BM2 Freight Services provides a portfolio of services that makes us a one-stop shop in today’s world of transportation.

Brexit Causing Uncertainty For Global Supply Chain


18Mar

 

Brexit, supply chain, british, uk, eu, parliament, Norway, Europe, supply chain, germany

Brexit Duties Deadline

On March 13, British Parliament voted down the idea of leaving the E.U. on a “no-deal” scenario in which the primary concerns of avoiding a hard border with Ireland and deciding what tariffs to implement would not be addressed.  The vote was no landslide however, with a 312 ‘against’ to 308 ‘for’ final tally.  With the approaching March 29 Brexit deadline looming, the vote on extending that deadline passed last Thursday with a 412 ‘for’ to 202 ‘against’.  However, beyond that point the picture is unclear as the U.K. will be faced with a number of options on how to proceed with their exit from the E.U.  The few concrete factors to the situation include the deadline being pushed back to June 30, and businesses are highly against a “no-deal” Brexit as proceeding in that direction would adversely affect their supply chains and revenue.

Brexit Expert Insights

With 2 solutions to the Brexit “no-deal” scenario voted down by Parliament, the scenario remains largely up in the air for how the U.K. plans to exit the E.U.  In addition to the deadline extension, Parliament voted on an amendment to result in a second referendum that was voted down.  Furthermore, professor of political science at the University of Pennsylvania, Brendan O’Leary stated that a viable option for reaching an agreement on the Brexit would be the Norway option.

The Norway scenario would allow the U.K. to still be a part of the E.U. single market, but would decrease the U.K.’s voice in shaping the conditions due to no longer being a part of the E.U.  However, based off of the current solid facts of the situation the possibility for a second referendum is still looming.  Should another time crunch with the new June 30 Brexit deadline present itself, the possibility of Conservative members of Parliament voting for a second referendum increases.

Furthermore, the overview of the ongoing Brexit scenario demonstrates how interconnected the supply chains of the U.K. and E.U. really are.  Additionally, we would recommend that companies with supply chains in these geopolitical areas take a close look at the situation and find ways to mitigate the risk of additional import and export duties going into effect once a deal is struck.  Adidas is a great example of a company that has taken steps to mitigate Brexit risks by centering their European supply chain in Germany and the surrounding areas.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Market Stability and Contracted Freight On The Rise


11Mar

Market stability, freight, trade war, tariff, otvi, contract freight, contracted freight, port, los angeles, long beach, china, freight market, spot-rate

Market Stability Amid Trade War

Recent data from the Outbound Tender Volume Index (OTVI) shows that national trucking volumes are almost exactly where they were last March in 2018. However, spot rates are down 10-15% and tender rejection rates have also dropped significantly since last year. This recent data indicates that 2019 might experience a dramatic increase in contracted freight.

Due to the large volume of freight entering ports, most notably Los Angeles and Long Beach, lead times for trucks have naturally increased. This increase has resulted in trucks actually being available where they are needed most. The steady flow of freight from ports, combined with available capacity in the right place and the increase in contracted freight, is providing stability to the typically volatile market.

However, 91 of the 135 freight markets in the United States have increased in volume in the last week. This presents the question… how long will this market stability last?

Our Insight

Opposite to early 2018, the freight market has seen volume increase at a slow but steady rate. This slow but steadily increasing freight volume could be attributed to many companies shipping their inventory out of China amid concerns raised by the recent trade war. Major port cities like Los Angeles and Long Beach have been overwhelmed with record freight volumes. This has created a bottleneck effect: volume is being processed as quickly as possible, but there is simply too much to process all at once.

Market stability is attributed to the steady trickle of volume coming from these major port cities, but this stability will only last so long as volume remains relatively the same across the country. Well over 50% of the country’s freight markets experienced volume increases in the past week. Should volume levels in other areas of the country continue to rise, capacity will eventually disperse across said markets and cause spot-rates to skyrocket. Furthermore, should the market destabilize contracted freight would experience a sharp decline as well. However, if more deadlines to the trade war tariff hikes are publicized, then port cities will continue to see a rise in volume, and the market will presumably stay relatively stable.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Trade Tariff Hike Delayed Again by Trump


05Mar

Tariff hike, tariff, trade, trade talks, trump, lighthizer, ustr, China, congress, house ways and means committee

“Substantial Progress” in Trade Talks

On the evening of Sunday, February 24th President Trump tweeted that the scheduled tariff increase to 25% would be delayed yet again.  In his tweet he cites “substantial progress” in trade talks and cited the negotiations as overall “very productive”.  The President’s tweet came in stark contrast to U.S. Trade Representative (USTR) Robert Lighthizer’s statements that March 1 would be a hard deadline for the tariff increase.

