Showing posts with label logistics. Show all posts
Showing posts with label logistics. Show all posts
Sunday, January 28, 2024
Thursday, July 09, 2015
The Haiku of Finance for 07/09/15
Squeezing supply chain
Idle truck fleets carry cost
Find cargo to roll
Saturday, July 27, 2013
Mitigating Supply Chain Vulnerability to Inflation
I have a sinking feeling that many logistics professionals are unprepared for the havoc that inflation can wreak on supply chains. Corporate supply chain managers have rested on outsourcing non-core supply functions to third parties without considering how inflation will disrupt those functions. Just-in-time inventory and lean manufacturing assume that raw materials will be available on demand. Inflation destroys that assumption when suppliers who can't keep up with rising costs go out of business. Consider this article as a think-piece that logisticians will need to start their contingency planning for alternatives.
Pre-ordering inventory. Companies can stock up on raw materials if they have the storage space or can lease space. They can negotiate long-term contracts to deliver stuff but if they're smart they will lock in today's prices with fixed increases in annual increments. This will really stick it to suppliers who didn't plan ahead. Suppliers who don't hedge against increases in material delivery costs risk failure. Downstream companies will have once-in-a-lifetime opportunities to vertically integrate by acquiring those suppliers who end up in bankruptcy.
Financial engineering. This topic is too broad for one article. Suffice it to say that corporate treasurers will have to think more like hedge funds by taking positions in the futures markets that balance their supply commitments. If I were running steel mills or petrochemical plants, I would think long and hard about how many energy-related futures contracts my enterprise would need to neutralize rapid increases in prices for oil and coal. Mining companies that closed their hedge books will have to open them again.
Sourcing from non-inflating economies. I've blogged before about the desirability of currencies in Australia, New Zealand, and Canada because their central banks are not pursuing monetary stimulus. That disposition also makes these countries good choices for locating the origins of a supply chain. They also happen to have abundant natural resources (except maybe New Zealand, which has lots of sheep). Global purchasing managers may wish to look at sourcing from any African or Southeast Asian economies that have just conquered an inflationary period; good luck with that one. I'd avoid Latin American sourcing alternatives because that neighborhood loves inflation. Argentina and Venezuela just can't get enough of high prices and product shortages.
Have more suppliers. The Hershey Co. buys cocoa from hundreds of suppliers. They mitigate political risk and currency risk by having one of the most robust supply chains on the planet. Companies that survive hyperinflation will get deliveries from multiple sources. This also applies to delivery methods. Companies that depend on rail or pipelines are pretty much hostage to those methods. Companies supplied by truck have more flexibility. I suspect that a lot of trucking companies will go bankrupt if they haven't hedged their fuel costs or locked in long-term fuel contracts with minimal price adjustments.
Think fast, logisticians. Hyperinflation will catch a lot of businesses by surprise. Don't let your employer be one of them.
Pre-ordering inventory. Companies can stock up on raw materials if they have the storage space or can lease space. They can negotiate long-term contracts to deliver stuff but if they're smart they will lock in today's prices with fixed increases in annual increments. This will really stick it to suppliers who didn't plan ahead. Suppliers who don't hedge against increases in material delivery costs risk failure. Downstream companies will have once-in-a-lifetime opportunities to vertically integrate by acquiring those suppliers who end up in bankruptcy.
Financial engineering. This topic is too broad for one article. Suffice it to say that corporate treasurers will have to think more like hedge funds by taking positions in the futures markets that balance their supply commitments. If I were running steel mills or petrochemical plants, I would think long and hard about how many energy-related futures contracts my enterprise would need to neutralize rapid increases in prices for oil and coal. Mining companies that closed their hedge books will have to open them again.
Sourcing from non-inflating economies. I've blogged before about the desirability of currencies in Australia, New Zealand, and Canada because their central banks are not pursuing monetary stimulus. That disposition also makes these countries good choices for locating the origins of a supply chain. They also happen to have abundant natural resources (except maybe New Zealand, which has lots of sheep). Global purchasing managers may wish to look at sourcing from any African or Southeast Asian economies that have just conquered an inflationary period; good luck with that one. I'd avoid Latin American sourcing alternatives because that neighborhood loves inflation. Argentina and Venezuela just can't get enough of high prices and product shortages.
