Cargo Theft Experiences Decline

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Cargo Theft Data

A recent report from Commercial Carrier Journal (CCJ) stated that cargo theft reports in the United States dropped 19% from 2017 to 2018. In 2018 alone, there were 592 cargo thefts in the U.S. with an average cargo value of $142,342. According to the CCJ, the fourth quarter was the most active in 2018 for cargo thefts, with a reported 171 thefts.

There are several variables contributing to higher Q4 cargo thefts in general, but 2018’s unusually stimulated theft environment was directly correlated to the ongoing tariff war with China. Countless companies considered pulling their products out of China amid the looming tariff hike and combined with increased shipping during the holidays, heightened cargo theft rates were imminent. Despite the volatile freight environment, the good news is that cargo theft still decreased 19% from 2017. The reasonable assumption for freight moved in 2019 and 2020 is that theft rates will continue to drop. However, there are proactive strategies your company can take to further protect your cargo from any future risks.

Proactive Planning

According to freightwaves.com, one key factor contributing to the decline in cargo theft is shifting overall truck maintenance from a reactive mentality to a proactive mentality.

What is a “proactive mentality”?

Instead of addressing vehicle issues as they arise, trucking companies are now trying to focus more on preventative maintenance. This means less downtime on the road and less maintenance issues during transit. With roughly 74% of cargo thefts happening to full truckload shipments while over the road, it is crucial to decrease idle time at truck stops and maintenance shops to ensure the safety of freight. Are you currently vetting your carriers for preventative maintenance?

At BM2 Freight, we believe in connecting great shippers with great carriers, and that means placing the security of your shipments as one of our top priorities. We vet all of our carriers for proper and regular preventative maintenance, as well as ensure superior cargo safety ratings. Have more questions? Give one of our supply chain experts a call at (859) 308-5100.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Possible Extension Of Tariff War Deadline

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Tariff Updates from the White House

Following the recent State of the Union address, President Trump told White House reporters last Thursday that there are no plans to meet with Chinese President Xi Jingping before the March 1 tariff deadline. However, according to a new Bloomberg report, the Commander-in-chief is considering pushing the March deadline with China back 60 days. During a recent Cabinet meeting, Trump stated that if a “real deal” can be struck, then he would consider letting the tariff hike slide but continued that he is “not inclined to do that.” U.S. Department of Agriculture Deputy Secretary, Stephen Censky, stated that Trump and Xi Jinping are planning to meet next month to speak on the trade standoff.

Furthermore, there are mixed reports highlighting the looming uncertainty of the March tariff hike, with one CNBC report stating that the “likely outcome is that the tariffs remain at the current 10 percent rate.” Adding to the uncertainty is an article from Reuters citing three anonymous sources indicating disputing that CNBC report.

Agriculture Shippers’ Luck Running Thin

The agriculture industry has been at the mercy of the Trump administration since the beginning of the trade war. Trade trends of soybean shipments to China have fluctuated greatly as the uncertain trade conditions unfold, further illustrating industry volatility. China soybean shipments experienced a steep decrease right before the December tariff deadline, however, when the 90-day extension was announced in January, soybeans picked back up to 754,609 metric tons.

Overall, China buys an estimated 60% of U.S. soybeans. Therefore, when faced with the uncertainty of this trade war, farmers are put into a tough spot… plant more soybeans or switch to a new crop, less affected by the impending tariffs.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

State Of The Union Sheds Little Light On Trade War

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Trump’s Comments on Trade

Tuesday night President Trump gave his second State of the Union address. His comments on trade policies were brief and direct, calling for the passing of the United States-Mexico-Canada Agreement (USMCA) and the Reciprocal Trade Act. However, there was no solid news from the President on the approaching March deadline for the ongoing United States and China trade war. U.S. Trade Representative, Robert Lighthizer, and Treasury Secretary, Steve Mnuchin, are scheduled to travel to China for more negotiations later in February. However, Trump has made it apparent that final deals will likely end up being made directly between him and Chinese President Xi Jinping.

