The Friday Report: December 13th, 2019

Quick wrap up of a few hot topic newsworthy stories in the supply chain logistics industry

 

Time to Park:  Trucking Industry Leader Celadon Closes

In a surprising turn of events, one of the largest U.S. trucking firms is calling it quits. Last week, two former Celadon executives were charged with fraud and conspiracy for allegedly hiding millions of dollars in shareholder and lender losses.  Stymied by the fast fall of freight rates and pileup of penalties levied by the U.S. Department of Justice for settlement of securities fraud charges against prior management, the trucking industry heavyweight filed for bankruptcy.  Celadon filed for Chapter 11 bankruptcy protection voluntarily along with 25 affiliate entities with the exception of Taylor Express. Celadon, one of the largest for hire carriers in North America is the largest carrier in the state of Indiana and massive job loss is expected.

Earlier in the year, Celadon reached an agreement with the U.S. Department of Justice to pay $42.2 million to settle security fraud allegations resulting from inaccurately reporting assets and profits.  The settlement, combined with company debt and industry struggles hampered Celadon’s ability to recover, costing 4,000 jobs.  The closing happened abruptly, stranding approximately 3,000 truckers hauling loads without pay, use of company gas cards or even transportation home.  Loads were refused and trucks were parked.

According to industry analysts, 640 trucking firms declared bankruptcy in the first half of 2019.  Freight volumes have declined for eleven consecutive months and the market remains in a recession.  Celadon competitors have been offering bus tickets home and have provided food to stranded drivers.  The Celadon closure is the largest trucking failure in 2019 and is one of the largest in the history of the U.S. trucking industry.

Consumers Craving Convenience Check out Click-and-Collect

Using existing brick-and-mortar stores, more retailers are expanding into online ordering for grocery pickup services.  Kroger and Walmart have pushed ahead to grow this segment of their business.  By 2020, industry experts estimate that 25 percent of consumers will have used click-and-collect service for grocery shopping to avoid check-out lines in stores to save time and increase the flexibility of grocery shopping options.

For grocery retailers, solving the problem of identifying when a consumer’s vehicle is in the vicinity of the store is the biggest challenge followed by the time it takes to pack a grocery order.  Having the needed quantity of order pickers in the store is a related challenge.

Instacart partners with retailers to help offer pickup of online orders nationwide in addition to its core delivery service.  So far, Walmart is winning the click-and-collect grocery wars with 11-13% of its customers using the service.  By 2020, this is expected to grow to one third of Walmart sales.  Walmart continues to refine elements of its service to reduce waiting times and pinpoint the parking spot selected by the customer for pickup.

U.S. Tariffs and Trade Wars Tax the Food and Beverage Industry’s Taste for Profitability

For the past two years or so, trade battles have made it challenging for companies across the food industry to export products.  This has caused significant financial burden on businesses across the food supply chain from farmers and producers to shippers.  Rapid shifts in trade policy, declining trust and rising costs and the complexities of dealing with tariffs is frustrating the food industry.

For farmers, business conditions are the worst in decades.  Trade wars have increased already high interest rates and low prices and farmers’ net income has declined 45% since 2013.

Here are some other notable challenges impacting the food and beverage industry in the United States:

  • Wait for Congressional passage of USMCA to replace NAFTA
  • Need for the resolution of trade war with China
  • Necessity to resolve the aluminum and steel tariffs as this impacts food packaging

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