However, along with a handful of administration members cited progress in the trade negotiations with China.  Despite these reports, there has been very little specific detail reported on the situation that may offer businesses some insight into what to expect.  Furthermore, USTR Lighthizer testified before the House Ways and Means Committee on Wednesday, February 27th and reflected the same general sentiment from Trump and his administration that “we are making real progress”.  Details on the negotiations seem to still be locked up tight despite the reported progress that has been made thus far.

Lighthizer Hints Tariff Exclusion Process

In addition to the general details of progress being made from USTR Robert Lighthizer at last Wednesday’s House Ways and Means Committee meeting, Lighthizer cited China devaluing its currency since the initial 10% tariff came into effect in September of 2018.  Furthermore, due to China devaluing its currency, “the effect has been less significant that fully 10%” according to Lighthizer.

However, despite the lack of specifics offered thus far, USTR Lighthizer did commit to having an implemented exclusion process should tariffs rise to 25%.  He further reported that the administration is “looking at” an exclusion process for the 10% tariffs that are in place now.  Additionally, Representative Jackie Walorski cited a letter at the recent hearing that her and 168 additional Congress members sent to the USTR in October of 2018 which stated the need for an exclusion process.  In an attempt to delve for a specific timeline on when a tariff exclusion process would be defined and implemented she went further to cite the most recent spending bill that instructs the USTR to establish an exclusion process for the next round of tariffs within 30 days of its signing.

Despite the recent efforts to gain more insight into the specifics of the tariff timeline, the overarching theme of uncertainty seems to persist.  Our insight at BM2 is that it would be wise to proceed as if the 15% tariff hike will eventually go into effect.  However, the pressure from Congress combined with Lighthizer’s commitment on having a tariff exclusion process is promising for businesses.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Cargo Theft Experiences Decline


25Feb

Cargo theft, freight, shipment, theft, security, safety, carriers, shippers, trucking companies, trucking, truck maintenance, maintenance

Cargo Theft Data

A recent report from Commercial Carrier Journal (CCJ) stated that cargo theft reports in the United States dropped 19% from 2017 to 2018. In 2018 alone, there were 592 cargo thefts in the U.S. with an average cargo value of $142,342. According to the CCJ, the fourth quarter was the most active in 2018 for cargo thefts, with a reported 171 thefts.

There are several variables contributing to higher Q4 cargo thefts in general, but 2018’s unusually stimulated theft environment was directly correlated to the ongoing tariff war with China. Countless companies considered pulling their products out of China amid the looming tariff hike and combined with increased shipping during the holidays, heightened cargo theft rates were imminent. Despite the volatile freight environment, the good news is that cargo theft still decreased 19% from 2017. The reasonable assumption for freight moved in 2019 and 2020 is that theft rates will continue to drop. However, there are proactive strategies your company can take to further protect your cargo from any future risks.

Proactive Planning

According to freightwaves.com, one key factor contributing to the decline in cargo theft is shifting overall truck maintenance from a reactive mentality to a proactive mentality.

What is a “proactive mentality”?

Instead of addressing vehicle issues as they arise, trucking companies are now trying to focus more on preventative maintenance. This means less downtime on the road and less maintenance issues during transit. With roughly 74% of cargo thefts happening to full truckload shipments while over the road, it is crucial to decrease idle time at truck stops and maintenance shops to ensure the safety of freight. Are you currently vetting your carriers for preventative maintenance?

At BM2 Freight, we believe in connecting great shippers with great carriers, and that means placing the security of your shipments as one of our top priorities. We vet all of our carriers for proper and regular preventative maintenance, as well as ensure superior cargo safety ratings. Have more questions? Give one of our supply chain experts a call at (859) 308-5100.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Possible Extension of Tariff War Deadline


18Feb

Tariff war, tariff, white house, trump, xi jingping, soybean, trade, extension, tariff extension, agriculture, China

Tariff Updates from the White House

Following the recent State of the Union address, President Trump told White House reporters last Thursday that there are no plans to meet with Chinese President Xi Jingping before the March 1 tariff deadline. However, according to a new Bloomberg report, the Commander-in-chief is considering pushing the March deadline with China back 60 days. During a recent Cabinet meeting, Trump stated that if a “real deal” can be struck, then he would consider letting the tariff hike slide but continued that he is “not inclined to do that.” U.S. Department of Agriculture Deputy Secretary, Stephen Censky, stated that Trump and Xi Jinping are planning to meet next month to speak on the trade standoff.

Furthermore, there are mixed reports highlighting the looming uncertainty of the March tariff hike, with one CNBC report stating that the “likely outcome is that the tariffs remain at the current 10 percent rate.” Adding to the uncertainty is an article from Reuters citing three anonymous sources indicating disputing that CNBC report.

