Jan 23

Container Weighing Rules for 2016: Background

Source:  JOC


Effective July 1, 2016, any container leaving from any port in the world must be accompanied by a shipping document signed either electronically or in hard copy by the shipper on the bill of lading listing the verified gross mass of a container in order to be loaded onto a ship. The mandate from the International Maritime Organization under the Safety of Life at Sea (SOLAS) convention comes after misdeclared weights contributed to maritime casualties such as the breakup and subsequent beaching of the MSC Napoli on the southern U.K. coast in 2007 and the partial capsizing a feeder ship in the Spanish port of Algeciras in June, 2015.

The weighing must be done in one of two approved ways, called Option 1 and Option 2, on scales calibrated and certified to the national standards of the country where the weighing was performed. Many of finer points of the new regulation have not yet been finalized, such as enforcement, and what happens to a container that arrives at a port without the necessary documentation or if the VGM (verified gross mass) declaration for a container turns out to be false or incorrect.


Jan 13

Possible Service Impacts of Carrier Mergers in 2016

From JOC.com

With two and possibly three mergers or acquisitions among container lines scheduled to occur this year, beneficial cargo owners are wondering how their supply chains will be impacted.

French carrier CMA CGM will acquire Singapore’s NOL for about $2.4 billion; the Chinese government has approved the merger of Cosco and China Shipping Container Lines into a single entity called Cosco Shipping Group; and the South Korean government has been encouraging Hanjin Shipping and Hyundai Merchant Marine to engage in some kind of consolidation.

The merger of some or all of these lines could be the start of a wave of mergers that would reshape the mostly money-losing and overtonnaged shipping sector. BCOs are divided on the impact of more consolidation. Some think it will help provide stability and better services, while others worry about the impact on competition.

“Capacity is out of control right now, and we could wind up seeing as few as six to eight carriers,” said Pat Moffett, vice president of global logistics at electronics company VOXX International. “If the carriers handle it right, they will improve their services and balance their rates so that everyone can reach a comfortable level.”

In the long run, Moffett said shippers may be better off with stable freight rates, even if they rise over time, rather than the kind of volatility of the last year or two. “When rates drop 30 percent, carriers can’t expect to get the whole megillah back in six months,” he said. The consolidation of the fragmented industry into a few major carriers wouldn’t result in a global monopoly, because they’d still be in stiff competition with each other, Moffett added.

Other shippers disagree. “More services, more differentiation of the market is better than less in terms of the steamship line business,” said Alison Leavitt, managing director of the Wine & Spirits Shippers Association and a participant in this issue’s Shipper Roundtable that begins on page 6. “As steamship lines merge or consolidate, it cuts down on the options. Our preference is that there are a lot of options in the marketplace and that steamship lines have freight rates that keep them viable. Unfortunately, that’s not necessarily the case right now, so I think the mergers and acquisitions will continue.”

Lars Jensen, CEO of research firm SeaIntel Maritime Analysis in Copenhagen, said he’s not surprised by the merger activity. “I have been saying that by 2020 there will be only eight big carriers, and this is gradually what is beginning to unfold,” he said. “It will take a long time.” He said the CMA CGM-NOL consolidation and the merger of the two Chinese carriers will result in a shakeup of the five major vessel-sharing alliances.

Over the next year, one of BCOs’ biggest concerns is the reconfiguration of the major alliances resulting from mergers. APL, which will keep its name, will remain in the G6 Alliance through 2016, but will eventually withdraw and become a member of the Ocean Three Alliance as part of CMA CGM.

The new Cosco-CSCL entity could join the Ocean Three, which consists of China Shipping, CMA CGM and United Arab Shipping Co., or it could remain in the CKYHE Alliance of Cosco, “K” Line, Yang Ming, Hanjin and Evergreen Line.

