The Logistics Issues podcast: Patrick Soleymani of George Mason College on depressed freight markets | Season 4 Episode 33

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Transcript

David Maloney, Editorial Director, DC Velocity  00:01

When will trucking return to regular? Stopping cargo theft. And staff return to the workplace in droves. Pull up a chair and be part of us because the editors of DC Velocity focus on these tales, in addition to information and provide chain traits, on this week’s Logistics Issues podcast. 

Hello, I am Dave Maloney. I am the group editorial director at DC Velocity. Welcome. 

Logistics Issues is sponsored by PERC, the Propane Schooling and Analysis Council. Propane is the protected, dependable power for materials dealing with. Propane-powered forklifts can enhance air high quality inside your amenities for a more healthy, extra productive workforce. See how propane may give your productiveness a lift at propane.com/forklifts.

As typical, our DC Velocity senior editors Ben Ames and Victoria Kickham will likely be alongside to supply their insights into the highest tales of this week. However to start in the present day, by any measure 2023 has been a troublesome yr for the trucking trade. Simply how unhealthy are market situations and when will trucking see a return to higher occasions? To seek out out, here is Victoria with in the present day’s visitor.

Victoria.

Victoria Kickham, Senior Editor, DC Velocity  01:18

Thanks, Dave. Our visitor in the present day is Patrick Soleymani. Patrick is a world commerce lawyer and affiliate dean and administration professor at George Mason College’s Faculty of Enterprise. We’ll speak concerning the sluggish situations we have been experiencing within the trucking trade and whether or not or not we will count on to see issues flip round anytime quickly. Welcome, Patrick.

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  01:39

Thanks a lot, Victoria. Nice to be with you.

Victoria Kickham, Senior Editor, DC Velocity  01:42

So, as I stated, robust situations proceed throughout the trucking trade. I questioned, how would you sum up the place we’re proper now?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  01:50

Nicely, you understand, Victoria, People proceed to spend extra on providers, not items, on this post-pandemic atmosphere. Planes, as many people have heard, have been busy, however they have not been busy with items. They have been fairly busy with folks going from one place to a different. So, once we assume that nearly each good for a house was on a truck sooner or later in its life, and now there’s a lot much less folks staying at residence, it is turn out to be an issue. Some info that I got here throughout is that less-than-truckload shipments — effectively, in fact, we name these LTL — fell 17%, between 2021 and 2022 and this yr, one other 5% within the first quarter. In fact, inflation continues to be an issue, making a foul scenario worse, and corporations are destocking. And at last, I’d say, manufacturing of products in China has decreased. Much less items from China means much less ships docking at California’s ports. Meaning much less items being introduced in by truck or rail from one coast to a different. Particularly, China’s exports to the U.S. dropped a whopping 13% in the course of the first seven months of this yr.

Victoria Kickham, Senior Editor, DC Velocity  03:10

Yeah, so all of that has actually contributed to the freight recession that we have been in, and proceed to be in. I am questioning in the event you can touch upon, you understand, do you count on any of that to finish anytime quickly, and sort of what must occur for situations to enhance?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  03:25

Proper. Nicely, the pandemic created a powerful demand for items. Individuals have been caught of their homes and merchandise have been coming to them. Now it is kind of gone the opposite method round. Shortages that we used to see at supermarkets and retail shops have been remedied. That’s actually pushing a variety of the recession. With the intention to see enchancment, we have to see the next shopper demand for items, the information exhibits that buyers are spending. The factor is, they’re not likely spending on items. We’re additionally seeing increased gasoline costs, and paired with increased inflation, that does not bode effectively for the trade. So, we have to see decrease gasoline costs. We have to see a decreasing of the rampant inflation, and these will, if historical past is any lesson, encourage the next demand for items.

Victoria Kickham, Senior Editor, DC Velocity  04:26

How would you assess the influence in the marketplace of Yellow Company’s latest chapter. You realize, speaking about situations and what we’re seeing now, what do you count on the influence to be, as I stated, and possibly what [are] the labor implications as an example?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  04:40

Certain, there’s vital implications. Yellow Corp. was a less-than-truckload firm, and people are often pallet-size shipments, drivers on particular routes in the course of the day, and people drivers often get residence at evening. Truckload carriers, that are about 5 occasions as large because the LTL trade, are those that transfer these full trailers throughout the nation. Most of those firms are hiring. The truckload carriers are, and the reason being truckload carrying sees vital annual turnover, between 55 to 60%, and that is due to the grueling situations. That is as a result of a variety of these drivers are leaving their households and driving cross nation for weeks or months at a time, and there is solely a lot they’ll take doing that. And due to the excessive turnover, traditionally, they’re often hiring. However the LTL firms will not be hiring as a lot, so that they know these 30,000 Yellow staff that misplaced their jobs, they’ll have a tough time discovering a touchdown spot until they comply with enter the truckload market, in order that’s going to be the largest labor implication.

