Ben Schuchart

Excessive truckload detention is a drain on our entire supply chain!! Carriers and drivers most often suffer the financial burden, but the reality is that even freight brokers, manufacturers, shippers & receivers are negatively impacted. When network efficiency improves...everyone wins!! Join Tenstreet, LLC's True Load Time initiative and unlock powerful facility performance intelligence to help your teams accurately predict, price & plan truckload wait times for loading/unloading. #EfficientLogistics #RealWaitTimes #HowMuchisYourTimeWorth #Transparency #ModernPlanning #InformedBidding #Benchmarking

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Despite claims that the freight recession is over, those of you who follow the public less-than-truckload (LTL) carriers note that most LTL outfits have been reporting declining year-over-year volumes for October and November (e.g., https://lnkd.in/gJ9Cf-VF). Continued soft volumes in the LTL space stem mostly from ongoing weakness in the industrial economy (e.g., manufacturing). In that regard, I wanted to share one industrial production series, focusing specifically on production of goods made by machine shops, turned products, and screws/nuts/bolts (https://lnkd.in/gnYJjMD8) that does a good job of capturing inflections in freight market cycles. One chart. Thoughts: •These industrial production data show seasonally adjusted physical unit output for this 4-digit industry. Crucially, the BEA estimates only 15% of the consumption of goods belonging to this industry are imported, suggesting an ongoing important role for domestic manufacturing (accounting for ~$70 billion in shipments each year: https://lnkd.in/g4tp2fr8). •As can be seen, during normal freight cycles, upticks of production in this sector correspond quite closely to the onset of bull market pricing cycles in late 2013/early 2014 and mid-2017. Equally, downturns in production correspond to bearish conditions. •The fact production didn’t start dropping till late Q3 2023 (about a year after the freight recession started) can be easily explained by the rampant raw material and labor shortages in 2021 and 2022 creating very large increases in order backlogs (https://lnkd.in/gB4iMH2j) that supported production even after new orders had cooled down. Implication: production by machine shops in the USA merits close monitoring as we move into 2025. An uptick of production would be another indicator that we are exiting the current limbo of flat freight volumes. As it appears this series has finally found its nadir, it will likely take a few more months for production to rise significantly (e.g., late Q1 2025). #supplychain #supplychainmanagement #freight #trucking #manufacturing 

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There is a lot of excitement in the trucking community that the current freight recession is over (heavily influenced by the articles from FreightWaves). While I’ve publicly said I expect a substantial increase in dry van truckload spot rates next year, it’s important to remember that a significant rebound of freight volumes will take some time to materialize (this isn’t an overnight thing). This can be seen in the most recent quarterly version of the trucking ton-mile index (now that September’s data is complete). One chart. Thoughts: •Q3 2024 came it 0.1% above Q2 2024; I feel good at this stage declaring Q2 2024 the bottom of the current freight recession, which began in late Q2 to early q3 2022. •While we saw very high levels of containerized imports, which appeared in sectors such as electrical goods wholesaling posting record inflation adjusted sales, it’s critical to remember that many freight-centric sectors of U.S. manufacturing continue to perform poorly relative to peak freight demand in the first half of 2022. These include: Wood products: https://lnkd.in/gNmwNRd5   Paper: https://lnkd.in/gYDt3kcK Plastic & rubber: https://lnkd.in/g8ya9dAw Nonmetallic mineral products: https://lnkd.in/gJEH2Gh5 Machinery: https://lnkd.in/gy2NrYza •It will take time for manufacturing activity in these industries to rebound. As I’ve said repeatedly, late Q1 to early Q2 2025 is when I truly expect demand conditions to get strong enough for spot rates to show the type of sustained increase needed to pressure contract rates. Implication: I get carriers are excited that brighter days are ahead in 2025. However, we need to be reasonable and understand it takes time for the manufacturing ecosystem to see sustained demand increases. Moreover, I have severe concerns about 2026, as I expect folks are going to be in for a very nasty inflation surprise… #supplychain #supplychainmanagement #shipsandshipping #freight #trucking