“All of the carriers talking about mergers are in different alliances, so what happens to the alliances? Whose ships come out? Whose ships stay in?” said Greg Boyle, director of forwarding and distribution for Philips and another participant of this year’s Shipper Roundtable. “When we do our allocations, it’s based on carrier first, but then alliance second. So we have to make sure that we have alliance coverage. And now you’re talking about redoing almost every major alliance in the industry. That’s very concerning.”

Boyle is worried about the transition period during which the mergers take place and the alliances are reshaped. “It’s a matter of timing, how quickly and efficiently they can do the merger and bring the extra benefits to the market,” he said. “It’s not a matter of whether we see them as good or bad. We just see them as how quickly they can incorporate the new company.”

Another shipper’s strategy for coping with the reshaping of the industry is to stay in touch with the carriers it has always worked with. “We stay pretty close to what’s happening with each of the five carriers we do business with, in terms of the district they serve and any kind of speed constraints that may result from vessel-sharing alliances,” said Susan Pellechio, vice president of transportation and supplier collaboration at Staples, and the third member of the Shipper Roundtable. “We’ll stay on top of the mergers during the course of the year, which helps us protect the house. Obviously, there will be ripple effects from any period of consolidation and vessel-sharing, so we’ll be speaking to some new providers as well. But given the volume of containers we move on an annual basis and the reliability of our freight, we’re in pretty good stead.”

Contact Peter Leach at peter.leach@ihs.com and follow him on Twitter: @petertleach.

Dec 03

Container Weighing Rule update: 2015-12-3

| Dec 02, 2015 6:00AM EST – JOC

Only 30 percent of shippers and forwarders surveyed by Inttra say they and their customers will be prepared for the July 1 start of new global regulations requiring containers to be weighed before they’re loaded onto ships.

“We are six months away from the change taking place and a majority of survey participants said they had their doubts or that their company or customers would not be prepared,” Inna Kuznetsova, president of Inttra Marketplace, told JOC.com.

Forty-eight percent of the 410 Inttra customers who responded to the survey said they “have their doubts” about whether they or their customer will be ready. Another 10 percent said they won’t be ready.

Sixty-six percent said they expect the new rules to produce moderate or major disruptions. Inttra’s customers include more than 50 carriers and 110,000 shippers and forwarders. The company provides electronic booking and shipping instructions for more than one-fourth of all container movements.

The new container-weighing requirement adopted by the International Maritime Organization asamendments to the International Convention for the Safety of Life at Sea are aimed at misstatement of container weights, which can create deadly hazards aboard ship, in ports, and on highways.

Compliance with the new rules will require companies to alter business practices, Kuznetsova said.

For example, the various parties must agree on when the weight certification should be provided. Submitting it when the box is booked is too early for the shipper or forwarder, who may not yet know the container’s exact weight. Waiting until the shipping instruction is provided is too late for the carrier to incorporate the information into its vessel stowage plan.

“Things like these are part of the business processes, and they have a lot of impact on how shippers and forwarders and carriers and terminal operators structure their work,” Kuznetsova said.

She said the new rules will require adjustments to electronic messages, and could prove especially challenging for companies that still use faxes and phone calls for shipping documentation.

Cargo interests and container lines  have been working to try to head off problems and develop best practices for dealing with the new rules. The Agriculture Transportation Coalition and the Transpacific Stabilization Agreement have created a working committee comprising 25 shippers and motor carriers from AgTC, eight container lines, and three software providers.

Inttra has launched eVGM, a working group of companies, and an online discussion group open to all shipping professionals. The working and the discussion groups are focused on standards and processes to ease the transition, and to pave the way for digital technology to adapt to the new rules requiring verification and certification of containers’ “verified gross mass.”

Kuznetsova said members of the working group include APL, BDP International, CEVA, Damco, Hapag Lloyd, Hamburg Sud, Kuehne + Nagel, United Arab Shipping Co., and other Inttra customers, and that the discussion group has more than 100 participants.

“An e-commerce solution is necessary to minimize the impact of the reporting requirements which otherwise would result in a slow and costly process,” said BDP Vice President John Clark.

