Cole Salm

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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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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To recap the 2Q24 earnings for publicly-traded LTL carriers, I felt it appropriate to come up with one word or phrase to define each carrier. Also, for comparison purposes, I felt it appropriate to look at a 2-year comparison, 2Q22 vs 2Q24. This takes out some of the noise from the Yellow Corp closure. Essentially, this gives us a peak into how each carrier took advantage of the Yellow Corp situation.   🔴 ABF: Transactional.  Transactional pricing weighed heavily on results, and still does. Their OR worsened by 4.3 points to 89.8, they experienced a large shift in freight profile (huge drop in shipment size), but maintained their revenue market share. 🔴 FedEx Freight:  Right-sizing. Finding a way to prosper while shrinking their network. Their OR held steady at 78.1, they improved their yields noticeably, but they did lose revenue market share. 🔴 Forward Air: Under construction. While the newly-merged operation undergoes its reconstruction, costs are up and business has dropped. Their OR worsened 7.9 points to 92.5, they lost major market share, and yield change was poor as price cuts were used to keep customers. 🔴 Knight Swift: Super-sizing. Explosive network and business growth while building out a national footprint. Their OR worsened by 4.6 points to 89.2, but they added major market share via new longhaul business while maintaining yields. 🔴 Old Dominion: Steady. As I have alluded before: death, taxes, and ODFL. While their OR deteriorated 2.4 points to 71.9, they maintained market share and yields. 🔴 Saia: Concerning. Costs from terminal expansion have begun to impact profits. Their OR worsened by 2.9 points to 83.3 but they have won serious market share gains while maintaining yields. 🔴TForce Freight: Fat. Their CEO feels there is too much fat that still needs to be cut. Their OR slipped 1.9 points to 92.3 and they experienced major market share losses with a big shift in profile (weight/shipment up bigly) and poor yields.  🔴 XPO: Transforming. This carrier is being re-built with the addition of Mr. Dave Bates. Their OR held steady, and good market share gains wave been won while maintaining yields. The industry is clearly down when compared to 2022, which was a banner year for carriers. When including Yellow Corp, tonnage and revenue is down 23%, and weight per shipment is down 3%. Even excluding Yellow Corp from the mix, tonnage and revenue among the remaining carriers  is down 11%. The 2nd quarter of 2022 was about as good as it has ever been for LTL carriers, as seen by their mostly robust OR figures. ORs were at historic lows and business was strong. Maintaining an OR within several points of those marks while keeping market share and yields steady is quite the accomplishment. There are some sharp operators in this industry indeed. But continued softness could begin to really test their mettle.

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LTL vs. Dedicated Trucks: What You Need to Know 🚚 LTL Shipping: Pros: Cost-effective for smaller shipments, flexible, eco-friendly, and offers good tracking. Cons: Longer transit times, higher risk of damage due to handling. Dedicated Trucks: Pros: Predictable delivery, increased security, and tailored service. Cons: Higher costs, less flexibility for varying needs. Market Trends: 📈 Costs are rising, tech is improving, and sustainability is a key focus. Which is right for you? LTL for cost-efficiency and flexibility, dedicated trucks for reliability and security. Share your thoughts or experiences below! 👇 #LTL #DedicatedTrucks #Logistics #Shipping