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One question I frequently am asked is what indicators I examine to make predictions about demand trends in for-hire trucking. While not an all-inclusive list, here are some of my favorite indicators (some familiar, others less so). •Shown below, industrial production of coating, engraving, and heat treating establishments (NAICS 3328) has historically been a strong directional predictor of trucking demand (e.g., sharp increases in 2014 and mid-2017 - 2018, drops in 2015-2016 and 2019). Data from https://lnkd.in/gS3JcG7a •Institute for Supply Management's new orders sub-index for the PMI data. •Capacity utilization across all manufacturing from the Federal Reserve Board. Available from https://lnkd.in/gVUJ74ru. •Inflation adjusted spending on single-family housing starts, multi-family starts, and improvements from the Bureau of Economic Analysis. •Existing single-family home sales. Data from •Inflation adjusted spending on warehousing construction from the Bureau of Economic Analysis. •Fracking activity from either the Federal Reserve Board or Bureau of Economic Analysis. •Inventories to sales for machinery wholesalers from the U.S. Census Bureau (https://lnkd.in/ggc9ECg7). Implication: reading demand for the trucking industry is challenging, as many sectors generate demand for freight that needs hauled by trucks. I've found integrating data from the above series, plus others, tends to provide a good sense for the direction of trucking freight demand. As I'll be sharing more this week (and you can infer from the chart below), demand conditions remain muted (as reflected by Knight-Swift Transportation and Old Dominion Freight Line Q3 earnings). #supplychain #supplychainmanagement #freight #trucking #logistics

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Many of you know I frequently disagree with FreightWaves regarding their continually revisions to their predictions of when the truckload market will turn, and I also challenge that their tender volume data are representative for all of truckload operations. However, one thing I do agree with them about is that the American Trucking Associations continually claims about a systematic shortage of truck drivers are incorrect. That said, this article from today (https://lnkd.in/gt4fmJep) caught my attention. A few thoughts: •FW's isn't pulling punches in stating "the bill [H.R. 3013] is intended to rectify the shortage of truckload drivers — an oft-repeated myth of the ATA, and one for which the organization’s projections are revised frequently — there is no real urgency behind its advancement. •And no punches pulled with, "Based on its results this Congress, the American Trucking Associations’ lobbying efforts make it look less like a Machiavellian operator, pulling strings in the halls of power, and more like another Washington grifter — a shop that raises a lot of money, pays its staff well and takes congresspeople to dinner, but gets little done." Implication: regarding this story, grabs🍿and waits for the ATA to respond. #supplychain #supplychainmanagement #freight #trucking #truckload #transportation

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Headlines about layoffs rightly cause much concern and consternation in the trucking industry (e.g., https://lnkd.in/g9useTDD). However, it is critical to understand that this tells only half the story because a substantial percentage of trucking layoffs occur because a firm loses a key customer account. What that means is that the firm which won the business will often expand (which tends not to be reported). Below I wanted to document just how prevalent such reallocation of jobs is in trucking using population-level data from administrative records for all employer firms in truck transportation via the Business Dynamics Statistics (BDS) program. Data from https://lnkd.in/gVr6BbRW for all carriers. Thoughts: •The chart shows three series. The job creation rate is the jobs added by the subset of carriers that expanded or started operations in year t relative to t-1 divided by the average employment across all carriers in years t and t-1. Analogously, the job destruction rate is defined as the jobs lost due to carriers that downsized or exited in year t relative to t-1 divided by the average employment across all carriers in years t and t-1. The Net Rate of Job Change is the difference between the series and represents the percent change in employment for a given year. Data cover 1978 – 2021, with each data point representing change for that year relative to the prior year (e.g., 1978’s data point compares March 1978 data with March 1977 data). •What I want to emphasize: even when the net rate of job change is relatively low (e.g., 4.3% for March 2019 vs March 2018), this hides that there is a much higher rate of jobs being reallocated across carriers. For example, that 4.3% March 2019 figure hides a 14.9% job creation rate and a 10.6% job destruction rate. •Consequently, what economists call excessive job reallocation in 2019 was 21.2%, which represents the sum of job creation and destruction rates (14.9 + 10.6) less the absolute value of the net change in jobs (4.3), ergo 25.5 – 4.3 = 21.2. That is a lot of reshuffling of jobs across firms. Implication: Trucking jobs are reshuffled across carriers all the time. Focusing only on layoffs misses that firms which win new contracts are likely to expand. #supplychain #supplychainmanagement #freight #trucking #truckload #logistics #transportation