Victoria Kickham, Senior Editor, DC Velocity  04:52

Fascinating. Do you get a way that we may even see extra of this, you understand, extra firms exiting the market and, you understand, contributing to this downside?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  06:10

Certain. I am not overly involved about extra firms declaring chapter, I feel what you are going to most likely see is a continuation of the exit of these mom-and-pop trucking companies that have been created as a part of the pandemic increase. Yellow’s chapter is not earth-shattering for the trucking trade. They practically filed for chapter 4 occasions prior to now 15 years. Loads of that was associated to some acquisition selections. They made labor relations with their Teamsters and another issues that have been fairly distinctive to Yellow. This in no means implies that the trucking trade is doing effectively, however Yellow may be checked out as an outlier.

Victoria Kickham, Senior Editor, DC Velocity  07:00

How are the situations we’re speaking about affecting non-public fleets equivalent to Walmart and Amazon? I ponder in the event you can sort of weigh in on that?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  07:08

Certain. Nicely, you understand, Victoria, as you drive round, you may even see these Walmart and people Amazon vans there. They’ve recovering much more than what we used to see with UPS, FedEx, and your native postal employee. You realize, these fleets assist create some jobs for earlier LTL drivers like these at Yellow, as a result of they’re extra localized, they’re the getting in within the morning and coming again within the night forms of fleets, however typically, they take away [from] the for-hire market, and that is prolonging the trucking recession. So, if you have a look at the Amazon truck that pulls up, doubtlessly, in your driveway and drops off these merchandise, by doing that, it is now not most of the LTLs which might be concerned. You are even seeing a few of this entering into the non-public fleet enterprise. For instance, UPS has seen a drop of round 10% in package deal quantity this previous quarter, and FedEx noticed an 18% common drop across the similar interval. So, the non-public fleets will not be simply impacting LTL, however they’re additionally impacting parcel providers.

Victoria Kickham, Senior Editor, DC Velocity  08:28

Earlier you talked about, you understand, the persistence — persistent, excuse me — inflation and excessive costs, and people issues clearly stay an issue for companies and shoppers. What’s your outlook for a way that may influence peak transport season, which is coming fast, and in addition into 2024?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  08:46

Certain. Nicely, I see this being a bit extended. The Fed has raised rates of interest to their highest degree in 22 years. Client spending remains to be robust; unemployment is comparatively low, and because of this we may even see extra price will increase going into the top of 2023, which is the height transport space, and in addition then going into 2024. From one perspective, these price will increase can cool inflation, and doubtlessly enable for extra items to journey throughout the nation. That is excellent news for the trucking trade. However there are another headwinds to be eager about. One, if you do have elevated charges, that does begin to eat away at shoppers’ skill to place issues on their bank cards. It can also begin growing the unemployment price, which impacts shopper spending. And remember China. Not too long ago, China has a serious property-market problem. A serious Chinese language funding agency truly not too long ago missed funds to its company buyers. It reminds many people right here within the U.S. of the Lehman Brothers dilemma again a long time in the past. If Chinese language exports proceed dropping, it can lengthen the trucking recession effectively into the height transport season and 2024.

Victoria Kickham, Senior Editor, DC Velocity  10:19

Given all this, what can shippers count on when it comes to pricing, and actually simply normal provide chain traits within the months forward?

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  10:27

Nicely, provide chain points have eased a bit because the pandemic and the conflict in Ukraine, and that is one of many the reason why we’re on this trucking problem. Nonetheless, there are some limitations forward. For instance, Volkswagen not too long ago reported that it would not be capable to ship as many automobiles as initially anticipated, not due to shortages in semiconductors, which we have heard about by means of the previous years, however truly, logistics delays. The excellent news is, is that a few of these issues proceed to slowly alleviate. However then there’s different challenges that we’re seeing increasingly more of prior to now yr, and can most certainly proceed to see going into the longer term years, which is local weather change. It actually is not serving to issues. Excessive climate is hampering the nation’s provide chain, and in addition impacting pricing. And at last, gas prices, which oftentimes are handed on to shoppers, which then causes shopper demand to be depressed.

