Fuel prices have shippers rethinking their supply chains
The spike in fuel prices is big enough to shift shippers’ priorities from delivery speed to cost, a major reset since the start of the COVID-19 pandemic, writes Bill Cassidy in the Journal of Commerce.
“I had already included a 10% increase in fuel surcharges in my budget, and that’s been blown out of the water,” says Holly Pearce, director of logistics at battery-maker C&D Trojan. “Best case, I’ll be paying $1.5 million more, worst case, $3.9 million more, and I already had $7 million baked into my budget for domestic surcharges.”
She says fuel costs will “make us less inclined to ship light truckload, say 20,000 or 22,000 pounds, and we’ll be less inclined to ship LTL as well. We’ll wait for a full truckload.” Another alternative: shift back to intermodal rail from over-the-road truck.
Don’t sleep on diesel
With diesel costs on the rise and tougher emissions standards only two years away, electric powertrains and aerodynamic enhancements are big factors for truck fleets.
“The regulatory compliance roadmap shows you that in the next six years, there are a lot of reductions coming in place that will drive electrification,” Chet Ciesielski, VP of Navistar’s on-highway truck business, tells Fleet Owner. “Government is driving toward improved fuel, which helps the fleet, and it’s also driving us toward a more electrified future.”
Diesel isn’t going anywhere soon, he says, noting that “we have to make continuous improvements on those products because the fleets will be running those on a large scale for at least the next five to 10 years.”
COVID prompts lockdowns in China
China is suffering its worst COVID-19 outbreak since the pandemic began.
Ports and warehouses remain open, although truckers require negative COVID tests to pick up cargo, and Shenzhen, one of the country’s most populous areas and home to its third-largest port, is in lockdown.
American Shipper speculates that if no ports shut down but volumes coming out of factories are reduced, it would actually help normalize supply chain flows without forcing carriers to cancel sailings.
The worst-case scenario would be widespread port closures. Bjorn Vang Jensen, vice president of Sea-Intelligence, warns in an online post that if Yantian closes, “the whiplash effect when it reopens will lay waste to all the progress (maybe being) made in the U.S.”
Developers offer updates on automated trucking
Developers of automated driving technologies for heavy-duty trucks showcased their on-road testing and commercialization plans at the Technology & Maintenance Council annual meeting last week.
Kodiak Robotics says it has completed more than 1,300 deliveries and has been transporting freight autonomously in Texas since 2019, including runs between Dallas and Houston without intervention by a safety driver who is “essentially along for the ride,” says Jamie Hoffacker, head of Kodiak’s hardware division. Kodiak aims to launch its autonomous driving product for fleet customers in 2025.
The prospect of self-driving trucks could further intensify a land grab near big cities, reports the Wall Street Journal. A model where autonomous vehicles would handle the highway driving while humans would haul freight for the final stretch of city deliveries would require land on the outskirts of cities to park and switch trucks.
Investors are looking to profit by buying up these sites and renting them out to logistics or traditional trucking companies under five- or 10-year leases.