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Transcript
Gary Master is chief operating officer and publisher of both AGiLE Business Media and Supply Chain Media, publishers of DC Velocity and CSCMP's Supply Chain Quarterly, respectively. He has more than 30 years of experience and contacts in the material handling, logistics, and supply chain industry.
As a consultant, he has partnered with more than 200 companies to assist them in increasing their sales, identifying merger targets, and successfully onboarding new acquisitions, and he has identified new products and opportunities in the marketplace as a whole.
David Maloney, Editorial Director, DC Velocity 00:00
Welcome to the world of "whack-a-mole supply chains." Truckers are having more roadside breakdowns. And freight markets are projected to remain tight.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Aptean. Aptean is a global provider of mission-critical, industry-specific logistics and transportation management solutions. Aptean routing and scheduling delivers the most advanced transportation management systems to world-leading brands, helping to maximize operational fleet efficiencies, improve driver retention, optimize resources, and turn private fleets into profit engines. If you're ready to make savings of up to 30% and see ROI within 12 months, Aptean can help. For more information, visit Aptean.com and discover what's next, now.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin today: supply chains everywhere have struggled to keep up with the demands of a surging economy. Capacity constraints abound, and shortages have popped up everywhere. Joining us to talk about the current state of the industry is our own president and COO of Agile Business Media, as well as the group publisher of DC Velocity. Gary Master. Welcome, Gary. Good to have you with us today.
Gary Master, Group Publisher, DC Velocity 01:37
Thanks, Dave. Good to be here.
David Maloney, Editorial Director, DC Velocity 01:40
Gary, your training before you got into the wonderful world of supply chain press was as an economist, and you talk to lots of people every day within the industry, looking at what's going on in supply chain. And so, what's your perspective as an economist with where we are?
Gary Master, Group Publisher, DC Velocity 01:57
That's a great question. It's a loaded question, and do we have about two and a half hours to discuss that this morning?
David Maloney, Editorial Director, DC Velocity 02:04
Right.
Gary Master, Group Publisher, DC Velocity 02:05
Um, no, in all seriousness, as an economist, it's a simple, simple mathematical formula. Right now, we've got demand far exceeding supply almost all across the supply chain, and, I mean, if you look at—I mean, I was just jotting down just a few that I'm even aware of, that have been brought up in discussions, the problem is exacerbated. It's not just supply exceeding demand, but it's also a dramatic labor shortage across the supply chain, from manufacturing to the logistics component to sourcing, you name it. And if you've gone and tried to buy a used car, it's up 39% right now, used car prices, from last year. And I saw a report just this morning, Dave, it's like, you know, the rate of used-car price inflation has decreased in June. Well, it's bloody up 39% from last year. The damage its kind of already done.
David Maloney, Editorial Director, DC Velocity 03:08
Right.
Gary Master, Group Publisher, DC Velocity 03:10
But you look at rental cars, gas, plastics, and palm oils, steel, truckers, chassis, homes, in the housing market, look at what's going on there. Toilet paper, lumber, paper, furniture, appliances, chicken, cheese, coffee, olive oil, hotdogs, bacon, chlorine, oxygen, and labor. We all have shortages across the board, and it's simply, you know, an economy that's coming back quicker than anybody anticipated, and in a shortage of labor, and that labor issue is significant.
David Maloney, Editorial Director, DC Velocity 03:42
Well, you've referred to this as "whack-a-mole supply chain." What do you mean by that?
Gary Master, Group Publisher, DC Velocity 03:47
What we're really looking at right now is, we're seeing inflation and supply chain shortages that are driven by workforce shortages and demand exceeding supply. What that's doing is causing bottlenecks, in a lot of the supply chain, for manufacturers to make finished goods. I call it a whack-a-mole supply chain because we're having new areas of bottlenecks or shortages pop up each week. And I talked about all the different areas that we're even, you know, mentioning. We're trying to solve one problem and another one pops up. With limited labor, it's going to continue.
