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Q4 Cowen/AFS Freight Index projects transportation market in flux
AFS cautions shippers to stay vigilant as conflicting forces pressure freight costs
ATLANTA (Oct. 18, 2022) – AFS Logistics (afs.net), an industry-leading 3PL provider, and Cowen Research today released the October 2022 Cowen/AFS Freight Index for Q4, a snapshot with predictive pricing across multiple sectors in the freight industry. The latest release of the index projects quarter-over-quarter (QoQ) declines in transportation costs across all reported modes, with the exception of ground parcel.
“While the freight industry prices remain elevated on a year-over-year basis, specific sectors are seeing marked quarter-over-quarter decreases and are now receding from historic highs,” says Tom Nightingale, CEO, AFS Logistics. “But while flagging demand and falling quarterly rates indicate market power shifting away from carriers, shippers must remain vigilant as carriers inject unprecedented general rate increases.”
The Cowen/AFS Freight Index is unique due to its dataset and forward-looking view. The expected rate levels are derived from the data associated with $11 billion of annual transportation spend by AFS customers across all modes and includes actual net charges that factor in accessorials such as fuel surcharges. Past performance and machine-learning produce predictions for the remainder of the quarter, set against a baseline of 2018 rates for each mode.
Key implications for ground and express parcel Peak season surcharges are now in effect for a far longer period of time than in the past and apply to more shippers. Peak surcharges for additional handling and oversize packages have been in place since January for UPS and started on Sept. 5 for FedEx. For comparison’s sake, the 2018 peak season lasted 34 days for UPS and 35 for FedEx. Last year, peak residential delivery surcharges from both major carriers applied to customers who shipped more than 25,000 residential and ground economy packages per week. This year, that threshold decreased to 20,000 packages per week, so more shippers should expect to pay these surcharges. And year-over-year (YoY) rate increases for various peak surcharges go as high as 60%, acting as a potent tool for carriers to avoid undesirable packages.
In Q4, the aggressive peak surcharge increases and additional surcharge costs arising from the seasonal increased share of residential deliveries will help push up the average rate per package for ground parcel, taking the index forecast up to a new high of 28.5%, as compared to the 2018 baseline.
While express parcel rates increased sharply in Q2 of this year, lower fuel surcharges, declining average billed weight and a shift to fewer premium services resulted in a decline of 5.1% in Q3. For the quarter ahead, the express parcel index is projected to further decrease to -1.8% compared to the 2018 baseline, though that figure still reflects a 4.3% YoY increase.
“Earlier this year, carriers had a strong hand in relation to pricing due to capacity issues during the pandemic, and fuel prices running amok,” says Micheal McDonagh, president, parcel, AFS Logistics. “But as the economy softens and shipment volume decreases, carriers will need to strategize to gain volume.”
GRIs – Worse than they look Citing inflation, FedEx announced the highest-ever net list rate increase of 6.9%, effective January 2023 for both express and ground parcel. But that published average increase can be misleading. The actual list rate increase varies based on package characteristics, as do increases to individual surcharges. For example, the list rate increase for a zone 8 package with a billed weight of 26 pounds could actually be 7.4% for priority two-day shipping, and together with accessorials, calculations show the total cost to ship a package once the general rate increase (GRI) takes effect could actually amount to a 12.7% increase – nearly twice the announced GRI.
Annual GRIs also have a compounding effect that drives up costs significantly over time to a far greater extent than steady annual increases may indicate. Based on list rate and accessorial increases for the five-year period from 2017 to 2022, an example zone 5 package with a dimensional weight of 54 pounds has become 38.2% more expensive to ship priority overnight.
“While the record-high GRI announcement from FedEx grabbed headlines, shippers may still be surprised by the more costly reality lurking behind the annual increases they’ve grown accustomed to,” says McDonagh. “The forthcoming UPS GRI will likely be comparable to FedEx’s, which then leaves shippers with the task of testing how ‘sticky’ this latest GRI really will be.”