Victoria Kickham, Senior Editor, DC Velocity  11:31

Patrick, thanks a lot for becoming a member of us in the present day. We actually admire your perception.

Patrick Soleymani, Affiliate Dean, George Mason College Faculty of Enterprise  11:35

My pleasure, Victoria. Thanks.

Victoria Kickham, Senior Editor, DC Velocity  11:37

Thanks. Now we have been speaking with Patrick Soleymani of George Mason College. Again to you, Dave.

David Maloney, Editorial Director, DC Velocity  11:46

Thanks, Victoria and Patrick. Now let’s check out among the different provide chain information from the week. And Ben, you wrote this week that cargo thefts are on the rise. What’s inflicting extra of those crimes to happen, and what may be carried out to stop them?

Ben Ames, Senior Information Editor, DC Velocity  12:01

Yeah, that is proper, and this comes on the heels of what we have been speaking about with our visitor. Market situations are robust, but in addition we have seen an actual rise within the frequency of freight theft these days, which is, in fact cargo that is stolen from each warehouses and from vans. By some estimates it is at a 10-year excessive. The explanations for this crime wave aren’t completely clear, though we truly had a visitor on this podcast a couple of weeks in the past, Anne Reinke, who’s the CEO of Transportation Intermediaries Affiliation, and she or he had stated that one cause is the digitalization of the freight and trucking market, which allows technology-based scams. So, protecting that in thoughts, this week we noticed a report from CargoNet. That is an organization that is a theft-prevention and restoration service, they usually gave some additional particulars on precisely how these thieves are pulling off this rising variety of crime[s]. So, the most recent crime approach that is favored is what’s known as a cargo misdirection scheme. It is a sort of a fictitious pickup. Nicely, it is an actual pickup, nevertheless it goes to a fictitious place. So, in these schemes, scammers impersonate a motor service, and that features them authorization to move a cargo. Then they rent a motor service to ship that cargo to a location that they’ve entry to, to allow them to later steal it. These thieves typically impersonate two or three totally different firms in that profile with a purpose to disguise their identities and deceive the victims.

David Maloney, Editorial Director, DC Velocity  13:37

That’s fairly intelligent, sadly, for shippers and carriers. Did the report have any recommendation as to methods to forestall these sorts of scams?

Ben Ames, Senior Information Editor, DC Velocity  13:46

They’d some recommendation, sure — and by the way in which, this can be significantly essential over the approaching lengthy weekend, as a result of there’s usually an increase in thefts when the individuals are gone for prolonged hours and workplaces and vans could also be parked. So, to protect towards these scams, CargoNet stated that shippers ought to take into account recording the details about every motor service and driver and automobile that is used to choose up any cargo. In fact, that is for investigative followup in case the cargo is stolen. On a extra preventive method, freight brokers can construct higher or extra refined compliance applications to detect motor service id theft, and that is significantly efficient if a sure commodity has been incessantly focused. So, that leads me to the subsequent half: There are particular commodities which might be significantly well-liked with thieves. Traditionally, cargo thefts, thieves attempt to steal significantly priceless shipments: televisions, computer systems, home equipment. These are issues which might be price some huge cash packed right into a dense, single cargo. And extra not too long ago, they have been making an attempt to seize just a little bit wider number of stuff. CargoNet listed photo voltaic panels, power drinks, alcoholic drinks, motor oil, and shopper electronics. Go determine, however apparently that is what’s well-liked when of us try to tear off the trailer these days. However in trying on the previous week, particularly, CargoNet stated that thieves could also be in search of shipments of constructing supplies. They talked about shingles, lumber, energy instruments. These sorts of issues are being moved significantly shortly proper now in lately that we’re dwelling in, in response to excessive climate occasions like Hurricane Idalia that hit Florida this week, in order that was, you understand, actually kind of disappointing in human nature, clearly, when of us try to get shipments there and assist catastrophe victims and a few of these are, you understand, uncovered to theft.

David Maloney, Editorial Director, DC Velocity  15:54

Proper, precisely, and I assume it is unhealthy sufficient that they steal the shipments, however to take these rebuilding merchandise away from individuals who actually need them is kind of a double whammy to these of us who’ve actually gone by means of quite a bit this previous week or so.