David Maloney, Editorial Director, DC Velocity 04:21
So, what are some of the major bottlenecks that you're seeing out there that are affecting supply chains directly, in addition to a lot of the commodities that you mentioned earlier?
Gary Master, Group Publisher, DC Velocity 04:31
Well, I think the bottlenecks, I think a lot of them arise from a shortage on the raw materials and components, but a couple of months—I'll just gave you an idea of the enormity of the problem. You know, according to Suzanne Clark, the president and CEO of the U.S. Chamber of Commerce, she said: "The worker shortage is real. It's getting worse by the day. The worker shortage is a national economic emergency. It poses an imminent threat to our fragile recovery in America's great resurgence." And to go further, you know, the Biden-Harris administration announced in June a supply chain disruptions task force to address short-term supply chain discontinuities. And so, you can see the enormity of the problem, and I think the industries I talked about, Dave, I mean, it's kind of crazy right now. I had a garage door break in my home, the springs, had a repairman come. He came, he looked at it, and he goes, "I used to carry 600 of these in the warehouse. I can no longer order springs for garage doors anymore, because the steel prices have gone too high, and manufacturers are saying 'You need to buy a new garage door with the springs.'" The shortage is that incredibly tight. And so, it's just across—I mean, if you try to buy out a home, home prices are through the roof, and everybody's really, really intent on selling now, or thinking about selling, but then where do they go when they sell, because home prices are up across the country.
David Maloney, Editorial Director, DC Velocity 06:00
From a supply chains perspective, it used to be that anytime there was a higher demand, you just threw more labor at it, but as you mentioned, we can't find the workers to be able to throw that labor there. So what do we do? Where do we go from here?
Gary Master, Group Publisher, DC Velocity 06:13
Yeah, that's a great question. I think it's twofold. It's understanding the labor shortage, and how it's intensified after Covid, and then then I can answer what we can do. During Covid, we had supply chain shortages all across the supply chain. And Dave, to your point, the supply chain is very flexible, it's very nimble, it's designed to adapt to things that are thrown at it. And it did a pretty good job during Covid. I mean, we had shortages, but there are based on panic buying for the most part, and different shifts in demand that were dramatic, from the global shutdowns. I think what's happened, and if you look at the numbers it bears that out, right now we had, the graying of the supply chain was happening before Covid. Covid hits, you go into a year-and-a-half hibernation, and individuals across the country started thinking, "You know what? It's kind of nice not working. You know what, it's kind of nice not working the same amount of hours. Instead of going from 60 hours a week, I'm going to go to 20. Instead of working at all, I'm going to retire early." We've had thousands and thousands of people decide to retire or reduce their stress in their life by working less. So, we have the graying of the supply chain with labor, and then you have all this labor force that has now retired or exited, and they're not coming back. And you mix that with a demand that has come up, and it's really, it's a ferocious demand right now, to be honest. It's a real problem, and it's not one that I see is transitory. I see it's one that's going to be lasting for a couple of years to come. So the question is, what do we do about that? I think there's three things we can do. I think, number one, we need to make manufacturing and logistics jobs less labor-intensive and more satisfying to the worker, using technology. And when I say that, that's across all spectrums and all components of the supply chain, from from trucking to working in a port to working in a warehouse [or] DC, you name it. I think the second thing is, we as an industry have to come together. The time is now to come together with suppliers, with shippers, with everybody, and all of our universities to say, "How do we attract more individuals to the logistics and supply chain labor force?" And that starts at the high school level, it starts at the college level, and it just starts, you start to attract people to our space. And it's just not—we don't do a great job of that. And we've talked about it for a while, needing to do a better job. We have to do a better job. The last thing I think we have to look at is ways to eliminate labor through automation, to help supply and demand for labor to come back more into alignment, and that elimination of labor, or the reduction of the need for labor, that automation is across the board, from ways that loads are assigned in trucking and [the] transportation side to the warehouse and DC. It's an oversimplification, but those are three tangible things that we could be doing as an industry, in individual companies, to help meet this crisis, this supply chain chaos.
