Mike Salvo Jr.

Its that time of year again! Are annual LTL rate increases putting pressure on your transportation budget? You're not alone. Many businesses face rising costs in less-than-truckload (LTL) shipping, driven by fuel surcharges, labor expenses, and capacity constraints. One solution to counteract these increases is consolidating multiple LTL shipments into full truckload (FTL) shipments. Here's why this strategy makes sense: ✅ Cost Savings: Combining LTL shipments into a single truckload can significantly lower per-unit shipping costs by maximizing trailer utilization and avoiding high LTL fees. ✅ Improved Transit Times: Consolidated shipments typically follow a direct route, reducing handling and transit time compared to traditional LTL that moves through multiple terminals. ✅ Reduced Damage Risk and W&I: With fewer touchpoints, your products are less likely to be damaged or delayed, enhancing customer satisfaction. ✅ Environmental Impact: Fewer trucks on the road mean reduced fuel consumption and lower carbon emissions—a win for your business and the planet. This option is not for every shipper! You need to identify your top receivers, where they are located and IF shipments can be strung into a multi-stop route. If you're considering optimizing your supply chain with consolidated shipping, let's discuss how our team at Hermann Services can help you make the transition smoothly and cost-effectively. Have you tried this strategy, or are you interested in learning more? Let’s connect in the comments or via direct message! #Logistics #Hermannservices #Shipping #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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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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SEVEN MONTHS… That’s the countdown, supply chain folks! The NMFTA is about to shake things up with major changes to the National Motor Freight Classification (NMFC) system, and it’s going to impact LTL shipping costs in a big way. Traditionally, NMFC classifications have used a straightforward set of classes based on density, stowability, handling, and liability. High class = high shipping cost. But now, carriers are bringing in new tech sharper than ever at calculating the exact dimensions and density of your shipments. So if that box of widgets has been enjoying a cozy, lower class rate, buckle up—it might get a “first-class” upgrade, minus the free cocktails! Higher rates are ahead for items that don’t meet the new density requirements. With this increased focus on density, shippers can expect more variable pricing, so it’s time to pack smart. To avoid any surprise shipping cost hikes, now’s the time to tighten up packaging, aim for maximum density, and work closely with carriers to stay ahead of these changes. May 1st—7 months to go. If you’re ready, congrats! If not, look forward to some “quality time” with the CFO, a frustrated sales team, and possibly some questions from customers about the spike in cost of goods. Fun times ahead!

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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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With the 4th of July holiday fast approaching, I wanted to take a look at where June’s dry van truckload spot market rates stand to get a sense if the market is showing any signs of turning. Two charts below using data from DAT Freight & Analytics. Thoughts: •Top chart shows dry van spot rates as well as dry van broker buy contract rates. Dry Van spot rates, while up $0.06 per mile from the April low, are down $0.03 per mile from June 2023. Given diesel prices are down just $0.08 per gallon from a year ago (https://lnkd.in/g5sUVM8V), fuel isn’t driving this difference. •June 2024’s $0.03 increase over May is quite weak relative to what we have traditionally seen in dry van TL bull markets. In 2014 the increase was $0.11 per mile; in 2017 it was $0.10 per mile; and in 2018 it was $0.17 per mile. For that matter, the increase was $0.10 in 2019 (a down year)! As such, spot prices so far are a sign of a cruel summer—my daughter is obsessed with Taylor Swift—from a pricing standpoint. •Bottom chart shows the dry van spot market cycle indicator (DVSMCI), calculated as the broker buy rate less the spot rate, with the difference divided by the average of the two measures. That ratio is currently 16.6%. While better than last year’s 19.9% reading, we are well away from the 10% threshold where we have tended to see markets flip. Implication: dry van spot market data suggest that folks who made predictions of the dry van truckload market flipping from bear to bull in late Q2 or early Q3 likely made an overly optimistic forecast. I increasingly believe the earliest the market could meaningfully flip is Q2 2025, and this will require many things to go right from carriers’ vantages for this to occur. #supplychain #supplychainmanagement #freight #trucking #truckload

