Logistically Speaking - HOT SHEET Week 31

What Are Freight Rates Telling Us

Truck Drivers are seeing their income drop right before their eyes as rates start to fall. Almost every good consumed in the US travels by truck before its end use, and we are seeing a decline in rates driven by a drop in demand.

  • The supply of truck drivers jumped in the past few months to take advantage of the lucrative paychecks that came with increased consumer demand for goods.
  • With this drop in demand and a "healthy" supply of truckers, we will likely see a freight recession, with truckers bearing the brunt of the turnaround.
  • For one signal, we can look to the spot market, where rates have dropped 30%, excluding fuel.
  • While the drop in rates is a good sign for inflation, given that fuel prices continue to fall, smaller trucking companies will start to feel the heat with a collapse in revenue.

Solution: Dunavant is presenting different alternatives to carriers to achieve more timely payments and better cash flow. 



During second-quarter earnings calls, top executives are talking more about bringing workforces and supply chains back to the US or neighboring countries. Data from Bank of America shows the use of the term has spiked to a record level, even though only about a quarter of S&P 500 companies have reported earnings so far.

  • "Companies' mentions of re-shoring skyrocketed recently amid supply chain challenges, and we believe the 2020s will mark the beginning of de-globalization," wrote Savita Subramanian, Bank of America equity and quant strategist.
  • With a tight labor market and an increase in wages, a near/re-shoring strategy will involve an investment in automation or efficient technologies.
  • The re-shoring narrative with increased spending on capital expenditure suggests that companies are looking to replace overseas workers with technology.
  • YOY Capex change for the second quarter was 24% for the S&P 500, with the material and industrial sector increasing the most.

Solution: Dunavant recently established its newly United States/Mexico cross-border solution that allows entry of goods at any of the ports of entry for Mexico.  Please contact Johnny Ariza (956) 285-4648


North American Port Congestion

While the number of ships waiting off LA/LGB has fallen to 26 from a high of 109, North American port congestion has re-entered record territory. As of last week, 153 ships queued waiting to enter US ports, a majority off the east and gulf ports. The ship queue has jumped 66% over the past seven weeks.

  • One possible explanation for this shift in congestion from the west coast to the east/gulf coast is contract negotiations. The congestion accelerated in June, the last month before the west coast labor contract with the ILWU expired.
  • As a hedge, many shippers decided to look at alternative ports to diminish disruption due to labor strikes.
  • Of the ships waiting, 38% are on the west coast, while 62% are waiting off the East/Gulf coasts.
  • We are seeing now that many companies have overcompensated due to shifting their supply chain to hedge for incidents on the west coast. Because of this miscalculation there is $31 billion worth of goods either on the water or stuck at a rail head due to congestion.

Solution: At Dunavant, we monitor multiple data sets to be proactive rather than reactive when making everyday supply chain decisions. This coupled with our large footprint allows us to create tailored solutions such as transloading in Houston or accessing Mexican ports.


Inventory Swings

Last Thursday, the commerce department reported that gross domestic product had contracted .9% for the second quarter following a contraction in the first. Looking at the data, a significant driver of the shrinkage was businesses slowing the expansion of their inventories.

  • At the end of 2021, businesses stocked up on goods in anticipation of consumer demand and to avoid supply chain disruptions that had dented profits the previous year.
  • After realizing they had overstocked and consumer demand was falling due to rampant inflation, many have slowed orders to their suppliers and used existing inventory to fill orders.
  • These actions translate into less national output. Slower inventory accumulation subtracted two percentage points from output in the second quarter meaning GDP would have grown had businesses not been trimming their stockpiles.
  • The key for the broader economy is how consumers respond in the year's second half. As we mentioned earlier $31 billion worth of goods are stuck in the congestion.
  • When that unravels, we have a major oversupply with softening demand; great for inflation not so much for GDP. Business inventories are meant to track sales to customers. If those sales drop, more inventory cutting could be in store.

Solution: Allow Dunavant to perform a complete audit of your supply chain to find inefficiencies and innovative ways to save.  You might want to consider relocating slow moving inventory from existing DC’s to create space for fast moving inventory. Dunavant has dedicated warehouse space in Houston and the ability to support this option throughout the US and Mexico.



Mark Genereaux
Senior Vice President, Customer Experience 


Posted by Andrea Wiley at 10:49