David Maloney, Editorial Director, DC Velocity 09:36
Yeah, I agree. Those are some great points. Do you think things will get better anytime soon, or as you sort of mentioned, this may be with us for a while? Is there any timeframe, or is it a matter of making our supply chains not quite as lean as what they were before?
Gary Master, Group Publisher, DC Velocity 09:51
Dave, that's a great question, because I keep reading from all the Wall Street pundits and everyone else that this is "temporal," and If I hear it's temporal one more time, I think I'm going to scream. I think that, you know, you've got a labor shortage, and, you know, I heard the latest projection from Deloitte: We're gonna be 2.1 million jobs short, just in manufacturing alone, by 2030. Two point one million. Does that sound like a temporal problem to you? It doesn't to me. And I think that some of the really acute, quote-unquote, "temporal" shortages, I think they're going to go into 2022. I think they're going to go into late 2022 in some of those spaces. So, I don't think we're talking about a temporal problem. I think we're talking about one that's—the labor market and the lack of labor is driving a lot of things. It's the underlying cause. And then the whac- a-mole supply chain, I think we're looking into 2022. That's going to continue.
David Maloney, Editorial Director, DC Velocity 10:54
Great insight, Gary. Thank you very much for your time. It's certainly something we all need to be aware of. As we said, we just can't throw more people at the solution. We've got to find creative ways of being able to manage it all. Thanks, Gary.
Gary Master, Group Publisher, DC Velocity 11:07
Thank you, Dave.
David Maloney, Editorial Director, DC Velocity 11:08
And I do appreciate you allowing us to put you in the hot seat this week. Now, let's take a look at some of the other supply chain news from the week. Victoria, you reported about how there's been a rather sharp increase in the number of unscheduled roadside events, or breakdowns. What can you tell us?
Victoria Kickham, Senior Editor, DC Velocity 11:25
Sure, Dave. Yeah, it seems that trucks traveling our nation's highways are experiencing a greater need for repair and maintenance these days. Trucking fleets experienced more frequent unscheduled roadside maintenance in the first quarter of this year, leading to higher costs for many companies. That's according to data from the American Trucking Associations, or ATA, and fleet repair and maintenance firm FleetNet, released this week. ATA's Trucking & Maintenance Council said its first-quarter TMC/FleetNet America Vertical Benchmarking program, which is the report that tracks all this data, found an industrywide increase in unscheduled maintenance during the first three months of the year, with fleets reporting double-digit decreases in the number of miles traveled between those unscheduled repairs. Fleets averaged, they said, in the first quarter, 29,506 miles of operation between unscheduled road repairs, and that's down nearly 19% compared to what they did in the fourth quarter of 2020. Broken down by segment, truckload carriers averaged 21,856 miles between breakdowns, which was down 13% in miles traveled from the previous quarter. LTL carriers averaged 44,380 miles in the first quarter, down from 54,556 in the final quarter of 2020. And tank trucks ran 17,420 miles between unscheduled maintenance, down from 19,905 miles in the previous quarter.
David Maloney, Editorial Director, DC Velocity 12:58
Well, Victoria, did they say what may be causing this problem?
Victoria Kickham, Senior Editor, DC Velocity 13:00
You know, they did not. This is part of a report that members have access to. But there are a few trends we've been reporting on that may hold a clue, and one of them is what you and Gary were just talking about. So, DC Velocity has reported quite a bit on supply chain constraints in recent months, and that includes shortages of parts for cars and trucks—everything from, you know, lug nuts to the semiconductors used in the computer-electronics portions of vehicles. Our transportation reporter, Gary Frantz, has written quite a bit about these shortages, as well as the problem of delayed deliveries of new vehicles that fleets have ordered. Those kinds of problems mean it's harder to repair and replace aging trucks, of course, so it makes sense that maintenance is at a premium. That said, the TMC/FleetNet survey that I was talking about emphasized that keeping on top of repairs and scheduled maintenance is important for reducing overall costs. One interesting—excuse me—statistic from the survey: The analysts said that if truckload carriers running the average miles between breakdowns—which for this quarter was, you know, a little over 21,000 miles—if they could reach what they call "best-in-class performance," they'd increase their miles between breakdowns by 89%, and that would lower overall costs. So, it's not an easy problem to solve, given the state of supply chains, but one that I think illustrates some of the stresses the transportation industry is under today, which is, you know, as I say, in line with what you guys were talking about earlier.