In light of this State of the Union, the National Retail Federation (NRF) and other trade associations are taking to Capitol Hill with 100 business owners to talk to Congress about the negative impact that the tariff hike would have.

Wise Purchasing

Even as the March tariff deadline approaches, leading global logistics providers have reported that there is no sign of a shipping slowdown due to the Chinese New Year. Shippers are increasing order size to mitigate impending tariff costs as much as possible. However, it is important to forecast the right amount of inventory to purchase amid the rapidly approaching risks of the tariff hike. Balancing what you can realistically sell in a certain time period to maintain your profit margins with the impending March tariff hike will tell you how much extra inventory to purchase.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Trade Talks Heat Up As March Deadline Approaches

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Top U.S. & China Representatives Meet

U.S. trade representative, Robert Lighthizer, and Chinese Vice Premier, Liu He, met January 30th to kick off more trade talks amid the rapidly approaching March 2nd deadline. The talks addressed the impending 15% increase on tariffs to over $200 billion in Chinese goods, should an agreement not be reached. Furthermore, the Congressional Budget Office has projected a 0.1% decrease in GDP growth for the next 10 years amid the highly volatile trade policies as well as a 0.5% decline in exports by 2022.

In the meantime, mixed reports are coming from top White House executives, including economic advisor, Larry Kudlow, and commerce secretary, Wilbur Ross. The mixed reporting indicates high uncertainty regarding the outcome of trade talks with China. American businesses like Harley-Davidson, Apple, and industrial machinery manufacturers are feeling the heat of impending retaliatory tariffs, thus experiencing a decline in sales to China.

Harley-Davidson Under Pressure

Furthermore, retaliatory tariffs have adversely affected renowned motorcycle manufacturer, Harley-Davidson, in Q4 of 2018. It is reported that the company experienced a $1.15 billion loss in revenue throughout 2017 as a direct result from China, E.U., and U.S. tariffs. Under the assumption that the 15% tariff hike will happen in March, Harley-Davidson CFO, John Olin, reported the company is projected to spend between $100-$120 million in tariffs in 2019. However, there is a silver lining to this predicament. Olin reported that the company is planning to open a new manufacturing plant in Thailand by Q3 of 2019, to more economically serve their Asian market.

The Takeaway

The exacerbated uncertainties of this ongoing tariff war—amidst Harley-Davidson’s predicament and the quickly approaching March 2 deadline—highlight the key supply chain aspects that companies should be focusing on. Should the tariff hike happen, it is important (now more than ever before) to evaluate where your company sources from and financially plan for 2019.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Tight Carrier Market Amid Recent Government Shutdown

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Carrier Margins Dwindle… Compromising Safety Protocol

Carriers typically base their pass-through costs (fuel surcharges) on the Department of Energy (DOE) weekly price per gallon report. However, since carriers typically purchase “rack price” (or wholesale) fuel, it is hard to predict an accurate pass-through cost due to rack prices being more volatile than DOE price per gallon reports. The recent spikes in diesel fuel costs have been passed on to carriers, thus reducing their margins by over half. Therefore, it would be wise to assume that there will be a brief squeeze on the carrier market due to the price spike in diesel fuel costs.

The recent government shutdown has also affected the National Transportation Safety Board (NTSB) investigations on a reported 87 accidents and counting since the beginning of the shutdown. Furthermore, this NTSB, a sub-part of the Department of Transportation (DOT), understaffing incident has led to inaccurate reporting of accident scenes, impeding insight into safer protocols for carriers.

In conclusion, the insights offered by the two preceding perspectives indicate that the spotlight, now more than ever, is on shippers to vet carrier companies for solid internal safety protocol, ensuring maximum efficiency and shipment safety.