Have more suppliers. The Hershey Co. buys cocoa from hundreds of suppliers. They mitigate political risk and currency risk by having one of the most robust supply chains on the planet. Companies that survive hyperinflation will get deliveries from multiple sources. This also applies to delivery methods. Companies that depend on rail or pipelines are pretty much hostage to those methods. Companies supplied by truck have more flexibility. I suspect that a lot of trucking companies will go bankrupt if they haven't hedged their fuel costs or locked in long-term fuel contracts with minimal price adjustments.
Think fast, logisticians. Hyperinflation will catch a lot of businesses by surprise. Don't let your employer be one of them.
Thursday, February 14, 2013
Adding a Few Analytical Tools
The financial analyst must have tools. I search far and wide for the data sources that make this blog worth reading. Check out the widget to the right that says "Favorite Analytical Tools" to see the latest additions to my toolbox.
The World Bank Logistics Performance Index ranks countries on the quality and efficiency of their logistics infrastructure. In a macro sense, it's useful for evaluating whether trade flows for a given country will have structural friction, i.e., a country with poor infrastructure will have a hard time growing its exports. In a micro sense, I can use it in conjunction with the Transparency International corruption index and Heritage Foundation economic freedom index to assess the risk of a company's investment in a resource play. I will stay away from hard asset prospectors in countries that score poorly in all three data sets.
The OECD Statistics are an analyst's dream. I first used them in my MBA program to compare regional business conditions. The data sets can be mixed and matched in endless combinations. For example, compare the inflows and outflows of foreign direct investment to see the world market's snap judgement on which countries are considered to be hot investments. Once again, the multiple reports on transportation infrastructure investment show me which countries are serious about making their economies attractive.
The Federal Reserve's economic research and data is useful for those patient enough to wade through it. The most relevant basic data for analysts is the "Z-series" Flow of Funds Accounts report, which summarizes changes in U.S. credit markets. I've also been subscribed to the San Francisco Fed's regular email announcements of published reports for over a decade. The Fed's longer reports aren't as boring as what you'll find in most academic journals. Then again, they're not romance novels either. Maybe the Fed could spice up its reports with some hot action.
The ICI Research and Statistics pages show us what investors are doing in the public capital markets. The most instructive data for me is in the Weekly Estimated Long-Term Mutual Fund Flows (on the Statistics page). The downloadable data set says it all. Retail investors have been pulling money out of actively managed mutual funds and piling into bond funds for quite some time.
I've used these sites and others intermittently over the years but sticking them in a widget makes it official. Delving into these types of portals is how I spend my time here at Alfidi Capital. I don't expect professional portfolio managers to keep up with me because I'm so much smarter than them. They pretend to use hard data to make decisions but they really just copy other firms that succeed in selling hot ideas.
The World Bank Logistics Performance Index ranks countries on the quality and efficiency of their logistics infrastructure. In a macro sense, it's useful for evaluating whether trade flows for a given country will have structural friction, i.e., a country with poor infrastructure will have a hard time growing its exports. In a micro sense, I can use it in conjunction with the Transparency International corruption index and Heritage Foundation economic freedom index to assess the risk of a company's investment in a resource play. I will stay away from hard asset prospectors in countries that score poorly in all three data sets.
The OECD Statistics are an analyst's dream. I first used them in my MBA program to compare regional business conditions. The data sets can be mixed and matched in endless combinations. For example, compare the inflows and outflows of foreign direct investment to see the world market's snap judgement on which countries are considered to be hot investments. Once again, the multiple reports on transportation infrastructure investment show me which countries are serious about making their economies attractive.
The Federal Reserve's economic research and data is useful for those patient enough to wade through it. The most relevant basic data for analysts is the "Z-series" Flow of Funds Accounts report, which summarizes changes in U.S. credit markets. I've also been subscribed to the San Francisco Fed's regular email announcements of published reports for over a decade. The Fed's longer reports aren't as boring as what you'll find in most academic journals. Then again, they're not romance novels either. Maybe the Fed could spice up its reports with some hot action.