David Maloney, Editorial Director, DC Velocity 14:28
Yeah, well there's certainly a lot of strain on that part of the industry sector. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 14:33
You're welcome.
David Maloney, Editorial Director, DC Velocity 14:34
And Ben, you reported on a new forecast showing the freight markets will continue to be very tight through the second half of 2021. What should we expect?
Ben Ames, Senior News Editor, DC Velocity 14:44
That's exactly right, Dave, and actually, this puts, you know, some specific details to the trends that Gary was talking about, you know, put simply, demand is exceeding supply. In this case, that's in terms of our freight carrying capacity, and the market has been very tight, very constrained already, for six months or something, and that trend is supposed to now continue through the second half of 2021, maybe later—in other words, into 2022. And that's according to a third-party logistics supply chain provider called Transportation Insight. They're located in North Carolina. They make a quarterly report examining these trends, and this week they said that capacity constraints are going to stay tight, and that's whether you're talking about small-parcel shipments, LTL, truckload, and international, on ocean. So, more specifically, you know, we're already in July, in the time of year when a lot of retailers start stocking up for the winter peak. But both UPS and FedEx Ground divisions are already strapped tight, and so the report said that they're likely to limit their capacity so that they can maintain their service levels and also stay profitable. You know, likewise, they said that a lot of LTL traffic, the fleets are not accepting new business, because they're already full. Same goes for truckload sector, so that things are—a lot of different ways of saying the same thing, but it's very hard to move freight right now.
David Maloney, Editorial Director, DC Velocity 16:16
To the report, explain why conditions are so tight right now.
Ben Ames, Senior News Editor, DC Velocity 16:20
Well, yeah, and again, this is going to kick back a little bit to some trends that Gary and Victoria were just talking about. One is a shortage of parts, and one is a shortage of people. So, simply, there are not enough trucks right now. There was another report from the analyst firm FTR Transportation Intelligence that said supply chain issues will restrict the production of new trucks by the OEMs. And of course, that creates a shortage of new vehicles. And there'll be pent up demand heading into 2022, so that's a good sign, in terms of those OEMs and vehicle makers staying busy in the new year. But in the meantime, we're just going to have to live with the shortage of vehicles and try to find other ways to get the cargo delivered.
David Maloney, Editorial Director, DC Velocity 17:13
Well, certainly there are a lot of challenges ahead for all of us. Thanks, Ben.
Ben Ames, Senior News Editor, DC Velocity 17:17
Yep,
David Maloney, Editorial Director, DC Velocity 17:18
We encourage listeners to go to DC Velocity.com for more on these and other supply chain stories. And also check out the podcast Notes section for some direct links on the topics that we discussed today. Thanks, Ben and Victoria, for sharing highlights of the news this week.
Ben Ames, Senior News Editor, DC Velocity 17:32
Thank you.
Victoria Kickham, Senior Editor, DC Velocity 17:34
Yep, glad to be here.
David Maloney, Editorial Director, DC Velocity 17:35
And again, our thanks to our own Gary Master for being with us. We encourage your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded each Friday.
And a reminder the Logistics Matters is sponsored by Aptean. Forged from decades of industry experience, Aptean routing and scheduling supports logistics and delivery fulfillment operations with the tools needed to optimize resources, automate route planning, and drive savings of up to 30%. Your fleet operation holds the key to enhance profit. Aptean routing and scheduling can help you find it. Visit Aptean.com and discover how now.
We'll be back again next week with another edition of Logistics Matters, so be sure to join us. Until then, please stay safe and have a great week.