Agriculture Shippers’ Luck Running Thin

The agriculture industry has been at the mercy of the Trump administration since the beginning of the trade war. Trade trends of soybean shipments to China have fluctuated greatly as the uncertain trade conditions unfold, further illustrating industry volatility. China soybean shipments experienced a steep decrease right before the December tariff deadline, however, when the 90-day extension was announced in January, soybeans picked back up to 754,609 metric tons.

Overall, China buys an estimated 60% of U.S. soybeans. Therefore, when faced with the uncertainty of this trade war, farmers are put into a tough spot… plant more soybeans or switch to a new crop, less affected by the impending tariffs.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

State of the Union Sheds Little Light on Trade War


11Feb

State of the union, trade, tariff, trump, trade war

Trump’s Comments on Trade

Tuesday night President Trump gave his second State of the Union address. His comments on trade policies were brief and direct, calling for the passing of the United States-Mexico-Canada Agreement (USMCA) and the Reciprocal Trade Act. However, there was no solid news from the President on the approaching March deadline for the ongoing United States and China trade war. U.S. Trade Representative, Robert Lighthizer, and Treasury Secretary, Steve Mnuchin, are scheduled to travel to China for more negotiations later in February. However, Trump has made it apparent that final deals will likely end up being made directly between him and Chinese President Xi Jinping.

In light of this State of the Union, the National Retail Federation (NRF) and other trade associations are taking to Capitol Hill with 100 business owners to talk to Congress about the negative impact that the tariff hike would have.

Wise Purchasing

Even as the March tariff deadline approaches, leading global logistics providers have reported that there is no sign of a shipping slowdown due to the Chinese New Year. Shippers are increasing order size to mitigate impending tariff costs as much as possible. However, it is important to forecast the right amount of inventory to purchase amid the rapidly approaching risks of the tariff hike. Balancing what you can realistically sell in a certain time period to maintain your profit margins with the impending March tariff hike will tell you how much extra inventory to purchase.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Trade Talks Heat Up as March Deadline Approaches


04Feb

Trade, china, march, tariff, white house, Harley-davidson, Harley Davidson, tariff war

Top U.S. & China Representatives Meet

U.S. trade representative, Robert Lighthizer, and Chinese Vice Premier, Liu He, met January 30th to kick off more trade talks amid the rapidly approaching March 2nd deadline. The talks addressed the impending 15% increase on tariffs to over $200 billion in Chinese goods, should an agreement not be reached. Furthermore, the Congressional Budget Office has projected a 0.1% decrease in GDP growth for the next 10 years amid the highly volatile trade policies as well as a 0.5% decline in exports by 2022.

In the meantime, mixed reports are coming from top White House executives, including economic advisor, Larry Kudlow, and commerce secretary, Wilbur Ross. The mixed reporting indicates high uncertainty regarding the outcome of trade talks with China. American businesses like Harley-Davidson, Apple, and industrial machinery manufacturers are feeling the heat of impending retaliatory tariffs, thus experiencing a decline in sales to China.

Harley-Davidson Under Pressure

Furthermore, retaliatory tariffs have adversely affected renowned motorcycle manufacturer, Harley-Davidson, in Q4 of 2018. It is reported that the company experienced a $1.15 billion loss in revenue throughout 2017 as a direct result from China, E.U., and U.S. tariffs. Under the assumption that the 15% tariff hike will happen in March, Harley-Davidson CFO, John Olin, reported the company is projected to spend between $100-$120 million in tariffs in 2019. However, there is a silver lining to this predicament. Olin reported that the company is planning to open a new manufacturing plant in Thailand by Q3 of 2019, to more economically serve their Asian market.

The Takeaway

The exacerbated uncertainties of this ongoing tariff war—amidst Harley-Davidson’s predicament and the quickly approaching March 2 deadline—highlight the key supply chain aspects that companies should be focusing on. Should the tariff hike happen, it is important (now more than ever before) to evaluate where your company sources from and financially plan for 2019.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Tight Carrier Market Amid Recent Government Shutdown


29Jan

Carrier, government shutdown, shutdown, DOE, NTSB, safety, ports, supply chain, shipment, shipper

Carrier Margins Dwindle… Compromising Safety Protocol

Carriers typically base their pass-through costs (fuel surcharges) on the Department of Energy (DOE) weekly price per gallon report. However, since carriers typically purchase “rack price” (or wholesale) fuel, it is hard to predict an accurate pass-through cost due to rack prices being more volatile than DOE price per gallon reports. The recent spikes in diesel fuel costs have been passed on to carriers, thus reducing their margins by over half. Therefore, it would be wise to assume that there will be a brief squeeze on the carrier market due to the price spike in diesel fuel costs.

The recent government shutdown has also affected the National Transportation Safety Board (NTSB) investigations on a reported 87 accidents and counting since the beginning of the shutdown. Furthermore, this NTSB, a sub-part of the Department of Transportation (DOT), understaffing incident has led to inaccurate reporting of accident scenes, impeding insight into safer protocols for carriers.