Kuznetsova emphasized that the online discussion group’s participants will be separate from Inttra’s market development, and that participants will not be required to work with a specific vendor to comply with the new rules.

“Some have said that SOLAS VGM could be to the ocean shipping industry what Y2K was to the broader business world,” Kuznetsova said.  “These survey results are consistent with that, as they reflect concerns over potential disruption and lack of preparedness. We believe that coordinated action can facilitate a smooth transition.”

Contact Joseph Bonney at joseph.bonney@ihs.com and follow him on Twitter: @JosephBonney.

Nov 19

Panama Canal Backlog Update 2015-11-19

| Nov 18, 2015 3:33PM EST JOC

The vessel backlog that’s plagued the Panama Canal since mid-October remains above normal levels, but canal authority officials say wait times are now diminishing since they started taking steps to expedite traffic through the waterway.

The number of vessels awaiting transit has been reduced significantly over the past month, according to data from AIS Live, a sister product of JOC.com within IHS. On Wednesday there were 10 vessels in transit and 16 vessels at anchor: 12 on the Atlantic and four on the Pacific side. That’s down considerably since the prior two weeks when AIS Live data showed at least 20 vessels at anchor on either side of the canal.

According to canal authority officials, the recent delays are largely the result of an influx of larger-than-average vessels, unseasonably high traffic to the U.S. West Coast and weather conditions related to the El Nino drought. Measures meant to expedite traffic have been cutting down wait times, they said, even if the backlog remains higher than average. The Panama Canal Authority didn’t respond to JOC.com queries on when the backlog was expected to end.

The canal authority on Monday announced plans to increase its efforts to crackdown on the congestion. As of Friday, the canal authority said, only six slots — instead of the eight typically available — will be offered to regular vessels with beams under 91 feet. The just-in-time transit service will also be limited to one vessel in each direction for super and regular vessels.

A suspension on booking slots for vessels less than 300 feet in length was instituted, but has since been lifted and the number of slots for those vessels has returned to normal, the canal authority said.

The latest measures come just a week after the canal authority postponed all non-critical maintenance work at canal locks, modified its booking system, canceled draft restrictions and assigned additional crews to operate tugs, locomotives and locks.

“We are working hard to improve the situation and are making steady progress, but it is slow,” Panama Canal Administrator and CEO Jorge L. Quijano said in a statement last week. “And we will do more to address the issue as quickly as possible for our valued customers.”

The congestion began to mount last month, according to freight forwarder OEC Group.

“Beginning in mid-October, the Panama Canal began experiencing congestion issues on both the Atlantic and Pacific sides,” freight forwarder OEC Group said in a message to customers in early November.

Cosco told customers last week that a number of vessels have been delayed or otherwise impacted by the congestion. Two weeks ago, the carrier announced one ship, the Cosco Auckland, faced a 10-day delay. Last week, the Cosco Boston faces a similar nine-day delay.

Meanwhile, CMA CGM has announced plans to cancel its Manhattan Bridge Service to the Port of New York-New Jersey and Virginia for the Nov. 4 sailing of the vessel Amalthea on its Vespucci service rotation “due to operational issues resulting from delays in transiting the Panama Canal.”

But it’s not just vessel delays that are plaguing the canal, currently undergoing a $5.25 billion expansion project. The project is expected to be completed by April, but some of the newly installed locks have begun to leak and repairs will be more extensive than previously indicated, authorities have said, leaving the date for their completion uncertain.

The expanded canal will allow container ships capable of carrying more than 11,000 20-foot-equivalent units to transit the waterway, more than twice the vessel size that can pass through the existing locks.

Quijano has assured shipping leaders that the canal’s new, larger locks should open on schedule. The nation’s foreign ministry already has sent invitations to some 70 heads of state for the opening ceremony.

Despite some claims from shippers and carriers alike that repairs to the newly constructed canal locks that are now leaking water were behind the delays, the canal authority said last week that was not the case.