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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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LTL shippers: I highly encourage you to watch the NMFTA’s Shippers Only Listening Session on NMFC changes coming in 2025. It is linked in the comments below.   Big changes are indeed coming to LTL classification.   This listening session will help you prepare. Specifically, a very large and set of proposed changes will be issued on 01/30/25. These changes will be considered and voted upon at a public meeting on 03/03/25. Approved changes will then be implemented on 05/03/25. The proposed changes provide for classifying commodities by a 13-sub class-by-density scale when density is the primary transportation characteristic. These changes will include: 🔴 132 existing 11-sub items with CL60-CL400 ratings such as Plastic Articles, Athletic Goods, and Furniture will be extended to 13 subs. The two new subs will provide CL55 and CL50 ratings which allow shippers with very-dense handing units to get a lower class than the current CL60 minimum. 🔴 3,814 single-class items such as Poker Chips CL70, Brake Drums CL60, and Greenhouses CL200 will be cancelled and move under an exiting or new 13-sub item as noted above. Classes will range from CL50 for 50 PCF and above, to CL400 for less than 1 PCF. 🔴 129 modified density scale items such as Asphalt with 3 subs (CL55 for >=30 PCF, CL65 for >=22.5 but < 30 PC, and CL85 for <22.5 PCF will be cancelled and move under an existing or new 13-sub item as noted above. 🔴 1,198 sub-provision items such as Camera Tripods (CL200 if setup, CL100 if knocked down) will be cancelled and move under an existing or new 13-sub item as noted above. 🔴 In all, roughly 75% of the 7,000 NMF items in the NMFC could potentially be impacted with these changes. The list of items potentially impacted is extensive. See the comments for a link to this list. You can search the NMFC items you ship to see if they may be impacted. The LTL industry is rapidly moving towards the day where shippers must know the weights and dimensions of their handling units (pallets, crates, etc).  While this will undoubtedly cause some disruption, the best plan of attack is to get in front of these changes and be prepared. Put in a plan now to capture accurate handling unit dimensions and weights. There are many topics to cover with these changes, and I will address them in future posts. One unexpected issue is that the NMFC’s Mixed Commodity rule will not be changed, at least not yet. That means if you ship multiple commodities on a pallet, you may still have to itemize each commodity in order to be correct. This will depend upon the carrier(s) you use. Note sure why the NMFTA chose not to modify this rule to align with their other changes. While you may feel otherwise, these are all very positive changes for shippers. Classification will be simpler, invoicing issues will reduce, and you can gain the benefit of reduced freight charges as you learn to build denser and more-squared off pallets.  

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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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The OTR Market only exists today because people like Uber Freight are allowing us to. Tick....tick..... tick..... it's only a matter of time before Uber Freight stops acting like another brokerage and starts acting like Uber. Groundbreaking and ingenuity is their trademark of doing the impossible but when it came to the freight market they fell short only by focusing on the wrong goals. They wanted to be a logistics company when technology is their strongest asset? I would never have written this five years ago, but today it is more apparent than ever that companies like Uber have the secret ingredient to highly disrupt the transportation market to a crippling level. The key ingredient they are missing is the knowledge to stop acting like a freight broker and start acting like a massive sourcing center of labor like they single-handedly reinvented the driver-for-hire market. When they figure this out they will have endless resources to cripple the market with on-demand pricing and real-time market rates coupled with an almost endless labor force. In 2021 over 1.6 million local driving jobs were created in America alone enticing thousands of drivers away from OTR and into local jobs. Dozens of local and warehousing companies saw a massive boost in growth to annual sums well over a billion dollars. Others saw opportunities and either chose to seize them and grow or play it cautiously and missed the bubble. Either way, the opportunity is still there but not as apparent post-covid. Uber was one of the companies that saw huge growth and took that opportunity to grow substantially in the grocery and food sector by using their savvy to grow their younger labor force. Now in 2024, we are watching the new normal continue in the freight market with little indicators of upward movement even during the pre-summer peak season in full swing. With the current OTR and long-haul markets crippled from the previous 6 quarters, it's prime time for Uber Freight to learn the basics of onboarding owner-operators and small fleet owners like a mega carrier so they can keep up with the pace. This could easily replace the dated market rates and surges with the true market rate in real-time. When they get the talent to onboard drivers like a carrier with the technology of Uber, we are all in trouble in the OTR world. Keep in mind that there are no front runners or market owners in transportation. There are 160k companies all fighting for the same routes and the same customers. It's easy to imagine one company running away with the talent in the market and becoming the new leader of global transportation when you overlay their model on top of the freight model. It's simply a few key elements that are keeping this beast at bay, but it's coming. We could easily be looking at a world of "true-on-demand shipping" within the next five years or less. The real question here is: 1. Will Uber breakaway from the traditional model, 2: will carriers learn younger drivers?

