18 DC VELOCITY AUGUST 2017 www.dcvelocity.com
Truckload contract pricing remains weak because shippers
won’t accept rate increases under any circumstances. Don’t
believe it? Ask C.H. Robinson Worldwide Inc.
The nation’s largest freight broker, which is also a major
third-party logistics service provider (3PL), felt the full
measure of shipper stubbornness during its second quarter.
In Robinson’s core truckload business, net revenues—
revenues after deducting the costs of purchased transportation—fell 14. 3 percent year over year. Net revenues in
its intermodal business fell 7. 9 percent year over year.
Less-than-truckload net revenue climbed 2. 4 percent year
The company reported strong net revenue gains in air,
ocean, and customs brokerage. Gross revenues—total revenue before transport costs—rose 12. 4 percent.
As a non-asset-based provider, Robinson owns no rolling
stock and buys a portion of its capacity through the spot, or
non-contract, market. Spot rates in June hit their highest
level in nearly two years, according to consultancy DAT
Solutions LLC, which tracks spot pricing.
Robinson’s cost of purchased transportation in the quar-
ter rose by $450 million over 2016 levels. At the same time,
though, contract shippers, which account for anywhere
from one-half to two-thirds of its base, were locked into
agreements that wouldn’t renew until mid-year at the ear-
liest. John G. Larkin, transport analyst for investment firm
Stifel, said Robinson did not anticipate such a profound
capacity crunch in the May–June time period. The result,
Larkin said, was a classic margin squeeze, where Robinson
paid relatively high rates for spot-market capacity while
honoring flattish contract rates for shippers that were
unwilling to make up the differential.
Robinson Chairman and CEO John Wiehoff didn’t
sugarcoat the issue in a call with analysts. “Our results were
significantly impacted by truckload margin compression,”
Wiehoff said. “Purchased transportation costs increased
significantly during the quarter, while much of our
customer pricing is committed at relatively flat prices.”
Wiehoff said the company has a “strong history” of sticking to customer contracts as it adjusts to changing market
REVERSAL OF FORTUNE?
The worst may be over for Robinson on this score, however.
Benjamin J. Hartford, analyst for investment firm Robert
W. Baird & Co. Inc., said Robinson’s overall net revenue
for the first three weeks of July was up 2 percent year over
year. That was below Baird’s third-quarter estimates of a
Spot prices have been significantly higher
than 2016 levels for the entire year, according to Ben Cubitt, senior vice president of
supply chain and transportation for Frisco,
Texas-based 3PL Transplace. They peaked
in the last week of June and first week of
July but have since dropped back, Cubitt
said. Spot prices aren’t through spiking in
2017, he added.
Tommy Hodges, a veteran trucking and
warehousing executive, and chairman of
Shelbyville, Tenn.-based truckload carrier
Titan Transfer Inc., said in a phone interview that truckload capacity tightness had
reached “bubble-like” levels and that a relatively incremental increase in nationwide
loads could trigger a run by users on power
units and trailers.
Historically, spot pricing tends to lag
contract rates by three to six months.
Cubitt expects that scenario to play out
again, although he doesn’t know when.
Robinson gets caught in buy-sell squeeze as Q2 truckload
net revenues plunge
Crown Equipment Corp. is expanding in Shanghai, China, with a new
facility to support growing customer needs in the region. The site
includes space for new equipment inventory, a parts distribution center, a training facility, and local sales, parts, and customer service operations. … XPO Logistics Inc. has opened a third regional distribution center for the beauty lifestyle brand European Wax Center in Camp Hill,
Pa. … Third-party logistics service specialist
Kane Is Able Inc. has expanded its distribution capacity at its Allentown, Pa., campus
with the addition of 200,000 square feet of
space. … Amware Logistics has opened a
fulfillment warehouse in Carson, Calif., just
10 miles from the ports of Los Angeles and
Long Beach. … Domino’s Pizza has signed a
182,000-square-foot lease for a new warehouse in New Jersey to serve
as a food processing and distribution center. … Saddle Creek Logistics
Services has leased a 160,000-square-foot facility in Lexington, Ky., with
the option to expand to a total of 350,000 square feet. … Cushman &
Wakefield has arranged the lease of a new warehouse in Middletown,
Pa., for syncreon, a third-party logistics service provider.