Key implications for LTL Weight and fuel surcharge per shipment both declined on a quarterly basis in Q3 2022, which helped drive a decline of 2.4% in LTL cost per shipment QoQ. However, the LTL index still showed a significant YoY increase in Q3 of 20.3%. And while the average fuel surcharge decreased by 5.4% QoQ due to lower crude oil prices in Q3, average accessorial charges per shipment jumped 8.4% compared to the previous quarter. Looking ahead to Q4 2022, the LTL index is again expected to decrease on a quarterly basis, from 55.3% to 48.6% – still a 10.1% YoY increase compared to Q4 2021.
Key implications for truckload While truckload rates have fallen sequentially, the rates have fallen less than volumes; indicating surprising resilience in the market and the long shadow of truckload contract rates. The Cowen/AFS Truckload Freight Index is forecasted to be 17.9% in Q4 as compared to 18.3% in Q3.
Not only is the Q4 truckload index expected to buck typical seasonal trends and decline on a quarterly basis, it also indicates the first negative YoY change since Q3 of 2020. This decline is largely due to the current macroeconomic environment, driven by factors like inflation remaining above 8% and expected rate hikes by the Federal Reserve. As a result, truckload carriers are likely to face challenges maintaining revenue growth over the next several quarters.
Nulogy, a leading provider in supply chain collaboration solutions, and Kinaxis, a global leader in supply chain orchestration, have announced a partnership to develop cutting-edge solutions for brand manufacturing supply chain networks worldwide.
The new partnership aims to catalyze fast-moving consumer goods (FMCG) and life science brands and their supplier networks to work together more effectively through digital transformation solutions, thereby mutually improving costs, service and revenue. Combining the supply chain orchestration capabilities of Kinaxis with the collaborative external manufacturing specialization of Nulogy will enable customers to share forecasts and order information with suppliers and receive inventory capacity information faster.
Nulogy’s purpose-built multi-enterprise platform enables greater responsiveness in the supply networks of leading FMCG and life science brands, including L’Oréal, Colgate-Palmolive, and Church & Dwight, as well as their extended suppliers and hundreds of sites around the world.
“Given the speed and volatility of today’s global market, it is more important than ever for brand manufacturers to digitally synchronize with their supplier communities in order to respond with agility,” said Jason Tham, CEO at Nulogy. “Through our partnership with Kinaxis, we look forward to collaborations that will elevate the performance of supply chain networks around the world.”
Kinaxis Maestro is the AI-infused end-to-end supply chain orchestration platform for fast, intelligent decision-making. Trusted by renowned global brands to provide agility and predictability to help navigate volatility and disruptions, Kinaxis has been a leader in supply chain planning for over 40 years.
"Our partnership with Nulogy improves visibility, control and collaboration of the upstream network of critical suppliers, like contract manufacturers and co-packers, by integrating a variety of supplier data into Maestro,” said Bill Walker, Senior Director, Partner Solutions Extensions at Kinaxis. “Giving our customers the ability to better run simulations, digitize planning and connect in suppliers.”
Learn more about the partnership at ASCM Connect on September 9, 2024. Kevin Wong, Chief Operating Officer, Nulogy; Polly Mitchell-Guthrie, Supply Chain Thought Leader, Kinaxis; and German Vizcaya Leon, VP Global Planning, Colgate-Palmolive will discuss how Nulogy and Kinaxis’s solutions in Advanced Planning & Scheduling and Supplier Collaboration have played pivotal roles in interconnecting Colgate’s network.
FOR IMMEDIATE RELEASE
Contact: Sherri Bosslet
Title: Director of Customer Relations
Phone: 937.415.1715
Email: sbosslet@daytonfreight.com
Date: September 5, 2024
Web: daytonfreight.com
ULINE AWARDED DAYTON FREIGHT FOR EXCEPTIONAL PERFORMANCE
DAYTON, Ohio – Dayton Freight Lines, Inc., a leading provider of regional less-than-truckload (LTL) transportation services, was presented the 2023 Exceptional Performance Award and the Minnesota LTL Carrier of the Year award from Uline.