The ICI Research and Statistics pages show us what investors are doing in the public capital markets. The most instructive data for me is in the Weekly Estimated Long-Term Mutual Fund Flows (on the Statistics page). The downloadable data set says it all. Retail investors have been pulling money out of actively managed mutual funds and piling into bond funds for quite some time.
I've used these sites and others intermittently over the years but sticking them in a widget makes it official. Delving into these types of portals is how I spend my time here at Alfidi Capital. I don't expect professional portfolio managers to keep up with me because I'm so much smarter than them. They pretend to use hard data to make decisions but they really just copy other firms that succeed in selling hot ideas.
Thursday, November 08, 2012
The Haiku of Finance for 11/08/12
Secure supply chain
Diverse primary sources
Avoid sole-source risk
Diverse primary sources
Avoid sole-source risk
Monday, September 17, 2012
The Haiku of Finance for 09/17/12
Quant easing won't work
Input prices will spike up
Looming shortages
Input prices will spike up
Looming shortages
Monday, September 10, 2012
Financial Sarcasm Roundup for 09/10/12
I love it when I'm right, especially when I'm ahead of the rest of Wall Street. I wrote a few days ago about the danger to the U.S. economy from the looming ILA strike at East Coast and Gulf Coast ports, and said strike now looks very likely. I am not alone in noting the severity of what we can expect; Asian shippers are getting very concerned. The financial analyst community needs to take a serious look at how re-routing container ships to the Port of Oakland leaves the U.S. economy exposed to a shutdown from as little as a few hundred Occupy Oakland idiot activists. I do not feel sorry for any hedge fund managers who insist on ignoring fundamentals just to pick up nickels in front of this steamroller. I want professional money managers to keep doing exactly what they're doing now, piling on one bad call after another by following each other in a herd over a cliff.
One thing I don't need cluttering my workspace is yet another prediction of monetary easing from the Fed. These Captain Obvious statements are pointless in the face of Helicopter Ben's repeated statements of intent, plus the proclivity of every academic to spend their entire careers justifying a PhD thesis (go read Ben's "printing press" speech and his Princeton work). Anyway, those economists are correct about further stimulus doing nothing but they're missing one thing. Money velocity is at rock bottom. Steroid injections go nowhere if blood isn't circulating. That can all change in a heartbeat if politicians force banks to lend. I am still convinced that some form of forced lending, like the HAMP mortgage modification program but much larger, will be one of the transmission mechanisms for a wage-price spiral into serious inflation.
Germany still wants to put the kibosh on the ECB's newfound willingness to destroy that country's credit rating with unlimited sovereign bond buying. The German constitutional court may vote to block German contributions to European rescue funds. That court needs to read Mario Draghi's speeches again, paying particular attention to the enormous caveats he put in about the austerity criteria any destitute country has to meet before getting a bailout. No way are Greece, Spain, and Italy going to meet those criteria with their economies already in austerity-driven death spirals. No way will they get more than token bailouts that temporarily prop up European stocks. No way is the ECB going to save the euro.
One thing I don't need cluttering my workspace is yet another prediction of monetary easing from the Fed. These Captain Obvious statements are pointless in the face of Helicopter Ben's repeated statements of intent, plus the proclivity of every academic to spend their entire careers justifying a PhD thesis (go read Ben's "printing press" speech and his Princeton work). Anyway, those economists are correct about further stimulus doing nothing but they're missing one thing. Money velocity is at rock bottom. Steroid injections go nowhere if blood isn't circulating. That can all change in a heartbeat if politicians force banks to lend. I am still convinced that some form of forced lending, like the HAMP mortgage modification program but much larger, will be one of the transmission mechanisms for a wage-price spiral into serious inflation.
