t know what the numbers got to, but I know that they were reporting 110 or more ships waiting, which that number has just continued to escalate. And, Bobby, remember last quarter, we were seeing much of the same thing, but the numbers were yet smaller in all of the ports. So, this has been a pretty dramatic spread, I hadn’t really thought about it that way until you said that. But it has been a pretty dramatic spread that all of the ports are now backed up. Because we could brag here in the Southeast that our ports were still operating very efficiently, which maybe they are, but they are still getting so much more volume that now, virtually, everyone is backed up.
Scott Luton (00:46:46):
Agreed. And speaking of volume, as we shared on the Supply Chain Buzz every Monday at 12:00 noon, looking at the Port of Charleston in 2021, 25 percent year-over-year volume increase, 2021 over 2020. So, a lot of the ports are benefiting from some of what Bobby was just sharing there. Lee, West Regions, what we’re talking about, what we’re finishing on before we make sure folks know how to connect with all of our panel here, your observations from the West.
Lee Klaskow (00:47:11):
Yeah. I think it’s really [inaudible] from the ports was about over a hundred ships that are kind of in Southern California waiting to unload their freight. I guess the good news is some of that backlog might get a little cleared as we head into the Lunar New Year, as a lot of China kind of shuts down. People go home from the cities, they go back to the rural areas. It’s worth noting, really, what’s going to happen this time when they have to come back, because a lot of those workers haven’t been home for two or three years since the pandemic began. So, it’ll be interesting to see what happens. That will have a good impact on spot rates. Liner rates are up around 80 percent this year, and we expect them to moderate over the coming weeks, but still remain extremely high from a historical standpoint.
Lee Klaskow (00:48:05):
That’s probably the biggest issue because those bottlenecks that are happening at the port is following its way inland. Warehouses, can’t find people. Rails are having difficulty finding people. So, the intermodal yards are being impacted as well. Intermodal is down about 12 to 15 percent so far this year. Some of the has to do with some cold weather – flooding, I should say – sorry- not cold weather, but flooding in Western Canada. It happened in December, just kind of still impacting intermodal volumes as we see it.
Scott Luton (00:48:44):
So, Greg, I’m going to give you the last comment on the West. But before I do, who knows? With all those folks coming back from those container ships, we might see a baby boom here in the states in the coming years. Greg, what else sticks out to you about the West?
Greg White (00:49:01):
Well, housing still continues to grow in the West. And, you know, the other thing that really jumps out at me is just the dramatic drop in volume and, yet, the same inverse dramatic increase in spend. That shows a significant delta between supply and demand versus all of the other regions of the country, frankly. And a lot of that is, as both Lee and Bobby have talked about, for those reasons. But I just think that’s the most imbalanced region of the country and it’s the most remote. It’s the longest distance between ship points. It’s the fewest number of ship points and delivery points of any of the regions. It’s also the largest physical region in the country. So, there’s just a lot of odd dynamics about the West, particularly now with what’s going on in the ports. But, clearly, there is a severe supply and demand imbalance out there.
Scott Luton (00:50:04):
Excellent point there. And, folks, I’m going to remind you again, freight.us bank.com, you can go there and sign up for this quarterly report. One additional comment, and then we’re going to make sure folks will know how to connect with Lee and Bobby, you know, Bobby mentioned their relationship or partnership with the American Trucking Association. And I think it was the ATA in this report, Bobby, that mentioned, in fourth quarter there was 5 percent less trucks in operation, which also didn’t help the shipping capacity and volume.
Scott Luton (00:50:37):
So, it feels like this fourth quarter a chuck full of key takeaways, Bobby. I always appreciate your analysis, especially in layman’s terms so we all could understand it, even if you’re not a freight broker, a freight analyst, you name it. Lee, I appreciate your time with us here today to help us decipher and give us some color commentary. Lee, let’s start with you. You, Logistics Lee, on the move always, no pun intended. Always a pleasure to have you on with us here. Greg mentioned our Austin trip, that was our cross country venture in the Supply Chain Now van. It was great to see you there. It feels like 17 years ago, but it was two probably. But, Lee, how can folks dial into what you’re doing at Bloomberg Intelligence?
Lee Klaskow (00:51:19):
Yeah. The best way really is to connect on Twitter @logisticslee. And I’m also on LinkedIn. I’m pretty active on both. So, you know, I love to connect with people. My research gets better the more supply chain professionals I get to interact with. So, please feel free to reach out.