“The greater demand is attributed, in part, to traffic diverted from the U.S. West Coast and a higher-than-normal volume of ships that require additional security measures, such as tankers and gas carriers,” the authority said in a statement.

The canal faced a similar backlog in March and April that was pegged to the lingering effects of U.S. West Coast port congestion tied to slowdowns during protracted contract negotiations between theInternational Longshore and Warehouse Union and the Pacific Maritime Association, which represents employers.

The canal has additionally seen a higher percentage of large and deep-draft vessels, which also affects transit time, the authority said.

Weather has also been a factor, the authority said. Various reports have cited adverse weather conditions in the area as El Nino has reduced rainfall and lowered the water levels of the Gatun and Alhajuela lakes, which feed water to the canal’s locks. The canal authority in September announced plans to restrict the size of vessel drafts passing through the waterway for the first time since 1998, but the restrictions were suspended after some rainfall helped raise water levels.

Fog, too, has played a part, the authority said. “In the month of October alone, fog delayed 107 vessels.”

Despite so many factors out of the authority’s control, Quijano said his team will continue to tackle the congestion.

“We have taken, and will continue to implement, measures to speed traffic and reduce wait times,” Quijano said.

Contact Reynolds Hutchins at reynolds.hutchins@ihs.com and follow him on Twitter: @Hutchins_JOC.


Nov 17

How have the U.S. Inventory-to-Sales Ratios affected Import Freight Rates

November 17, 2015

U.S. Inventory-to-Sales Ratios historically impact the importing community. As 2010 came to a close, the U.S. Inventory-to-Sales Ratios were at historic lows. The economy was bruised from the recession. Purchasing managers had never seen a recession such as the one the economy had experienced. Forecasting demand was impossible. Purchasing managers held purchasing to a minimum in 2010, but by Christmas, consumer spending began waking up. The combination of historically low inventories pre-Christmas 2010 and an unexpected pickup in spending that same Christmas led to a buying binge by Purchasing Managers in the first quarter of 2011.

In January 2011, I called 75 importers in the Denver area. I remember every importer sounding giddy with unexpected customer orders! They were frantically placing orders with their overseas suppliers. I quickly called my shipping division and alerted them to expect a severe pickup in container bookings at the end of February and well into the 2nd quarter. Not only had the importers been operating with low inventory, but the steamship lines had parked vessels and were “slow steaming”. Demand was going to hit a shipping industry that had laid off equipment and people.

What ensued in 2011 was a series of rate increases as high as $1800.00 per 40′ container from January to November of that year. Not only did rates go up, but space was so tight, in some cases it took 3 weeks to get onto a ship. Thankfully, due to our early sensing of this issue in January, we had not only locked in fixed rates for many of our customers, but we had locked in space, avoiding the rate spikes and delayed shipments.

As we head into the end of 2015, we are experiencing the exact opposite of 2010-2011. We have historically high inventories that grew even more in October. The inventory of mega-ships are adding to capacity in the market, and consumer spending has slowed. Unless we have some Black Swan event, this should keep containerized freight rates at the lower end of the range through at least mid-2016. We should also not experience capacity and lift issues.

Below is this month’s release of the U.S. Inventory-to-Sales Ratios and an analysis by the JOC.


Piles of warehoused goods don’t seem to be shrinking that fast, despite the much ballyhooed destocking of U.S. inventory. Data released by the U.S. Census Bureau Nov. 13 show U.S. total inventories, both total inventories and retail stocks, rose in September from August.

That could mean lower than expected U.S. freight demand, at least for long-haul domestic carriers, in the fourth quarter, though carriers specializing in smaller shipments could make gains, along with local and regional hauling companies that can replenish stores rapidly in small lots.

Slower than expected sales kept inventories high at major retailers in the third quarter.

At Macy’s, inventories rose 4.6 percent year-over-year. “We will need to liquidate this inventory in the fourth quarter so that we can maintain the flow of fresh, new merchandise,” Karen M. Hoguet, the retailer’s CFO, told Wall Street analysts in a conference call transcribed by Seeking Alpha.