The 2023 Exceptional Performance Award and the Minnesota LTL Carrier of the Year award were presented to Dayton Freight’s Milwaukee and Hudson Service Centers, respectively. Both awards were given based on the following criteria: exemplary customer service, technological innovation and lastly, partnership and dedication.
Uline, a family-owned business, is the leading distributor of shipping, industrial and packaging materials to businesses throughout North America.
Dayton Freight’s Director of Customer Relations, Sherri Bosslet quoted, “We are incredibly proud of our Service Centers in Milwaukee and Hudson WI for receiving these awards. These accolades from Uline truly demonstrate the dedication and diligence of our Dayton Freight team. We look forward to a lasting partnership for years to come.”
Founded in 1981, Dayton Freight is a private, union-free, less-than truckload (LTL) freight carrier headquartered in Dayton, Ohio. Currently ranked as the country’s 12th largest LTL company, Dayton Freight has 70 Service Centers in 14 Midwest states, served by 6,000+ employees. Offering 1 or 2 day service to thousands of cities, Dayton Freight is known for its prudent growth, operational excellence, advanced technology and an unparalleled company culture known as The Dayton Difference.
Photo Caption: Jeremy Cutchens (Dayton Freight), Shelly Hofmeister (Dayton Freight), Ed VanGrouw (Dayton Freight), Eric Dreissig (Uline), LJ Groen (Uline)
Nulogy, a leading provider of supply chain collaboration solutions, is hosting a session during the Association of Supply Chain Management's ASCM Connect 2024. Nulogy, Kinaxis and Colgate-Palmolive executives will present “Orchestrating Digital Transformation: Nulogy & Kinaxis Empower Colgate-Palmolive’s External Network” on Monday, 9/9/2024, 3:45 - 4:45 p.m. CT in Ballroom E, Level 4.
In an era when digital transformation is paramount for sustainable growth, Colgate-Palmolive stands out as a leader in the consumer packaged goods space. With a strong digital transformation vision and strategic partners that tout the technical capabilities and expertise to bring it to life, Colgate and its extended supply network has been able to reap the benefits of digitally-infused agility, resilience and efficiency to outcompete in today’s marketplace.
The session will cover Colgate-Palmolive’s vision for transforming its supply chain planning and execution, highlighting the imperative to enhance supply chain synchronization and collaboration.
Nulogy and Kinaxis join Colgate-Palmolive in this talk to discuss how their best-of-breed solutions in advanced planning and scheduling and supplier collaboration have played pivotal roles in interconnecting Colgate’s network.
Speakers include:
Moderator: Christine Barnhart, CPIM Chief Marketing and Industry Officer, Nuology
Panelist: Kevin Wong Chief Operating Officer, Nulogy
Panelist: Polly Mitchell-Guthrie Supply Chain Thought Leader, Kinaxis
Panelist: German Vizcaya Leon VP Global Planning, Colgate-Palmolive
Check out the complete Colgate-Palmolive case study by visiting https://bit.ly/3z6xwPK.
Covington, KY — In a significant step toward redefining supply chain efficiency and boosting the local economy, Lakeshore Learning hired Zion Solutions Group, a trailblazer in advanced supply chain integration, to help implement a cutting-edge 1.2 million square foot distribution center in Garland, Utah. This collaboration is set to create over 500 jobs, showcasing an unparalleled commitment to innovation and community development.
“Our relationship with Lakeshore Learning, beginning in 2015, has been a testament to what visionary collaboration can achieve," stated Jim Shaw, President of Zion Solutions Group. “This is not just a collaboration; it’s a leap toward the future of supply chain management. By combining Lakeshore Learning’s vision with our technological expertise, we are set to introduce a distribution hub that exemplifies efficiency, sustainability, and economic growth for Garland."