Scott Luton (00:51:39):
I appreciate that. You know what? I’ve skipped over one critical question, Greg. Mainly, for you and Lee, whether it’s one key takeaway, Lee, or whether it is one maybe observation that you can make as we move deeper into 2022, what would you be your final thought, Lee?
Lee Klaskow (00:51:59):
Moving into 2022?
Scott Luton (00:52:01):
Sure. Yeah. Let’s go that way.
Lee Klaskow (00:52:03):
I think that we will have more events happening that will come up the supply chain. I think rates will remain high. I think shippers really need to think hard and long about the strategic relationships they have with large transportation companies, small transportation companies, and making sure that their facilities are a place that a trucker wants to go. Because truckers have the luxury right now of saying no to freight. And, you know, you mentioned that there’s fewer truckers in the market, and one of the reasons why is because they have a lot of other opportunities that provide better work life balances that could pay something similar or maybe a little less, but they’re willing to do that trade off because of the work-life balance. Because being a trucker is a very demanding job, especially for the folks that are over the road and doing irregular routes. So, make sure your facilities are a place where truckers want to go. And if you’re not thinking about transportation from a strategic standpoint and the C-suite, you know, you really should be.
Scott Luton (00:53:15):
That is some of the best stuff I’ve heard all week, Lee. I really appreciate we wrap it on that note. But before anyone takes off, Bobby, two part question. One, perhaps your biggest takeaway from this fourth quarter Freight Payment Index. And two, we have let folks know how they can sign up for it, but how can they connect with you? Two pronged question there, Bobby.
Bobby Holland (00:53:37):
The biggest takeaway, similar to Lee’s, is the pressure is still on. I can’t look forward to see, you know, what’s going to increase or what won’t. But the pressure is that we’re able to measure. There aren’t enough things coming in to abate those. I mean, one of the factors, for example, was the labor shortage in the market. We’ve been using the 60,000 driver shortage now. I think ATA is coming up with, like, 80,000. And we saw that that was happening. So, bigger number of truckers out of the market, the capacity shortage ability to expand your fleet, the ability to get new trucks without cannibalizing the ones you have. And then, as you said, the supply chain issues, there’s not enough abating those so we expect the pressure to continue and possibly get worse.
Bobby Holland (00:54:33):
As far as how to get in touch with me, LinkedIn, my information is all there, bobby.holland@usbank.com as well. And I’d be happy to answer any questions I can.
Scott Luton (00:54:43):
Except predictions for the months ahead.
Greg White (00:54:47):
That’s right.
Scott Luton (00:54:48):
But you heard it there, the pressure is on. And that reminds me of The Heat Is On from Beverly Hills Cop. Do y’all remember that, Glenn Frey?
Bobby Holland (00:54:58):
[Inaudible].
Scott Luton (00:55:00):
That 80’s track. Legendary. Okay. So, Bobby Holland, I really appreciate your time and the U.S. Bank team. Greg, I’m going to come circle back to you after we let Lee and Bobby go and get your chief takeaway here today. Big thanks, Bobby Holland, Director, Freight Data Solutions at U.S. Bank, and a dear friend, Lee Klaskow, Senior Analyst, Transportation and Logistics with Bloomberg Intelligence. Thank you both, gentlemen.
Greg White (00:55:23):
Thank you.
Lee Klaskow (00:55:24):
Thanks for having me.
Scott Luton (00:55:25):
You bet. Greg, good stuff. Man, The Heat Is On ringing my ears for about three years back in the 80’s. I couldn’t get enough of it. It was like Beat It with Michael Jackson. Oh, we could have a lot of fun. But kidding aside, especially with Lee and Bobby’s kind of powerful close there, Lee, I loved how he challenged folks to, basically, take care of our truckers. They’re so critical, hardworking, smart problem solvers, critical to our backbone. And Bobby talked about the pressure is still on. Your thoughts, Greg.
Greg White (00:56:00):
Yeah. The pressure is on because those 80,000 truckers that we’re seeking to get back into the workplace are never coming. There won’t be a substantial relative increase of drivers in the industry. So, I was interested kind of in the comments, Mohib was talking about his five whys for where things are today. And the truth is, every single one of those goes right back to labor. We paid people to stay out of the labor force for, in my opinion, too long. Many of them decided it wasn’t worthwhile to come back. In fact, 3.6 million more people left the workforce last year than were expected. And 95 percent of those people – 95 percent of those people – were 55 and above, which is the prime age for people who drive trucks, do physical jobs, and have been doing a lot of the labor jobs that are looking at being automated these days.
