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 Here is just a quick summary of some things I am looking at this week and also some things which just make you go ... hmmmmmm:

1. California Ports 24-Hour Operation is Going Unused - WSJ).  So far the 24 hour out gate at the ports of LA/LB are considered a total bust.  Unfortunately, those making these rules don't understand the "chain" in supply chain.  It is not just about time available.  It is about trucks, drivers, port space, all sorts of workers, chassis and a myriad of other things.  If nothing is done on those fronts, the chain breaks and no amount of extra "open" time will fix it.  More to come but so far I rate the 24 hour port plan a F-.  
   
   
2. Driving up and down the highways at night allows you to see a big part of the problem.  Trucks parked all over the highway as they run out of hours and there is no parking for them.  Is anyone addressing this issue?  Does anyone think that parking on the side of the road, with no facilities and with no safety will attract people to the trucking industry?  Remember, for in trucking for every "machine" you employ you have to employ at least one person.  It is not like manufacturing where a "machine" eliminates the need for a number of people.  In trucking the capital employed to human is 1:1.  Treatment of Drivers: F.
   
   
3. Anyone been to Costco lately?  I have been in one in Michigan and one in Georgia recently and guess what?  The toilet paper shortage appears to be coming back.  This time I think it is more about lack of trucking capacity than anything.  Come on Costco, you can get restocked!
   
   
4. Inventory to Sales Ratios both total and just retail show little to no improvement.  This means my "when will this get better" meter is moving to the beginning of 2023 when I had it pegged at mid year 2022.  Still not coming off of the 2022 but the likelihood of it going into 2023 is getting more real. Likelihood of a quick resolution to the supply chain issues in America ending soon - D
   
   Total Inventory to Sales:
   
   
   
   
   

   Retail Inventory to Sales:
   
   

   

   
   
   
   
5. Port of Savannah is still the best port out there by far however it has been "found" by some big retailers who are slow to move their boxes off the port.  This has meant some ocean carriers have cancelled calls to Savannah and added the Ports of Jacksonville and Charleston.  I think just about everyone is starting to look at "over the water" movements to the East Coast versus getting into the mess of LA/LB then trying to move it over ground. Port of Savannah is an A
   
   
6. JB Hunt  (Stock information: JBHT)is the best run trucking company in America by far.  They knocked their quarter out of the park and they have even better days ahead.  They have transformed from an old school, irregular route trucking company to a high tech, well disciplined supply chain company.  And, the market is rewarding them for it as they have a P/E that values it like a tech company and just about everyone upgraded their stock this week.  YTD J.B. Hunt is up 44.64% as compared to Schneider (SNDR) who is up 19.7%.  (See comparison chart here).  JB Hunt is an A+
   
   
7. Costs continue to rise in all facets of the supply chain:  Various data sources tell us that yes Virginia, there is inflation, and a lot of it. 

The freight recession is real and the carriers are feeling the pain.  We know the smaller carriers are truly suffering however today Schneider (SNDR) reported and it does not appear to be pretty.  First, relative to expectations it was a tough quarter.  From Seeking Alpha:

1. EPS missed by .02 on Non GAAP and by .11 on a GAAP basis
2. Revenue was down 7.7% YoY and missed expectations by $40mm

A couple of key points from their press release:

1. Volumes and price were "compressed" and while they stated there was a "moderate" uplift in the seasonal volume the tone of the message was it was virtually meaningless.  We have learned this from other carriers:  There has been no meaningful "surge" period.
    
2. We knew there were shutdown costs due to the closing of the First to Final Mile business (Which opened to a lot of fanfare about 2 years ago) but I found it surprising they had to impair the value of trucks they are selling.  This tells me they are shrinking the fleet and are actually taking losses on the equipment to dispose of them.
   
3. While their truckload numbers are tough to decipher due to impacts of the FTFM closure and the impairment of tractors, both intermodal and logistics (think brokerage) suffered as well.  Intermodal was down 2% due to volumes and Logistics was down 13% (Blamed on a major customer insourcing). 
   
4. They lowered their guidance from what was $1.30 per share to $1.38 and it is now $1.24 to $1.30.  Again, this appears to be due to the tractor impairment charge.  Interestingly they lowered their CAPEX for the year which again, indicates to me they are shrinking the asset base.  

My opinion is the freight recession is even tougher than originally stated for all carriers.  While I do think there is some "kitchen sink" activity going on here (So many losses due to shutting down the FTFM that they are adding in other stuff to clean up) I think the recession is real.  

It took me a few days to even think about a world without Mike Welch.  Mike was truly a special man.  He was special not in a flashy way but special in a very specific way; he made everyone's life a little bit better.  He was a friend to me, a business mentor to me, a supplier in some instances and he was a model of community involvement for the community my family lived in for so many years.  He made our life better.

I feel a need to tell the story of how Mike and I met and started working together.  In 2004 I was the General Manager of a the Ford Service Parts Business working for Schneider Logistics (SLI).  Ford was building out their Daily Parts Advantage service model and asked SLI to somewhat replicate what we were already doing for GMSPO.  As the GM I had to find dedicated carriers to make all the deliveries nationwide to almost 5K dealers and we were having trouble finding a carrier in Evansville, Indiana.

Luckily, I had an acquaintance who used to sell truck parts but now owned a company called Segmentz.  They were a very small LTL company and at the time Ford wanted to really look at costs and so we took a chance on this small, unknown and very inexperienced company.  Right after we contracted with them they purchased Express-1 from Mike Welch.  This acquisition is what made Express-1 a public company and it turns out the only real profitable part of the merger / acquisition was the part we contracted with for the Ford Service Parts. 

This caused Mike to become President of the combined company and they shed just about everything that was Segmentz.  This is how I met Mike.  I was living in Novi, MI and Green Bay, WI at the time.

Fast forward to 2005 and I had decided to leave SLI and went to Whirlpool in St. Joe Michigan.  One morning I went to get my haircut and who was in the barber chair but Mike Welch!  I was shocked as I really had no idea they were based in Buchanan.  We talked a lot and it turns out Mike was deeply involved in my son's school and he was a great expedite provider to Whirlpool.  This meant I was able to rekindle both our professional work and our personal relationship.   So, what did I learn from Mike:

1. He was a humble man and he taught me the art of humility.  While being wildly successful in the logistics business he never sought the spotlight.  He made his business better, he took care of his associates and he made his customer's businesses better. 
   
2. He taught me about giving back.  While he clearly made a lot of money when he sold to XPO he always took care of the community.  He always was there when we needed him for the boys and girls clubs, the Lakeshore Foundation and anything else which would make the community better.  He was always there.
   
3. He never forgot his friends.  While I considered him a friend I would not say we were super close however every time I saw him you would think we had been friends since grade school.  He always had time and he always engaged.
   
4. Finally, he was a great businessman.  He was an entrepreneur, he served his customers, he was proud of what he built and he always was innovating.  I learned a lot about just down to earth business concepts from him.