In conclusion, the insights offered by the two preceding perspectives indicate that the spotlight, now more than ever, is on shippers to vet carrier companies for solid internal safety protocol, ensuring maximum efficiency and shipment safety.

Bottleneck at Southern California Ports

Impending tariff hikes at the beginning of March are putting pressure on shippers to rush product in from China. Among other things, this volume increase alone is causing a bottleneck at the ports of Los Angeles and Long Beach, in the form of chassis shortages and trucker shortages. The combination of the volume increase and the government shutdown is sure to cause delays and ripples across the supply chain. However, the Los Angeles and Long Beach ports are still in better condition than during the 2014-2015 gridlock, according to AGL CEO Jon Slangerup.

Therefore, the current market would imply planning longer lead times in your supply chain, while maintaining a clear focus on carrier vetting for proper safety protocol. There’s no indication yet if there will be other port gridlocks similar to the 2014-2015 incident, but it is wise to assume the most extreme circumstances when planning your own supply chain.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

Supply Chain Slow-Down on the Horizon


21Jan

PMI & Cass Freight Index Trend Downward

The relationship between the economy and supply chain is commonly misunderstood. In order to gain a full understanding of this complicated correlation, it is important to pay attention to valid macroeconomic studies. The Purchasing Managers’ Index (PMI)—which looks at U.S. economic health—and the Cass Freight Shipment Index—which measures freight volume in the United States—are two closely correlated studies to use in forecasting the supply chain.

Supply chain, PMI, purchasing managers’ index, cass freight index, cass freight shipment index, macroeconomic, government shutdown, tariff war, china, freight

During November 2018, the PMI dropped to a value of 54.1, the lowest since January of 2018, which indicates a possible economic slow-down for the start of 2019. Furthermore, when analyzing the PMI next to the Cass Freight Shipment Index, there is a correlation between the two. The Cass Freight Shipment Index dropped 5% in November of 2018, the lowest value since January of 2018. In conclusion, the correlation is that aside from outlier scenarios, like the 2008-2010 economic recovery, the general economic health of the U.S. and supply chain/freight market are closely correlated.

Therefore, when you are planning your 2019 supply chain, make sure to analyze macroeconomic studies to gain a better understanding of the current freight market. As economic health and freight volume declines, plan to spend less on freight, and vice versa. However, there are many outside variables that play a large role in the supply chain as well.

Current Events Affect Supply Chain

To gain a comprehensive understanding of the supply chain, not only is it important to analyze macroeconomic indexes like the PMI and Cass Freight Shipment Index, but it is also important to understand current events in relation to the supply chain.

The 90-day U.S. & China tariff war reaches another head in March of 2019. Tariff hikes will, in short, drive business away from China, but also cause a steep increase in supply chain costs initially. Additionally, the government shutdown is significantly affecting U.S. ports and air freight (read more here). With roughly 25% of U.S. government employees in furlough, sea and air freight are experiencing an impending bottleneck of paperwork ultimately affecting the timeliness of shipments and shipment security.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More

U.S. Government Shutdown Effects on the Supply Chain


14Jan

Us government shutdown, shutdown, government shutdown, supply chain, air cargo, tsa, federal government

Air Cargo At Risk

The U.S. government shutdown has caused some minor effects to the supply chain. However, the longer the government shutdown persists… the road could get exponentially bumpier. Furthermore, the shutdown is affecting 9 government departments, including the department of Homeland Security, which contains the Transportation Security Administration (TSA), the Food and Drug Administration (FDA), and the Federal Aviation Administration (FAA). Roughly 800,000 government employees are furloughed until the shutdown ends.

Thankfully, effects to the supply chain have been minor thus far. But, according to Brandon Fried, Executive Director of the Airforwarders Association (AfA), airlines are not currently accepting cargo screened by canine teams with the seal of approval from the TSA. This means that as long as the TSA is inaccessible, carriers searching for verification of information into the canine program are in limbo. However, air cargo is still flowing, despite grave implications that the government shutdown will persist.

Long Term Implications

With roughly 25% of the government shut down, it should be expected that communications with federal offices will be scarce. Companies in need of licenses, permits, and other paperwork are simply stuck until the respective offices resume normal activity. The lingering fear is that this shutdown will cause a back-up of paperwork the longer it remains in place. This clog could very well lead to a “system meltdown,” similar to one in 2014 that crippled container ports on the U.S. west coast.

According to the CEO of a major logistics company, the government shutdown is putting our country’s infrastructure at risk. Without the proper federal support, infrastructure develops holes that could eventually lead to a snowball effect of customs employees failing to adequately respond. Reported last week, Mick Mulvaney, the White House Chief of Staff, expects the shutdown to persist indefinitely.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Read More