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Starting June 1st, 2023 Our warehouse fee will be $0.65/cubic foot per month

In effort to lower the warehouse storage fee during inflation, we have went narrow aisle racking.This construction took us four months but the project is finally completed. With narrow aisle racking, we are able to drop storage by 24%.We as partners will go through this inflation together.

Starting June 1st, 2023 Our warehouse fee will be $0.65/cubic foot per month

In effort to lower the warehouse storage fee during inflation, we have went narrow aisle racking.This construction took us four months but the project is finally completed. With narrow aisle racking, we are able to drop storage by 24%.We as partners will go through this inflation together.

Blogs/hot-news

03/10/2023

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Efficient Freight Solutions Help Auto Shippers Reduce Inventory Costs

    Efficient Freight Solutions Help Auto Shippers Reduce Inventory Costs

    Production still down from pre-pandemic levels

    An F-150 rolls off the line at Ford's Dearborn plant in 2018 (Photo: Ford Motor Company)

    The pandemic disrupted supply chains in multiple sectors of the U.S. goods economy. Automotive production has not recovered to pre-pandemic levels, as the industry requires coordination between multiple tiers of suppliers. The United States produced 137,400 units in January 2023, which is 38% less than the 223,600 units produced in January 2019.

    U.S. Domestic Auto Production in thousands of units per month (Chart: St. Louis Fed)

    The Mexican automotive industry has also struggled to reach 2019 production levels, with General Motors and Chrysler holding respective market shares of 22.9% and 14.4%. Automotive shippers are "cautiously optimistic" about the second half of the year in terms of ordering, supply, and buying, according to Charles Klein, station manager at OEC Group's Detroit station, which transports significant volumes of international automotive shipments. Year-to-date Class I railroad motor vehicle volumes were up 10% as of March 4, indicating a solid start compared to the same period in 2022.

    Klein stated that the supply chain issues that hampered automobile production are diminishing. Trans-Pacific container transit times are reasonable, and while rail service still leaves much to be desired, the extreme congestion at inland intermodal ramps has improved "in leaps and bounds" over the past three months.

    The issue of inventory

    The combination of limited auto production and monetary and fiscal stimuli has created a low inventory environment. Typically, this situation would increase demand for transportation volumes. When a product's inventory levels fall below historical norms, the replenishment process increases transportation demand. Nonetheless, when inventory levels exceed historical demand, freight velocity typically decreases as businesses wait for sales to catch up and consume the excess inventory. Lower inventories have led to historically high used car prices in the automotive industry, which are unaffected by rising interest rates. In February, the Manheim Used Vehicle Value Index, which is derived from the analysis of millions of used car transactions, increased by 4%.

    Index of average used car prices in the United States (Chart: Manheim)

    The persistently high prices of used automobiles suggest that pent-up demand may respond positively to increased production of new automobiles. Nonetheless, some believe that rising inflation may be driving potential new-car buyers into the used-car market. In spite of rumors that shippers would adopt just-in-time inventory models, according to Charles Klein of the OEC Group, automotive shippers are opting for premium, expedited-style services to facilitate tight inventories and higher freight speeds. Some customers even request transloading in port cities because they prefer the speed and visibility of truck movements over intermodal rail. In 2023, both trucking and intermodal rates have decreased significantly, and the disparity between them has shrunk.

    Percentage savings delta between intermodal and truckload van contract rates

    As of March 8, the percentage difference between national average intermodal and truckload contract rates has shrunk from more than 15% for the majority of 2021 to 10.4%. Transporting freight via truck rather than rail is less expensive for shippers who wish to transport fewer goods.

    Charles Klein, manager of the Detroit station for the non-vessel operating common carrier (NVOCC) OEC Group, which transports significant volumes of international automotive shipments, reported that ocean carriers are also pleased to offer premium services. He noted a trend among steamship lines to offer actual premium expedited services, in which cargo will be given priority loading overseas, priority unloading at destination, and faster rail transit, and he advised shippers to investigate it.

    The pronounced negative environment for ocean container rates, particularly on the Trans-Pacific, caused by lower volumes and consequently a loosening of capacity, may encourage steamship lines to differentiate themselves and expedite customers' cargo.

    In 2023, inbound container bookings to the United States have rebounded, although they are nowhere near the elevated levels of 2021 that caused ports, terminals, and rails to become congested with excess containers.

    Inbound Ocean TEUs Index – United States

    As new car prices remain high and inventory levels remain low, the automotive industry is anticipated to remain leaner for an extended period of time. According to Barclays equity analyst Dan Levy, US pricing should remain robust, and inventory accumulation may continue until 2024, settling at 75% of historical levels. Levy predicts that the volume of global auto production will continue to increase but will plateau at 90 million LVP by 2026. Although there may be pent-up demand from aging car owners, Americans are over-indebted, and real personal incomes were negative in January 2023 compared to December 2022.

    Even as interest rates rise, automakers closely monitor consumer behavior, as Americans may have less disposable income due to high consumer credit card debt and negative real personal incomes. As OEMs and suppliers continue to maintain a leaner inventory model, analysts in the automotive industry speculate that the industry may not attempt to return inventories to pre-pandemic levels. Levy sees a mixed outlook for the industry, with recession risks, elevated inflation, and positives such as an expected steady upward trajectory in global auto production volumes and pent-up demand bolstering US sales.

    Revolving consumer debt held by Americans includes credit card debt (Chart: St. Louis Fed)

    While automotive shippers seek an increase in production, they are cognizant of weak consumer fundamentals, making it difficult to reconcile the two objectives. Therefore, they are prudent and prioritize supply chain strategies that account for demand's downside risk. Suppliers and original equipment manufacturers are opting to maintain a lean inventory while utilizing excess transportation capacity to increase freight velocity in their networks. This strategy allows them to be prepared while awaiting the unfolding of the consumer story.

     

     

    MintN

     

    Mint Nguyen

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