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Where are dry van truckload prices at? With DAT’s most recent data released this week, as well as the BLS’s PPI for general freight trucking, long-distance, truckload [primary services], I wanted to share my thoughts. Two charts below. Thoughts: •Top chart shows DAT’s dry van spot rates (red) and what they call contract rates (black) (including fuel). Both continue to move in parallel. Historically, every major market shift (2014, mid-2017, mid-2020) has corresponded to a sharp uptick in dry van spot rates, inclusive of diesel prices. We just aren’t seeing any signs of such an uptick now, which further solidifies my view that we can write of 2024 as the year the market could turn. It’s time to turn the page to 2025. •Bottom chart shows the producer price index for the commoditized portion of dry van TL freight (which includes fuel). That index continues to move sideways. Historically, as with spot rates (but to a much lesser extent [at least in 2014 and 2017-2018), we will see these rates spike when market cycles change. The BLS’s data likewise is corroborating this hasn’t happened yet. Implication: despite a lot of excitement with the election outcome, the brutal reality is that the dry van truckload sector needs a significant infusion of freight to get out of the current “limbo” conditions where we have seen one cycle end but have yet to see another cycle begin. To continue to echo the prediction I’ve made for several months, the soonest I see the market meaningfully changing towards carriers’ favor would be late Q1 to early Q2 2025. We will need to closely watch demand signals over the coming months, especially data on manufacturing new orders. For the late Q1 to early Q2 market turn to materialize, we will need to see a rapid uptick in new orders over the next few releases from ISM. #supplychain #supplychainmanagement #freight #economics #trucking 

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With the election settled, I’ve received many inquiries regarding how I anticipate dry van truckload rates will move in 2025. To help answer that, below I’ve charted year-over-year percent change in DAT’s dry van TL spot rate (red) and the BLS’s primary service PPI for general freight trucking, long-distance, truckload (NAICS 484121). Thoughts: •The most profound change that has occurred with these data is that the PPI is now more strongly correlated (albeit with a lag) with spot rates. A decade ago, a 10% year-over-year increase in spot rates would net a ~3% year-over-year increase in the PPI. That relationship appears to have doubled since COVID-19 hit (e.g., a 10% increase in spot rates now gets you a 6% increase in the PPI). •If we assume the shift in the relationship since COVID-19 isn’t due to a unique one-time event but is an underlying product of an environment with much greater information availability, then it would be reasonable to assume this magnitude of relationship will continue. •The question then: how much will spot rates increase? I’ve been on record saying I expect the next bull market cycle to look like 2014 in that I don’t see an increase in trucking ton-miles in 2025 that would be the same pace we saw in late 2017 and early 2018 (not to mention no ELD mandate at work). With that, I’m willing to predict spot rates increase ~15-20% year-over-year by Q3/Q4 2025. That would imply an increase in the BLS PPI by 9-12% year-over-year (but with a lag). That would be the same magnitude of increase in the PPI we saw in 2018. Implication: My best guess basing on looking at underlying demand and supply conditions is dry van spot rates rise 15-20% in 2025 from where they are in 2024 (with those figures being reached in Q3 and Q4 2025). That implies the BLS’s primary service PPI for dry van trucking will rise 9-12% year-over-year, with those gains lagging the spot market changes. #supplychain #supplychainmanagement #freight #trucking #truckload

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One argument I've been making regarding seasonal capacity tightness in the truckload sector is that 2024, while having more pronounced seasonal tightening than 2023 (when capacity was quite abundant), isn't showing the same degree of seasonal tightening that we saw in 2019. This morning, FreightWaves published an article (https://lnkd.in/gT7Dn5ex) that provides corroborating evidence of my prediction. Below I've shared the plot from the link. Thoughts: •Tender rejection rates are currently around 6%, which while higher than 2023, is down more than 150 basis points from where they were at this time in 2019. From a historical standpoint, their data reporting a 6% tender rejection rate points to capacity being generally plentiful. Implication: The fact seasonal tightening isn't more pronounced suggests that January 2025, excluding some extreme weather event, will see capacity becoming quite plentiful during the nadir month of the year for truckload shipments. These data continue to point to a true recovery of trucking conditions not materializing anytime before late Q1 2025. #supplychain #supplychainmanagement #freight #trucking

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A highlight from the article for shippers with dense freight: “Density ratings have been expanded from 11 subprovisions to 13, with generic headings being consolidated. Subprovision 11 will be amended to include densities ranging from 30 to less than 35 pounds per cubic foot (assigned class 60). Sub 12 would range from 35 to less than 50 pounds per cubic foot (class 55), and Sub 13 would cover densities greater than 50 pounds per cubic foot (class 50).”