Other retailers, such as JC Penney’s, are bolstering inventories to prevent “stock outs” that hurt sales during last year’s holiday season from repeating. “We made a strategic decision to invest in inventory,” Ed Records, Penney’s CFO, told analysts, raising inventory 9.3 percent.

Total U.S. business inventories rose by $5.1 billion in September to $1.82 trillion, a 2.5 percent annualized increase that pushed the U.S. inventory-to-sales ratio up to 1.38, compared with 1.37 in August, the Census Bureau said. Last September the inventory-to-sales ratio was 1.31.

For U.S. retailers, inventories rose 0.8 percent from August and 5.1 percent year-over-year to $584.3 billion, pushing the retail inventory-to-sales ratio up from 1.47 to 1.48. In September 2014, the retail ratio was 1.43. The ratio has ranged between 1.45 and 1.48 throughout this year.

Total U.S. business sales were essentially flat with August in September at $1.32 trillion, down 2.8 percent from September 2014, while retail sales were flat at $477 billion, according to the seasonally adjusted Census figures. In October, retail sales rose 0.1 percent to $447.2 billion.

For truckload and intermodal operators, high inventory levels mean diminished or weaker demand. In September and October of 2014, intermodal container volumes rose 4.5 and 4.9 percent, respectively, according to data from the American Association of Railroads. This year, intermodal volume rose 1.6 percent in September and dropped 1.4 percent in October.

For-hire truck tonnage rose 0.7 percent in September, but American Trucking Associations Chief Economist Bob Costello warned that high level of inventories throughout the supply chain “could have a negative impact on truck freight volumes” for U.S. carriers in the fourth quarter.

High levels of excess inventory have a ripple effect across supply chains and transportation networks. As the need to reorder merchandise or components drops, so does port activity. For example, imports rose only 3 percent in October at Georgia’s port of Savannah, which saw double-digit growth in containerized imports for much of the year. Containerized imports in Los Angeles, the largest U.S. container port, fell 3.3 percent year-over-year in October.

U.S. containerized imports peaked in July at 1,781,373 20-foot-equivalent-unit containers, according to JOC Senior Economist Mario O. Moreno, who last week scaled back his forecast for U.S. containerized imports this year to 5.4 percent from his previous forecast of 6.6 percent.

This year’s inventory bulge can be traced to the West Coast port labor dispute that practically shut down ports from Southern California to Washington state from November through March. U.S. sales-to-inventory ratios jumped significantly during that period, with the retail ratio rising from 1.42 in November to 1.47 in February. The ratio has been stuck between 1.45 and 1.48 since.

The increase in retail inventory in September also may reflect some shift of inventory within supply chains, as goods flow from manufacturers and suppliers in the U.S. through third-party warehouses and wholesalers to retail distribution centers and stores and eventually consumers.

Manufacturing inventories fell $2.4 billion to $645.1 billion, with the manufacturing inventory-to-sales ratio flat at 1.35. Merchant wholesaler inventories rose 0.5 percent to $588.1 billion, and the wholesaler inventory-to-sales ratio in September was flat at 1.31.

It’s going to take some time —  and possibly steep discount sales —  to bring those retail inventory levels down to the point where replenishment stimulates long-haul freight demand. In a story last week, Reuters estimated it would take retailers 1.38 months to clear through inventories with sales at September’s pace. The third-quarter inventory buildup could make fourth-quarter shipping demand seem flatter.

Carriers that handle smaller shipments — such as less-than-truckload carriers — may see some benefit, however, as shippers replenish goods in smaller lots from regional DCs or nearby warehouses. YRC Freight believes cautious shippers are more likely to restock in small bites, rather than big gulps, until consumers open their wallets wider. That could mean a larger number of smaller, palletized shipments moving in fast-cycle replenishment, the company said.