Artin Ghazarian, Chief Supply Chain Officer at Lakeshore Learning, highlighted the project's ambition: "Our journey with Zion Solutions Group has been marked by a shared drive for excellence. This distribution center goes beyond expanding our logistical capabilities—it's a testament to our dedication to setting new industry standards for efficiency and environmental stewardship in supply chain management."
Jordan Frank, EVP & Co-Founder of Zion Solutions Group, emphasized the collaborative synergy: Our relationship with Lakeshore Learning is more than a partnership; it's a melding of minds aimed at redefining the future of our industry. We're not just optimizing logistics; we're crafting a model of innovation that leverages technology for smarter, more sustainable operations. Our goal is to inspire the sector by demonstrating how collaboration and technology together can create impactful solutions.”
The facility will harness the latest in automation and robotics to optimize both efficiency and scalability. Zion Solutions Group will play a crucial role in this evolution, meticulously shaping the project from its conceptual stages to its final form. This includes value-added engineering to support Lakeshore Learning’s specific needs, overseeing the procurement and engineering processes to ensure precision, and integrating advanced software solutions—including Zion Apex (WES)—for peak functionality. Beyond the project’s completion, Zion’s Customer Experience team will continue to support the operations team and provide optimization opportunities, ensuring the facility operates smoothly and evolves with technological advancements.
With an operational goal set for 2025, Lakeshore Learning’s Garland distribution center represents a major milestone in job creation and economic growth for the region. This initiative aligns with Zion's mission to drive sustainable innovation and cement its leadership in the market.
For more information about Zion Solutions Group and its groundbreaking projects, please visit https://thezsg.com/.
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About Zion Solutions Group
Zion Solutions Group, a leader in Supply Chain Integration, uses its 90+ years of knowledge to deliver memorable experiences and guide intelligent change. Specializing in material handling integration, Zion provides comprehensive services that include detailed data analytics, solution design, procurement, implementation, and post-implementation support. Our customer-centric approach and Project Lifecycle process ensure tailor-made solutions using cutting-edge technology, setting us apart in the industry. Zion, in support of its core purpose, “To Leave a Positive Impact on the Lives of Those We Touch,” is committed to driving success and sustainable growth for our partners and customers.
About Lakeshore—Products Designed with Learning in Mind®
Lakeshore Learning Materials is a leading developer and retailer of top-quality materials for early childhood education programs, elementary schools, and homes nationwide. Since 1954, Lakeshore Learning Materials has offered innovative learning materials distinguished by their quality, educational merit, and safety. To learn more, visit LakeshoreLearning.com.
Panel Built, Inc., a leading provider of modular offices, mezzanines, and custom-engineered structures, has announced plans to expand its primary facility, PB1. The expansion will include additional office and fabrication space, allowing the company to better accommodate its rapidly growing workforce and increasing demand for its innovative space solutions.
As Panel Built continues to experience significant growth in both personnel and market reach, this expansion marks a critical step in the company’s strategic development. The additional space will enable the company to enhance its operational efficiency and continue delivering high-quality products and services to its diverse client base. The expanded facility will also provide a more collaborative work environment for the Panel Built team, fostering innovation and reinforcing the company’s commitment to excellence.
"Panel Built has built a reputation for delivering modular solutions that meet the unique requirements of various industries, including commercial, military, government, and industrial sectors. The company's expertise in engineering, design, and installation has made it a trusted partner for organizations seeking efficient and customizable space solutions.
The Blairsville facility expansion is expected to be completed by early 2025. Panel Built is committed to maintaining uninterrupted service to its clients throughout the construction process, ensuring that all projects remain on schedule and meet the company’s high standards of quality."
- Mike Kiernan CEO
About Panel Built, Inc.
Founded with the mission "To Solve Our Customers' Space Needs With Excellence And Great Customer Service," Panel Built, Inc. specializes in modular construction, offering a range of solutions from modular offices and mezzanines to guardhouses and cleanrooms. With extensive experience in both public and private sectors, Panel Built is dedicated to delivering space solutions that meet the highest standards of quality, safety, and customer satisfaction.