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Supply Chain News: Virus Crisis Stressing Freight Carriers in Different Ways


 

Truckload Volumes Drop Sharply but May have Bottomed, while Store Shipping Stressing FedEx

May 19, 2020
SCDigest Editorial Staff
     

The coronavirus crisis continues to significantly impact consumer behavior and thus freight volumes, with all sorts of ramifications.

In the truckload sector, the monthly Cass Freight Index found that US shipment volumes dropped 22.7% versus April 2019 levels. However, "We believe this will mark the bottom," Cass says, adding that "May should be better, as the US economy slowly begins to re-open and some manufacturing plants turn back on."

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The growth in ecommerce orders over the past five weeks has increased DHL's parcel volume to peak season levels.


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Among the carriers, Cass notes that April was much like March in that those that mostly moved groceries, home improvement, ecommerce, and consumer staples, demand was steady, while outside of those sectors there was a dearth of freight.

Overall, Cass's Freight Index was all the way down to levels seen at the depth of the recession in mid-2009.

Naturally, that has had effect on rates. The Cass Line Haul Index, which measures US truckload rates before fuel surcharge and other accessorials, fell another 7% year over year, continuing a steep slide that started in late 2018 and continued for most of 2019 and into 2020. It is also now back to 2009 levels.

Cass notes that spot rates for dry van carriage aee down 14%-15% year over year.

Lots of Action on the Parcel Sector


The parcel sector is really being impacted by the sharp rise in commerce volumes.

As SCDigest recently reported, UPS announced that its main US parcel delivery business saw its operating profits fall by 40% in Q1, even as home deliveries soared.

In fact, by the end of March, consumer deliveries rose to 70% of the total, versus 54% in 2019. The issue: UPS makes a lot more profit on B2B deliveries.

In its earnings report, the parcel giant said its trucks are traveling 10% further per stop and making 15% more stops on their daily routes in the face of soaring home deliveries from then                    locked-down consumers.

Meanwhile, FedEx said the ecommerce surge has led it limit the number of items that about two dozen other retailers can ship from certain locations, as the company tries to prevent its network from being overwhelmed during the coronavirus pandemic, according to a report in the Wall Street Journal.

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The issue: parcels being shipped to consumers from stores instead of distribution centers.

"These customers have seen significant volume growth since the spread of Covid-19," FedEx said last week in a notice to its Ground workers reviewed by the Wall Street Journal. "In a time of already high volume growth, capping the number of packages to be picked up at these locations will limit any negative impacts to the FedEx Ground network."

Total on-line sales rose 49% in April, according to Adobe Analytics, an incredible surge -and many retailers are trying to sell off existing store inventories on-line to bring in fresh merchandise.

The Journal reports retailers are reacting in a variety of ways, including using multiple carriers and in some case bringing parcel to FedEx Ground Facilities themselves.

Retailer Caleres, with banners such as Famous Footwear and Allen Edmonds, told the Journal it has worked around the limits by shipping more from its distribution centers and from other stores it owns. It also started doing curbside pickup at hundreds more stores to ease the strain.

As more evidence of the sea change in freight patterns, the growth in ecommerce orders over the past five weeks has increased DHL's parcel volume to peak season levels, according to a company press release last week . Domestic volume has increased by 36% and cross-border numbers increased by 28% compared to daily averages seen in February.

Any reaction to the changes in the freight maket? Let us know your thoughts at the Feedback section below.


 
 

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