Bottleneck at Southern California Ports

Impending tariff hikes at the beginning of March are putting pressure on shippers to rush product in from China. Among other things, this volume increase alone is causing a bottleneck at the ports of Los Angeles and Long Beach, in the form of chassis shortages and trucker shortages. The combination of the volume increase and the government shutdown is sure to cause delays and ripples across the supply chain. However, the Los Angeles and Long Beach ports are still in better condition than during the 2014-2015 gridlock, according to AGL CEO Jon Slangerup.

Therefore, the current market would imply planning longer lead times in your supply chain, while maintaining a clear focus on carrier vetting for proper safety protocol. There’s no indication yet if there will be other port gridlocks similar to the 2014-2015 incident, but it is wise to assume the most extreme circumstances when planning your own supply chain.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Supply Chain Slow-Down On The Horizon

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PMI & Cass Freight Index Trend Downward

The relationship between the economy and supply chain is commonly misunderstood. In order to gain a full understanding of this complicated correlation, it is important to pay attention to valid macroeconomic studies. The Purchasing Managers’ Index (PMI)—which looks at U.S. economic health—and the Cass Freight Shipment Index—which measures freight volume in the United States—are two closely correlated studies to use in forecasting the supply chain.

During November 2018, the PMI dropped to a value of 54.1, the lowest since January of 2018, which indicates a possible economic slow-down for the start of 2019. Furthermore, when analyzing the PMI next to the Cass Freight Shipment Index, there is a correlation between the two. The Cass Freight Shipment Index dropped 5% in November of 2018, the lowest value since January of 2018. In conclusion, the correlation is that aside from outlier scenarios, like the 2008-2010 economic recovery, the general economic health of the U.S. and supply chain/freight market are closely correlated.

Therefore, when you are planning your 2019 supply chain, make sure to analyze macroeconomic studies to gain a better understanding of the current freight market. As economic health and freight volume declines, plan to spend less on freight, and vice versa. However, there are many outside variables that play a large role in the supply chain as well.

Current Events Affect Supply Chain

To gain a comprehensive understanding of the supply chain, not only is it important to analyze macroeconomic indexes like the PMI and Cass Freight Shipment Index, but it is also important to understand current events in relation to the supply chain.

The 90-day U.S. & China tariff war reaches another head in March of 2019. Tariff hikes will, in short, drive business away from China, but also cause a steep increase in supply chain costs initially. Additionally, the government shutdown is significantly affecting U.S. ports and air freight (read more here). With roughly 25% of U.S. government employees in furlough, sea and air freight are experiencing an impending bottleneck of paperwork ultimately affecting the timeliness of shipments and shipment security.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

U.S. Government Shutdown Effects On The Supply Chain

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Air Cargo At Risk

The U.S. government shutdown has caused some minor effects to the supply chain. However, the longer the government shutdown persists… the road could get exponentially bumpier. Furthermore, the shutdown is affecting 9 government departments, including the department of Homeland Security, which contains the Transportation Security Administration (TSA), the Food and Drug Administration (FDA), and the Federal Aviation Administration (FAA). Roughly 800,000 government employees are furloughed until the shutdown ends.

Thankfully, effects to the supply chain have been minor thus far. But, according to Brandon Fried, Executive Director of the Airforwarders Association (AfA), airlines are not currently accepting cargo screened by canine teams with the seal of approval from the TSA. This means that as long as the TSA is inaccessible, carriers searching for verification of information into the canine program are in limbo. However, air cargo is still flowing, despite grave implications that the government shutdown will persist.

Long Term Implications

With roughly 25% of the government shut down, it should be expected that communications with federal offices will be scarce. Companies in need of licenses, permits, and other paperwork are simply stuck until the respective offices resume normal activity. The lingering fear is that this shutdown will cause a back-up of paperwork the longer it remains in place. This clog could very well lead to a “system meltdown,” similar to one in 2014 that crippled container ports on the U.S. west coast.

