Logistics and Transportation Industry News Update: Q3 Recap
That’s a wrap to the third quarter! Let’s take a look back and see what the last three months brought that can help us make smarter business decisions going into the fourth quarter and 2020.
Q3 of 2019 has come to an end. We’ll brush up on some topics originally introduced in our 2019 Industry Forecast post published at the beginning of the year. However, so much has changed since then that some things that mattered in Q1 have long since passed our interest. Here’s what’s going on in supply chain, logistics, and transportation now.
Little progress has been made in major trade deals (USMCA or China) since we reported after the second quarter.
On September 11th, President Trump announced via tweet that “as a gesture of good will” he would delay the next tariff increase of 30 percent tariffs (up from the original 25 percent) on $250 billion of goods to October 15th. Additionally, as it currently stands, we should still expect roughly $160 billion imported goods to receive a 15 percent tariff increase on December 15th. The Trump administration hopes a tariff increase that late in the year should continue to encourage consumer spending leading up to the Christmas holiday.
While it feels like almost all goods are being slapped with tariffs, here is a list of tariff-exempt goods from the Federal Register:
The uncertainty of the trade war has almost had a worst effect on the economy than the actual trade war itself. The feet-dragging on USMCA ratification combined with tariff threats and corresponding retaliations from China have severely hurt American farmers. Even the new trade deal Trump struck with Japan is expected to only help farmers “get back to even after Trump’s TPP exit” rather than begin to make up for China’s retaliations.
Midsize businesses, who employ millions of Americans, are also feeling the pressure. Halfway through September, Politico reported that:
“The U.S. Chamber of Commerce in partnership with RSM US LLP, an audit and tax consulting firm, released a quarterly survey report on Thursday showing that 40 percent of midsize company leaders say Trump’s tariffs on imported goods are posing challenges for their business. Twenty-six percent also reported being hurt by retaliatory tariffs that China and other countries have imposed in response to Trump’s duties over the last two years.”
The only thing the market can depend on is unpredictability, and that has everyone skittish. While at IANA 2019, Dave Gross, managing director of equity research, global transportation, and logistics for Stifel, made the comment: “From a freight standpoint, I’m predicting a little bit of a slow down.”
University of Tennessee’s professor of supply chain and logistics Ted Stank recommended shippers be prepared for “a very aggressive and active risk management profiling process in their supply chain, given the many things that can disrupt global supply chains.” In the same Logistics Management article where Professor Stank is referenced, author Jeff Berman gave some pointers to how shippers should prepare for a continued unpredictable trade environment.
altering the short-haul exception to the record of duty status (RODS) requirement available to certain commercial motor vehicle (CMV) drivers,
modifying the adverse driving conditions exception,
increasing flexibility for the 30-minute break rule by requiring a break after 8 hours of driving time (instead of on-duty time) and allowing on-duty/not driving periods as qualifying breaks from driving,
modifying the sleeper berth exception to allow a driver to spend a minimum of 7 hours in the berth combined with a minimum 2-hour off-duty period,
provided the combined periods total 10 hours (rather than the current 8/2 split),
allowing one off-duty break that would pause a truck driver’s 14-hour driving window.
The spot market has been on the decline in Q3, but the contract business has remained fairly good, reports the American Trucking Association’s Bob Costello. That could have been due to a variety of scenarios, such as tropical storms and hurricanes, and Costello isn’t too concerned as the spot market is a small segment of the trucking industry. Regardless, DAT reported a strong final week to the quarter and the spot market is going into Q4 with a strong start.
The decline of the spot market means freight brokers can negotiate competitively, but it’s important to not squeeze your carriers too much. LDI’s Nate Cross recommends referring to the DAT’s Broker Benchmark to negotiate with carriers. Negotiate a fair rate to operate with comfortable margins during this period, but do not gouge your carriers. LDI’s Joe Adinolfi always emphasizes that relationships are key in this industry, and even while the market is in your favor, continue to treat your partner’s right. Likewise, take this time to educate your customers about the logistics of supply and demand to allow them to negotiate as well, with the understanding prices will have to go up again.
If you’ve been following us, you’ll see that we’ve had a lot going on at LDI this year! 2019 has been #blessed with a flurry of humbling awards, agent-oriented initiatives, and awesome people doing awesome things. We’ll do a full roll call during our Q4 Industry Update, but until then, here’s what you’ll want to know going into the last part of the year:
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LDI has officially launched our in-house podcast, The Midnight Freight Broker! Join Nate and Joe each week as they bring to you a hot topic in freight, discuss broker business operations, and answer questions. You’ll hear everything you need to know about brokering freight from these guys and their upcoming guests!
Beginning in October, Joe will bring you information on our proprietary software, LDI Freight. The first Tuesday of every month will highlight a lesser known feature in our TMS to help streamline business operations. Watch for #TechTuesdays on our social media channels.
Let’s Make Some Money!
Take this information from the 3rd quarter and go bravely into the 4th quarter. Advise your customers about what they might want to expect this season and in 2020, familiarize yourself with negotiating tactics, and end your year strong.
For more information or guidance, contact your LDI recruiter or business developer today. We’re here to help!
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