Ben Ames, Senior Information Editor, DC Velocity  16:06

Yeah, it struck me that method as effectively, however hopefully, with this recommendation, we will forestall a few of that going ahead.

David Maloney, Editorial Director, DC Velocity  16:12

Thanks, Ben. And Victoria, in fact, in the course of the pandemic, many staff started working from residence for the primary time, however now firms are requiring that a lot of them additionally return to the workplace. You wrote this week about some latest traits affecting the place folks work. What are you able to inform us?

Victoria Kickham, Senior Editor, DC Velocity  16:30

That is proper, Dave, sure, and as you say, the distant work has been the norm for a lot of staff because the pandemic pressured firms to shut their doorways and transition to, you understand, digital staffing, however as you alluded to, the observe could quickly be a factor of the previous. And that is in accordance with information from an organization known as ResumeBuilder.com, and it was launched kind of late August. So, the resume and job search agency got down to study firm’s plans for returning to the workplace post-pandemic. They consult with this as RTO — return to workplace — practices and insurance policies, they usually collected and analyzed responses from about 1,000 firm determination makers throughout a fairly big selection of industries. I discovered this attention-grabbing for a couple of causes, and certainly one of which is that once we take into consideration warehousing and logistics, we regularly consider frontline staff — you understand, those that did not have the posh of working from residence in the course of the pandemic. These embrace truck drivers; choose, pack, and ship staff; and so forth. However there are lots of staff within the provide chain that have been capable of make money working from home: These in customer support and gross sales, in some circumstances, in addition to IT professionals and others. So, there are a good quantity of staff on this trade that fall underneath the work-from-home camp, and as I stated, it appears to be like like a lot of them will likely be returning to the workplace quickly in the event that they have not already.

David Maloney, Editorial Director, DC Velocity  17:47

Victoria, did they provide any statistics, or what did the outcomes point out?

Victoria Kickham, Senior Editor, DC Velocity  17:51

Yeah, effectively, nearly all of these surveyed stated that their firms can have staff again within the workplace by the top of subsequent yr. Damaged down: 51% stated they already require some or all of their staff to work in individual, and one other 39% stated they plan to take action by the top of 2024. One other 8% stated they’ll require some or all of their staff to return to the workplace by 2025 or later. So, that is 90% of firms that say staff will largely be again within the workplace a few yr from now. And apparently these firms which have already taken the leap are seeing some fairly good advantages. Three out of 4 firms surveyed stated they’ve seen an enchancment in income since staff have returned to the workplace, and a majority additionally stated that they’ve seen enhancements in issues like productiveness, employee retention, worker relationships, and firm tradition. One other outcome I discovered attention-grabbing: the survey discovered that many firms are providing incentives to get staff again to the workplace, and people embrace issues like childcare and catered meals. So, fairly attention-grabbing. The lunches feels like a good suggestion to me.

David Maloney, Editorial Director, DC Velocity  18:57

These are very attention-grabbing statistics. Thanks for sharing them, Victoria.

Victoria Kickham, Senior Editor, DC Velocity  19:01

You are welcome.

David Maloney, Editorial Director, DC Velocity  19:01

We encourage listeners to go to DCVelocity.com for extra on these and different provide chain tales. Additionally try the podcast Notes part for some direct hyperlinks on the matters that we mentioned in the present day. 

We would additionally wish to thank Patrick Soleymani of George Mason College Faculty of Enterprise for being our visitor. We welcome your feedback on this matter and our different tales. You’ll be able to electronic mail us at podcast@dcvelocity.com.

We additionally encourage you to subscribe to Logistics Issues at your favourite podcast platform. Our new episodes are uploaded every Friday.

And talking of subscribing, try our sister podcast collection Provide Chain within the Quick Lane. It is coproduced by the Council of Provide Chain Administration Professionals and Provide Chain Quarterly. Our present collection is on transportation tech. Take a look at Provide Chain within the Quick Lane wherever you get your podcasts.

And a reminder that  Logistics Issues is sponsored by PERC, the Propane Schooling and Analysis Council. Propane is the protected, dependable power for materials dealing with. Propane-powered forklifts can enhance air high quality inside your amenities for a more healthy, extra productive workforce. See how propane may give your productiveness a lift at propane.com/forklifts.

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