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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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I have found it really fascinating how often I hear of logistics companies electing to build their TMS versus buy a TMS that is already on the market. Curious - what do you think is the main reason this choice is made to build versus buy? Do you think it brings more value to your company? Do you feel like it differentiates you in ways that'll provide significant ROI? Does it seem like you can't get any TMS to follow the processes that you think work best? Job security for IT folks? Coming from and oil and gas background, I find this fascinating because we rarely saw O&G companies also try to be tech companies. They typically outsourced these projects. It's a new world for me here in logistics!

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At Tai, we understand that load volume is the clearest path to profitability in LTL. We’ve built a TMS that propels you on that path, hurdling over inefficiencies and barriers in your way. You’ll win more profitable loads with Tai TMS. Ready to scale your LTL operations and unlock new levels of profitability? Discover how Tai TMS can revolutionize your freight brokerage and take your business to the next level. #TaiTMS #FreightBrokers #LTL #CarrierNetwork #Logistics

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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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LTL should not be viewed merely as a secondary choice but rather as a key component that bridges the voids within your transportation framework. Discover three effective strategies for incorporating LTL into your multimodal strategy to fully leverage its capabilities. I suggest checking out this guide on LTL: http://sndr.pro/5M

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Yesterday's jobs report has caused an undue amount of fear that the U.S. economy is on the brink of a recession. Just as I've cautioned that demand conditions in the for-hire trucking sector are unlikely to become bullish in the 2nd half of 2024, I equally would urge caution about concluding that a recession is imminent. I say this based on data. One chart below. Thoughts: •Forget the inverted yield curve; the best predictor of normal recessions is employment in residential building construction. You will see sharp downturns ahead of the 1990, 2001, and 2008-2009 recessions. In contrast, residential construction employment continues to trend up on a seasonally adjusted basis (note, there was a bit of a scare in 2023, but as I wrote about recently, we have seen real investment in permanent residential structures and improvements increase in 2024 from 2023, consistent with 2024's employment uptick). •Historically, downturns in chemical manufacturing are a strong predictor of recessions (https://lnkd.in/gV_hhN4Y). Seasonally adjusted chemical production has been strengthening, the opposite of what we would expect. •We all agree that the balance of trucking demand and supply tightened in June. It seems highly unlikely this would happen yet, just 2 weeks later, the labor market would have weakened substantially (which is the period picked up by the surveys). Implication: as Jesse R. noted in his recent post, folks need to relax about yesterday's jobs data. Unless we have a massive energy shock in the next few weeks, we will see the FOMC cut rates in September (possibly even 50 basis points). Assuming we see about 100 basis points shaved off the federal funds rate by early 2025, we should see the improvement in demand needed to bring on the next bull market pricing cycle for truckload carriers. #supplychain #supplychainmanagement #markets #freight #trucking

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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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Dry Van Freight Market Update Week 40: ~ Elizabeth, NJ, Philadelphia, and Houston were the top three ports ranked by load post volume. In the week leading up to the strike, East and Gulf Coast combined load post volumes jumped 8% week-over-week; last week’s increase was five points lower.  ~Savannah, GA, the 2nd largest port on the East Coast, saw load posts drop by 6% w/w. ~The strike led to a 7% decrease in volume out of Elizabeth, NJ where spot rates rose by 3% w/w. ~Atlanta dry van outbound rates increased $0.07/mile to an average of $1.53/mile even with a 3% reduction in load volumes. ~The Southeast Region saw inbound and outbound regional rates increase by $0.10/mile w/w. #freight #trucking #supplychain #transportation #logistics

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Well, we've heard it from multiple sources now. The freight recession is "dead". So what now? Cost transparency 🤝 forecasting growth My (unsolicited) advice? - Lean into stability - Have really straightforward conversations with your suppliers, vendors, and carriers - Align with people/companies that value your goals J.B. Hunt Transport Services, Inc. #jbhunt #3pl #transportation

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