According to the CEO of a major logistics company, the government shutdown is putting our country’s infrastructure at risk. Without the proper federal support, infrastructure develops holes that could eventually lead to a snowball effect of customs employees failing to adequately respond. Reported last week, Mick Mulvaney, the White House Chief of Staff, expects the shutdown to persist indefinitely.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

2019 Logistics Forecast

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2018 Tax Cuts, Regulations, & Innovations

In the freight industry, 2018 was a year for the record books. New corporate tax cuts led to new business investments and the ELD mandate heavily impacted supply chains everywhere. Industry changes included more strategic supply chain planning, tighter capacity across the board, safer driving initiatives, strict enforcement of the ELD, and much more. In addition, the Federal Motor Carrier Safety Administration (FMCSA) developed two measures to ease the transition into the new ELD mandate: 1) issuing waivers to specialized carriers, and 2) granting more time for compliance to fleets with legacy onboard tracking. New innovations also emerged, including the electrification of powertrain components and hydrogen fuel-cell vehicles.

Infrastructure & State Transportation Funding

However, one unaddressed issue in 2018 is federal funding progress on infrastructure. Despite this hold-up, a handful of states—including Nebraska, Michigan, Pennsylvania, and Ohio—implemented major spending infrastructure programs. Minnesota and Connecticut officials also pushed for improved funding. In other states like Colorado, Missouri, and Utah, transportation funding failed to be voted through. Furthermore, California voters decided to further increase their 2017 increase to diesel fuel tax increase from 20 cents per gallon to a much higher 36 cents per gallon.

2019 Supply Chain Implications

Overall, there is a general push by the FMCSA to create safer driving conditions with mandated ELDs. Corporate tax cuts are allowing companies to invest more revenue back into their supply chains to find the qualified help they need to navigate these new FMCSA regulations. There also seems to be a push for a more “green” supply chain. We are sure to see more changes on each of these fronts in 2019.

Furthermore, there seems to be a state-level push for higher infrastructure and transportation funding. Once the political environment cools down after the next tariff deadline with China in March, it is not far-fetched to assume there will be more federal attention to navigating infrastructure issues that the freight transportation industry faces every day.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

ELD Mandate Causes Shift Across The Supply Chain

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Navigating the ELD Mandate

Implemented just over a year ago, the ELD mandate has obviously had the most effect on the trucking industry. However… there are less obvious effects from the new regulation. The ELD mandate is indirectly affecting ocean, air, and intermodal freight. To navigate ELD, shippers are adjusting their supply chains to maintain their supply chain’s efficiency by searching for alternate routes and modes. Due to this general shift in the supply chain, you can expect to see rates, capacity, and more variables affected.

Rates, Capacity, & Transit Time

The ELD mandate has started a “domino effect” in the supply chain. As shippers try to maintain their supply chain’s efficiency, other aspects shift as a direct result. The International Air Transport Association (IATA) reported that in April 2018 alone, North American airline freight volumes expanded by 3.2%. As the demand for air and other modes continually increased throughout 2018, you can expect to see increased rates across the alternate modes as a direct result. Combined with a driving hour shortage from the ELD, it’s crucial to ensure capacity is available prior to shipping your freight. Transit time largely depends upon each aspect of your supply chain running smoothly.

There are many variables that the ELD mandate affects on a daily basis. Therefore, it is important to 1) understand those variables, 2) ensure capacity at each transit point, and 3) develop strategic partnerships with carriers & brokers who are dedicated to your freight. Additionally, a handful of those variables include the region capacity to which you’re shipping, market rates by lane, and eligible/available carrier driving hours. If your supply chain does not have a person dedicated to consistently monitoring the above-mentioned variables to maintain your supply chain’s efficiency… consider giving BM2 Freight a call. We are the experts in navigating the ELD mandate and are eager to learn about your business model and your specific supply chain needs.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

BM2 Freight
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sales@bm2freight.com
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