“Demand for LTL, parcel and expedited services are typically strong in Q4, but these services will be even more popular in the two remaining months of 2015,” the carrier said in a statement. “Until U.S. businesses experience sell-through of current inventories, the marketplace will remain in this cycle. Reorder cycles will be abnormal, and the use of LTL should increase.”

For a truckload carrier the trailer may be half empty, but for an LTL operator, it’s half full.

Contact William B. Cassidy at bill.cassidy@ihs.com and follow him on Twitter: @wbcassidy_joc

Oct 19

Create a Culture of Supply Chain and Leadership Excellence with the Tools and Training of Transformance Advisors

Screen Shot 2015-10-19 at 11.22.30 AM

If you want to spread the culture of Supply Chain and Leadership Excellence in your organization, consider these classes, workshops and online tools offered by Transformance Advisors.

The Lean workshop is a great source of inspiration. The format allows everyone to participant and gain insights into areas of opportunity for their lean transformation – whether just getting started or making course corrections to an established program.

The Alignment workshop provides a great opportunity to share and debate the challenges with getting everyone committed to the same objectives. It’s a chance for participants to share experiences when alignment was achieved and the challenges, and even disasters, that occur when people are not aligned on common goals.

 The Fresh Connection simulation is the best tool I have seen for gaining an understanding of how decisions by various functional areas are intertwined with other areas and have a direct impact on ROI.

The Hybrid Supply Chain teaches your staff the of components of supply chain, then allows them to practice their new skills with the simulation technology of The Fresh Connection. All of this is taught with convenience and flexibility in mind using the “flipped classroom” model.

Transformance AdvisorsScreen Shot 2015-10-19 at 11.22.38 AM

Oct 05

Import Lead Time Improvement

by Hugh Finerty

What percentage of your foreign sourced orders, shipped by ocean carrier, arrive at your warehouse within two days of your original plan? In supply chain language, this difference from actual vs planned is referred to as “variance”.

The answer I get from most companies is pretty bleak. It is often accompanied by a fascial expression of frustration and exasperation. This is a common experience of most organizations sourcing overseas.

The largest of companies have been attacking this specific variance issue. Larger staff, sourcing staff located in the foreign countries, technology and Lean type of process improvements, all contribute to the reduction in the delivery time variances.

But, even the larger firms are struggling to eliminate the last few days of variance in the extended supply chain.

The Cost of Variance in the Extended Supply Chain

When I ask companies about the implications of this variance, I can sense the blood pressure rising, pupils dilating and memories of very unpleasant conversations and failed initiatives.

The answers include lost customers, lost orders, reduced orders, air freight costs to meet order delivery dates, low customer satisfaction scores, substitution costs, high levels of safety stock, costly inventory levels, replenishment whipsaws, multiple re-planning meetings, rescheduling manufacturing runs,  excessive time spent tracing orders and communicating changes, stresses on relationships with suppliers, stress on internal staff, cost of switching suppliers etc…

When these implications are summed, the cost of lead time variance in the extended supply chain crosses functional and organizational boundaries, and can overwhelm any margin the organization planned to achieve by sourcing off-shore.

Where to Begin

In the logistics segment of the extended supply chain, there are more variables than with an on-shore sourcing point. Identifying and categorizing these variables is a good starting point. These should include categories such as: controllable, uncontrollable, predictable, unpredictable, high risk, medium risk, low risk.

I like using a Lean tool called Value Stream Mapping to help me identify the activities along the logistics process. Once I have the process mapped, I can begin my analysis, assessment and design tasks.

Within each activity, I can now analyze the partners handling that activity, identify the controllable and uncontrollable risks, the predictable and unpredictable risks, current KPI’s, the visibility to the organization of that activity, categorize each activity based on its impact on the process, and identify which activities are having the greatest negative impact on achieving the on-time delivery goals.

Once this analysis and assessment is complete, we can begin adjusting the logistics structure to meet on-time delivery goals.