Greg White (00:57:02):
So, the labor force is not coming back – that’s just my opinion – ever, never to the level it was. You got to understand, first of all, that the largest generation in the history of the planet was – even before last year – leaving the workforce at 10,000 persons a day. And 3.6 million persons in addition, largely baby boomers, left the workforce. So, you know, we have to start thinking about things from a really different standpoint. The challenge that Lee leveled was to start thinking about this in different ways, to have leaders start thinking about this in different ways. Workforce and labor shortage is the root of inflation, it is the root of supply chain and disruption, and it is the solution for both of those things. We have to get people back to work. And we have to get people back to producing the goods or conducting the jobs that can and still will be conducted by human beings.
Greg White (00:57:58):
There are plenty of people that could go back into the workforce that aren’t. Some policy changes probably need to be put in place. For instance, you can still go on unemployment just because you fear Omicron or something like that. You probably need to go back to the standard federal unemployment rules that force people to have lost a job outside of their own free will to collect unemployment benefits. And when we do that, then people will go back to work. I think this change in the economy will also impact that as well.
Scott Luton (00:58:30):
The heat is on Supply Chain Now with Gregory S. White. I appreciate that. That is a great way to kind of bring our conversation to a close. A lot of data. A lot of takes. A lot of savvy takes on what’s going on across freight, but also global supply chain, global business.
Scott Luton (00:58:47):
I’m going to wrap on this here. Thank you, Daniel. This is great feedback. We appreciate all feedback we get from across the market. Daniel says, “Thank you so much for this insightful session. It very well complements my graduate studies and the supply chain analytics course that I’m taking this semester. Hoping to get more involved in the coming days and weeks. Thank you to all the panelists.” Daniel, thanks, first of, for being here. Thank you for that feedback, secondly. And third, I completely agree with you, Bobby and Lee, and then Greg, too, this is one heck of a one-two punch so we’ll have to have both of them back with us really soon.
Scott Luton (00:59:21):
All right. So, Greg, we want to encourage folks, check out their Freight Payment Index, free to get it. You got the link in the comments, so check it out.
Greg White (00:59:31):
Over there. I mean, anyway it’s over there.
Scott Luton (00:59:31):
Freight.us bank.com. Mohib says, “Hey, great to have analytical minds sharing their great insights.” Mohib, I agree. And folks to comments, bring it.
Greg White (00:59:42):
[Inaudible] among them.
Scott Luton (00:59:43):
Yeah. Bring it. I love your five things there. T-squared – holds down the fort for us on YouTube – says, “This was a triggering discussion.”
Greg White (00:59:52):
And T-squared is not easily triggered, let me assure you.
Scott Luton (00:59:55):
That’s right. Okay. Folks, stay tuned. Stay tuned as we continue to cover all things supply chain here at Supply Chain Now, the voice of supply chain. Stay tuned also for some wonderful footage of Greg White kayaking coming to a livestream near you.
Greg White (01:00:12):
Okay. Actually, it’s not my kayak. It’s on the way. It’s my wife’s. But, still, I will provide footage. She’s very good, as a matter of fact.
Scott Luton (01:00:20):
Vicky, you’re going to be a YouTube star, who knows. But, hey folks, thanks so much for tuning in. Big thanks to our friends at U.S. Bank, big thanks to Lee and the team over at Bloomberg Intelligence for what they do, both, to really get awareness, not just the data and what’s going on, but awareness of the industry. That’s good for everybody. Big thanks to our production team for all they do. Thanks to my co-host here. Folks, if you do anything, act on these challenges you heard from Greg, and Lee, and Bobby here. And do good, give forward, be the change that’s needed. And on that note, we’ll see you next time right back here on Supply Chain Now. Thanks everybody.
Intro/Outro (01:00:59):
Thanks for being a part of our Supply Chain Now community. Check out all of our programming at supplychainnow.com, and make sure you subscribe to Supply Chain Now anywhere you listen to podcasts. And follow us on Facebook, LinkedIn, Twitter, and Instagram. See you next time on Supply Chain Now.