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Q1 has come and gone, and the dry van truckload market did not turn as more optimistic predictions had predicted (https://lnkd.in/gbWQFQB6). Q2 hasn’t looked any better? Why? The answer: demand for truck transportation remains weak. This is in spite of strong year-over-year gains in imports and robust retail trade sales. How can this be the case? Simple: domestic manufacturing still produces the bulk of for-hire trucking demand, and freight-weighted domestic manufacturing remains in a deep slump. One chart below showing this using the seasonally adjusted for-hire trucking ton-mile index that I coauthor. Thoughts: •February’s seasonally adjusted ton-mile reading jumped 1.5% from January’s low reading (which occurred due to the polar vortex) but remains down roughly 2% from this time in 2023 (and remember, we had been in a freight recession for roughly 5 months as of February 2023 [September 2022 saw the first major drop in demand]). •Relative to the seasonally adjusted peak from March 2022, demand for truck transportation has dropped 4%. That may not seem like much, but employment has fallen just 0.3% over this same period (see https://lnkd.in/gdYDGD4j). •For those wondering why demand isn’t stronger given those strong import gains, remember what I’ve been preaching for year(s): imports don’t represent that much freight relative to what we manufacture domestically. Consequently, all the stock analysts focusing on import-centric retail trade are missing the boat (pun intended). Implication: for the dry van truckload market to turn from bear to bull, we either need a much larger loss of capacity (unlikely to happen quickly) or for demand to improve substantially, which will require a sharp rebound in domestic manufacturing activity (also unlikely to happen quickly). As such, I would pencil in “blah” conditions for the immediate future. #supplychain #supplychainmanagement #shipsandshipping #freight #trucking  

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Now that we are halfway through July, I wanted to look at where the dry van truckload spot market was at. Using data from DAT Freight & Analytics, I’ve calculated the dry van spot market cycle indictor as broker buy contract rates less dry van TL spot rates divided by the average of the two series. One chart below. Thoughts: •Historically, when this ratio falls below 10%, we tend to see a bull market pricing cycle begin, which is picked up well the Bureau of Labor Statistics primary service producer price index for general freight trucking, long-distance, truckload (https://lnkd.in/gUXXNHrd). Conversely, anytime we see the series move above 15%, we enter a bear market pricing cycle. Key dates for bull cycles labeled in black, bear cycles in red. These dates mirror swings in observed contract & spot rates picked up by BLS. •The bad news for carriers is that July’s reading of 15.8% is well away from the 10% threshold. As such, there aren’t signs of the market being ready to turn. •For the market to turn, we need more freight demand. Unfortunately, as I’ve been noting frequently, demand conditions just aren’t great now. For example, Cass Shipments, which tracks the trucking ton-mile index quite closely, fell in June to the lowest level since the recovery from the COVID-19 pandemic (https://lnkd.in/gAZb34hZ).  As I’ll share next week, machinery manufacturing and wholesaling is especially weak. Implication: I continue to see few signs that the dry van truckload sector will enter a bull market pricing cycle in 2024. It increasingly looks like any capacity tightening felt in June was just a return of seasonality. Continued weakness in pricing and freight demand reinforces my emphasis on why domestic manufacturing activity must be front and center in discussions about freight demand, with less attention given to retail sales. #supplychain #supplychainmanagement #freight #trucking #economics #markets

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DAT Dry Van-2-Truck Ratio Week 41: ~ Following the pre-hurricane surge in the Southeast, load post volumes erased the prior week’s gains and dropped 14% w/w.  ~ Volumes are still around 2% higher y/y. ~ Carrier equipment posts were flat and didn’t see any movement. ~DAT’s Dry Van Load-2-Truck ratio dropped 14% to 3.78, a 1/3 higher than 2023 for this week. #freight #supplychain #trucking #transportation #logistics

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FMCSA clearinghouse rule puts bullseye on freight capacity. Enforcement of FMCSA’s drug clearinghouse could trigger major shift in freight supply and demand. When even a small percentage of tens of thousands of trucks get forced off the road, a major freight capacity shift can ensue – and that’s exactly the scenario playing out now that states have new enforcement power over roughly 179,000 truck drivers. https://lnkd.in/dpk_7bWr Credit- Freightwaves

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Dry Van Freight Market Update Week 28: ~OH dry van outbound spot linehaul rates averaged $1.93/mile and are identical to last year even with 5.3% increase in freight volumes. ~Most of the volume gains were on the regional lane of Columbus > Chicago where volumes increased 39% w/w while rates remained flat at $1.66/mile. #freightmarket #supplychain #transportation #logistics #trucking

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