The solution often includes some scorecarding tools that will bring the suppliers into compliance on cargo tendering, technology tools that enhance visibility of the lifecycle of the order, partnership configurations to leverage core competencies and technology, and “leaning out” relevant processes.

Learn More

These are highly achievable goals that have significant impacts on ROI , customer satisfaction and staff morale. To explore this topic in more detail and as it applies to your organization, please email me at hugh@hughfinerty.com or go to www.hughfinerty.com.

Sep 04

People With This Personality Type Are Most Likely to Be Unemployed

(A friend just forwarded me this article. Wow… but, this does not mean that certain tendencies can not be influenced by awareness and training on the skills to counteract these tendencies.)

“Perceivers” more likely to be jobless

a homeless person with a sign

By Skye Gould and Rachel Gillett

Business Insider Aug 3rd 2015 10:11AM

If you’re wondering why it’s so difficult for you to hold down a job, you might consider taking a personality assessment.

Science suggests there’s one personality type that’s more likely to be unemployed than others.

A new report from Truity Psychometrics, a provider of online personality and career assessments, found that, overall, being a “Perceiver” significantly predicts your tendency to be jobless.

ISFPs (people with a preference for Introversion, Sensing, Feeling, and Perceiving) were the most likely of all 16 personality types to report being unemployed. And INFPs, INTPs, ENTPs, and ESFPs were all more likely than average to report that they were out of a job, according to the report.

Molly Owens, CEO of Truity and developer of the TypeFinder® personality type assessment, isn’t too surprised by this finding.

She tells Business Insider the result replicates previous studies of the Big Five personality model that have repeatedly found that people with high levels of a trait called “conscientiousness” — or a person’s tendency to be goal-oriented and persistent — tend to earn more and be more successful in their careers.

She says Judgers are often highly conscientious while Perceivers tend to have lower levels of conscientiousness, so it’s expected that Judgers would experience more career achievement.

“Perceivers tend to be freewheeling, spontaneous types who dislike schedules and structure,” Owens says. “At the extreme, and if they haven’t developed good organizational skills, Perceivers can have trouble meeting deadlines and keeping up with demanding jobs. So they may actually be more likely to lose their jobs in the first place, if they’re not meeting expectations.”

Owens says Perceivers might also be more likely to spend more time unemployed once they’re out of work than Judgers. “Unlike Judgers, who dislike unpredictable circumstances, Perceivers are more likely to take the unexpected loss of a job in stride, considering it a good excuse for a little time off. Undoubtedly, it was a Perceiver who coined the term ‘funemployment.'”

“Judgers, on the other hand, are usually organized, goal-directed folks who prefer a predictable routine. They are valued in the workplace because of their attention to schedules and deadlines, so they may be less likely to lose their jobs in the first place.”

On the flip side of this, Owens says Judgers are far less likely to take to being unemployed since they thrive on structure and want to feel that they are constantly moving forward.

“So they’re more motivated to get back to work, and probably more organized about the process of finding a new job,” she says.

Aug 25

High Inventory in US to Weigh on GRI’s and PSS’s

An inventory correction or “de-stocking” is under way in the U.S., as manufacturers and retailers attempt to whittle down inventories of components and goods. That correction is cutting into freight volumes moving by rail and on highways this summer, as shippers pull from existing stocks before placing new orders, sources told JOC.com.

That destocking “does not bode well” for freight volume growth, David G. Ross, managing director of the transportation and logistics research group at Stifel, said in an Aug. 24 note to investors.

“We believe we are going through a de-stock (or right-sizing of inventories) presently,” Ross said. “It appears to have begun in the second quarter and we expect it to continue through the third quarter.” The buildup of inventories raised red flags for Bob Costello, chief economist at the American Trucking Associations. “I remain concerned in the near term about the high level of inventories throughout the supply chain,” Costello said. “This could have a negative impact on truck freight volumes over the next few months.”

Even so, total truck tonnage rose 2.8 percent in July, following an 0.4 percent drop in June, buoyed by better retail sales, factory output and housing starts, Costello said in an Aug. 18 statement.