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When times provide challenging circumstances, review realities and adjust. From this article, see below: The US LTL producer price index (PPI) was up 8.2% year over year in April and 5.2% in May, according to data from the US Bureau of Labor Statistics. LTL pricing is significantly above its long-term trend line, said Noel Perry, chief economist at Truckstop.com.  Perry questioned whether such elevated LTL pricing is sustainable. “Normally, pricing doesn’t move that much, unless we have a long-term structural change,” he said. Yellow's bankruptcy, which cut LTL capacity by 10% last year, may have provided that needed structural change, at least until other LTL carriers are able to replace that capacity. https://lnkd.in/gtmeti_4

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We are now heading to the homestretch of 1Q24 LTL carrier earnings season. Next up is ABF Freight, the asset-based subsidiary of ArcBest. You might recall that back in 1Q24 ABF Freight flexed their new Dynamic Pricing model to goose business levels given the very soft freight market. While most carriers reported a soft 1Q23, with tonnage down around -11% and shipments down around -10%, ABF reported a solid 9% growth in shipments and 4% in tonnage. That was the Dynamic Pricing spigot being turned on. And soon after 1Q23, ABF began turning that spigot off. They still seem to be working with that spigot. Let’s take a look. 🔴 Revenue was down -3.8%, driven by a drop in shipment count of -6.9% and a whopping -17.5% drop in tonnage. 🔴  Rev/cwt was up impressively at 15.6%, with large tailwinds coming from a concerning -11.3% drop in weight/shipment. ABF also attributed this yield growth to pricing up their Dynamic Pricing business plus price increases on “core” business. 🔴  Their OR for 1Q24 was a 92.0, or a 1.2 point improvement from the 93.2 reported in 1Q23.  🔴  On a sequential basis, revenue was down -5.4%, with shipments up slightly at 1.4% and tonnage down -2.7%.  🔴  While total tonnage was down -17.5% compared to last year, ABF reported that “Core” tonnage was up a positive 9.0%. This indicates a stunning drop in transactional business.  🔴  The OR on a sequential basis dropped notably, from 87.7 in 4Q23 to 92.0 in 1Q23. This is a bit surprising.  🔴  Contract renewals averaged 5.3%, and ABF continues to raise prices on their transactional business (Dynamic Pricing).  🔴  ABF is seeing a deceleration in business from March to April, but is also expecting a turn-around due to growth from Core business. One positive tailwind that ABF will see later in 2024 is the lessening impact of their new Teamster agreement. It was front-loaded with a 13% wage increase in the first year, dropping down to 2.5% starting in mid-2024. So if ABF can maintain price increases and productivity improvements, they could begin to see a notable turn-around. Check out the 🚛Let's Talk Logistics 🚛newsletter where additional management commentary and insight regarding FedEx Freight's recent quarter results and future plans will be expanded and expounded upon by the LTL Observers. You can check out other LTL carrier earnings news there as well. A link to the newsletter is in the comments.

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I don't know who needs to hear this, but fines are typically the wrong way to handle thing Try incentive based pricing instead I understand that the trucking and brokerage net margins are very slim. A huge drag on that margin is cost to serve (some of you call it cost per load). Quantify those costs, and share the gain to incentivize those behaviors. As an example - it costs the average broker about $37 to match a shipment (find a truck and convince them to take it), ~$22 to track it. Instead of fining a carrier for not, pay a carrier to do it. They'll feel better, you'll feel better, and you'll get better outcomes (read this as make more $$$$$$$$). See also - posts on aligning incentive to behavior because the biggest challenge in this being successful is your people not wanting to "give up" GP -- when you as the business are taking the real margin hit. There's a follow up on AI on this one too bruh

