Check Call: Sustainability takes a seat at the table

August 15, 2023

Welcome to Check Call, our corner of the internet for all things 3PL, freight broker and supply chain. Check Call the podcast comes out every Tuesday at 12:30 p.m. EDT. Catch up on previous episodes here. If this was forwarded to you, sign up for Check Call the newsletter here.

(Image: Grouphug Solar)

For those looking to get some federal supply chain contracts, sustainability measures will start to matter. The Biden administration has a new proposal, the Sustainable Products and Services procurement rule. Basically the rule is supposed to encourage buyers to purchase sustainable products and services to the maximum extent possible. If bidding on freight for the Department of Defense, General Services Administration or NASA, be prepared to have sustainability measures in place, even if acting as an intermediary for the shipper that is a vendor for the government.

Not only is the White House jumping on board with sustainability measures, it’s a rising concern of most supply chain professionals. The State of Supply Chain Sustainability report by the Council of Supply Chain Management Professionals and MIT Center for Transportation and Logistics found that there is significant pressure from investors and corporate buyers to choose more sustainable alternatives. One of the study’s interviewees stated, “I think we’re seeing more and more of our customers — both our direct customers and our indirect customers — are expecting it, or in some cases demanding it. They are looking to only purchase from companies that are investing in sustainability and are committed to being leaders in that space. I think there is a much stronger pull from the customers for it.”

Whether it’s through customer pressure or pressure higher up the food chain, this is a topic coming to the table for discussion. It doesn’t have to be overnight decisions, but if it comes down to retrofitting a warehouse to be more sustainable and have strong enhancements versus maintaining the status quo, the return on investment is going to be stronger with a better warehouse. More and more shippers are placing emphasis on sustainability measures and carbon tracking. Don’t be left out.

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One of the biggest disruptors for shipments out of China is coming up the first week of October. Oct. 1-7 is Golden Week, the seven-day holiday when most of those working in China take the week off and travel.

Now the real question is: Why does that matter in the middle of August? Great question, I’d love to tell you. Container ships coming to the U.S. can take anywhere from two weeks to more than a month to get stateside. During normal times it’s no big deal but now that Golden Week is on the horizon, it’s imperative that any space shippers need gets secured early. Now is the time to start making those plans with shippers as to what production lines need to be expedited and what ones can wait and come around Halloween. In the coming weeks, space on ships will be at a premium and not everyone wants to pay to fly something over.

Maersk has published some of the major impacts Golden Week has on logistics. If we have learned anything from the supply chain crises here in the U.S., contingency plans exist for a reason, so if there isn’t one for October, there is no time like the present to create one.

(SONAR TRAC Market Dashboard)

TRAC Tuesday. This week’s TRAC lane is from Memphis, Tennessee, to Cincinnati, a 477-mile jaunt through Tennessee and Kentucky. Spot rates for this lane are falling from mid-July, but rates are still higher than the National Truckload Index. At $2.53 per mile and falling, expect carriers to bid higher than $2.53 and brokers to push it down to maintain margin. There isn’t a significant change to capacity but the Outbound Tender Rejection Index is falling in both markets, which means capacity could be tightening in the back half of the week.

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Who’s with whom? Forward Air is moving forward. The LTL company has entered a business combination agreement with Omni Logistics. Omni is an expert in high-value expedited LTL freight. The two similarly sized companies will have 300 locations until they consolidate and build new facilities in the network.

According to FreightWaves’ Todd Maiden’s article, “The cash-and-stock transaction will give Omni shareholders $150 million in cash and a 37.7% equity stake in Forward. The consideration represents a $3.2 billion enterprise value for Omni. Forward plans to insource Omni’s third-party LTL network and implement other cost-cutting measures. Approximately $75 million is expected to come from cost takeouts, $60 million of which will occur within six months of the closing. Revenue opportunities represent the other $50 million of the total.”

Double Broker Corner

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Thoughts on this situation? Let me know. I’d love to share them with everyone.