The inventory correction could lower shipper freight spending in August and soften the market for motor carriers and intermodal rail operators, at least until the peak inland shipping season gains speed.

“Since September makes up the bulk of third-quarter volume and earnings, we will resist cutting estimates until we see and hear how next month is tracking,” Ross said. Much depends on whether consumers begin spending more of the savings they’ve enjoyed from lower fuel prices this year, money they’ve mostly been banking.

Balancing inventory in an uncertain economic climate is a challenge for retailers and businesses across the board. U.S. business inventories rose 3 percent year-over-year in June to $1.8 trillion, climbing 0.8 percent from May, the largest sequential increase since January 2013, according to data released by the U.S. Census Bureau.

The Census data shows U.S. retail sales rose 1 percent year-over-year in June, but inventories were up 4.1 percent.

That robust build-up in stocks helped grow U.S. gross domestic product faster than expected in the first and second quarters. The U.S. Commerce Department revised its initial first quarter GDP projection from an 0.7 percent contraction to 0.2 percent growth from the 2014 fourth quarter. The department is likely to revise its initial second quarter GDP estimate of 2.3 percent growth upward, but the inventory correction could weaken third-quarter GDP.

“The last few years, rising inventory levels were not a big deal, as they kept pace with sales,” Ross said, “but the inventory-to-sales ratio has been climbing for the past year, which has been concerning from a freight point of view, as excess inventories lead to a drop in freight demand when they get worked off.” According to the U.S. Census Bureau, the total U.S. retail inventory-to-sales ratio, including motor vehicles, climbed from 1.42 in June 2014 to 1.46 this June.

Some of the inventory buildup at U.S. businesses is attributed to “safety stock” ordered during the labor dispute that caused gridlock at U.S. West Coast ports last fall and in the first quarter, ending only in March. The Census Bureau’s total retail inventory-to-sales ratio spiked over that period, hitting 1.47 in February.

Target saw inventories rise 9 percent year-over-year in the first quarter, a rate of increase the retailer cut to 4 percent in the second quarter. “While we’ve made a lot of progress in the second quarter the year-over-year increase is moderated even further so far in August,” John Mulligan, the CFO, and as of Sept. 1, COO, of Target said during an earnings conference call this month.

Inventories rose at U.S. retailers in the second quarter, often outpacing sales growth. Home Depot increased inventories by $435 million, after adjusting for currency exchange rates, a slight year-over-year increase. At Lowe’s inventories rose by $389 million, or 4.2 percent, to support strong sales of appliances.

Wal-mart Stores kicked the trend, increasing net sales 4.8 percent but limiting inventory growth to 2.2 percent. The company’s goal is to grow inventory less than sales, Greg Foran, president and CEO of Walmart U.S., said during the company’s earnings conference call. “We are reviewing the end-to-end inventory management process with a special focus on shrinkage and working to close gaps,” he said. “Investments are being made in training programs store and asset protection associates as well investments in staffing and high shrink areas of the store. But it will take time to see results.”

Some retailers, including Hibbett Sports, are using discounts to eliminate excess inventory, even when it cuts into profit margins. The athletic retailer said markdowns early in the second quarter contributed to a year-over-year 0.5 percentage point drop in gross profits from net sales. “(Hibbett) has since seen positive trends in gross profit as its inventory position has improved,” the company said last week. Inventories at the $913 million retailer increased by $11 million from January through Aug. 1., a 4.5 percent gain.

The good news for shippers and their carrier partners is that consumers are spending once again. Retail sales were up 0.6 percent in July from the previous month, and 2.4 percent year-over-year, the U.S. Census Bureau said Aug. 13. Total sales for the May 2015 through July 2015 period were up 2.3 percent. Increased consumer confidence could help retailers bring inventories back in line with sales just as the build up for the end-of-the-year holidays kicks off.

Contact William B. Cassidy at bill.cassidy@ihs.com and follow him on Twitter: @wbcassidy_joc