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One statement I routinely hear or read is surprise at how dry van truckload capacity has been so resilient given the collapse of commoditized over-the-road dry van TL lanes. Apart from abnormal profits earned in 2021 and 2022 helping keep carriers afloat, I believe another reason for the resilience of capacity is that many other services these carriers offer have not seen nearly as precipitous of a drop. One chart below showing this. Thoughts: •This chart compares the full producer price index (PPI) for general freight trucking, long-distance, truckload (NAICS 484121) (full PPI) versus the primary service PPI (which captures generic dry van services). Prior to COVID-19, these two series moved in unison. However, since late 2022, they have sharply diverged, with the full PPI falling far less (it currently hovers ~35% above pre-COVID levels, compared with 15% for the primary service PPI). Both indexes include fuel surcharges. •I’ve checked with the BLS economist who collects these data, and what we are seeing isn’t the effect of reweighing or other methodological changes. Rather, the only conclusion is that other services (which account for ~1/3rd of revenue for establishments classified as primarily over-the-road TL carriers) have shown much greater resilience. •These services could include dedicated contract carriage, warehousing and storage, specialized TL transportation, or intermodal. When you think about large public TL carriers like JB Hunt, you can see services like intermodal and dedicated operations have shown much greater price stickiness. Implication: the greater resilience of the PPI for all services offered by dry van truckload carriers helps explain why the sharp decline in rates for the commoditized portion of TL services hasn’t caused a larger shakeout of industry capacity (in addition to record profits earned in 2021 and 2022). #supplychain #supplychainmanagement #freight #trucking #truckload

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Focus on your core competency There has been much said & even more written about RXO, Inc.'s acquisition of Coyote Logistics. My good friend, Grace Sharkey 🚛🤖💙 wrote of the deal over the weekend. For those in the business, this deal comes as little surprise. It's no secret that UPS has struggled to make sense of the volatile world of the brokerage industry. When it's good, it's great, but when it's bad... it's really bad. And lately, it's been really bad. While leaders are tasked with unlocking new revenue, not all that glitters is gold. And oftentimes those same leaders make the case that an acquisition creates the magical formulae of 1 +1 = 3. So let's do the math: UPS bought Coyote Logistics $1.8 billion in 2015. RXO, Inc. will buy Coyote Logistics from UPS for $1.025 billion sometime in 2024. 9 years & nearly $1 billion (that's billion with a 'B') in value gone. This is not an aberration. Brokering freight is increasingly commoditized & the margins of 2015 will likely not materialize for some time. I believe that RXO, Inc. got a great deal. I believe Coyote Logistics is a great company. The deal makes sense, but the landscape is changing. 2H of 2024 is going to be very, very interesting. https://lnkd.in/gt9MGusT

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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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The American Trucking Association recently released data showing a driver shortage of 64,000 in 2023, with a projected record high of over 82,000 in 2024. To meet demand, the industry will need to recruit more than one million new drivers over the next decade to replace those leaving. This highlights the pressing need for the industry to address the issue and attract new talent. #Openforce #Logistics #Courier #Delivery #TPA #LastMile #Expedited #IC #1099 #OccAcc #IndependentContractor #Contrators #MasterContractors #Distribution #Routes #Pharma #CourierService #trucking #logistics #transportation

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How can diversifying your LTL carrier base improve your shipping efficiency and reduce costs? Discover the benefits in our latest article. Read it now and then reach out to my team or me. We're here to guide you through every step!

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PLUG: Here are Knight, we have a few different options for customers seeking dynamic pricing. Ask me about them. :) RE: this article - I’ve read a variety of opinions surrounding CH Robinson’s recent spot-quoting AI reveal. Personally, I applaud them for being an early-adaptor within the Artificial Intelligence/Transportation Industry space. At the end of the day, finding new ways to provide their customers faster, more consistent spot-quote responses is a win/win endeavor. Now will there be an “adaptive AI learning curve” that helps ensure their AI pricing is both competitive and profitable? Yes, of course. The transportation world (as a whole) is so dynamic that it will be interesting to see how quickly AI reasoning can “detect and adjust” to market swings. Most certainly there will be people behind the scenes calling “audibles” in those situations. Will they be able to execute on the business generated? Well that’s the never-ending, never-relenting question mark behind every company in our space. Ultimately, if they can’t execute, nothing else matters. I’m guessing they have a lot of brilliant minds invested here to ensure this project not only has feet but is ultimately successful.

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