Germany still wants to put the kibosh on the ECB's newfound willingness to destroy that country's credit rating with unlimited sovereign bond buying. The German constitutional court may vote to block German contributions to European rescue funds. That court needs to read Mario Draghi's speeches again, paying particular attention to the enormous caveats he put in about the austerity criteria any destitute country has to meet before getting a bailout. No way are Greece, Spain, and Italy going to meet those criteria with their economies already in austerity-driven death spirals. No way will they get more than token bailouts that temporarily prop up European stocks. No way is the ECB going to save the euro.
Monday, August 13, 2012
The Haiku of Finance for 08/13/12
Logistics signal
Cutbacks mean broader trouble
Wake up to downturn
Cutbacks mean broader trouble
Wake up to downturn
Friday, February 11, 2011
Trucking Success Implies High Yield
Let's talk a little about yield, or the trucking measurement for revenue per hundredweight. How does a company maximize it?
Hiring a senior exec who focuses on yield management is one way, as Con-way Freight is doing right now. It works if the exec has a plan to cut across the firm and gets buy-in from every business unit. This hire had better have an excess of charisma and networking ability.
Product focus helps. Limiting your freight to stuff that commands a premium - like perishables - means you've staked out a niche in a channel where customers absolutely must pay to have something delivered on time. It also means you deliberately prune away low-cost business lines using your hand-dandy BCG growth-share matrix.
Tiered pricing helps. Charge more for rush deliveries. Don't eat costs like bridge tolls if you can compete on non-price service metrics like timeliness. If you have to pass on fuel surcharges to your customer, don't count them towards yield. Fuel costs are mostly out of a company's control although they can be partially hedged with energy futures.
Reader, your thoughts are always welcome. There must be plenty of people out there with relevant wisdom.
Hiring a senior exec who focuses on yield management is one way, as Con-way Freight is doing right now. It works if the exec has a plan to cut across the firm and gets buy-in from every business unit. This hire had better have an excess of charisma and networking ability.
Product focus helps. Limiting your freight to stuff that commands a premium - like perishables - means you've staked out a niche in a channel where customers absolutely must pay to have something delivered on time. It also means you deliberately prune away low-cost business lines using your hand-dandy BCG growth-share matrix.
Tiered pricing helps. Charge more for rush deliveries. Don't eat costs like bridge tolls if you can compete on non-price service metrics like timeliness. If you have to pass on fuel surcharges to your customer, don't count them towards yield. Fuel costs are mostly out of a company's control although they can be partially hedged with energy futures.
Reader, your thoughts are always welcome. There must be plenty of people out there with relevant wisdom.
Thursday, February 03, 2011
Whither The Suez Canal In Early 2011
Unrest in Egypt makes Suez-bound shippers nervous. Is there really cause for concern?
The Suez Canal itself remains open to throughput traffic, but some Egyptian ports remain inaccessible due to unrest. This could pose a short-term problem for Egyptians if any overland routes into the country are disrupted. Transnational firms exporting from Egypt think their supply chains are secure. They are probably very fortunate that Internet access was restored so soon. In-transit visibility can be lost very quickly when all of your query systems are Web-based.
Oil prices continue to rise purely on fear of the unknown. We know now that the Egyptian military has a big stake in maintaining that nation's stability, is moving to secure ports, and is probably the most powerful institution in the country (and thus most able to broker a way out of the political crisis). Shippers are balking at changing crews in the canal but the Egyptian army's history of securing it during crises should put them more at ease.
Concerns about disruptions of Suez Canal traffic are probably overblown.
The Suez Canal itself remains open to throughput traffic, but some Egyptian ports remain inaccessible due to unrest. This could pose a short-term problem for Egyptians if any overland routes into the country are disrupted. Transnational firms exporting from Egypt think their supply chains are secure. They are probably very fortunate that Internet access was restored so soon. In-transit visibility can be lost very quickly when all of your query systems are Web-based.
Oil prices continue to rise purely on fear of the unknown. We know now that the Egyptian military has a big stake in maintaining that nation's stability, is moving to secure ports, and is probably the most powerful institution in the country (and thus most able to broker a way out of the political crisis). Shippers are balking at changing crews in the canal but the Egyptian army's history of securing it during crises should put them more at ease.
Concerns about disruptions of Suez Canal traffic are probably overblown.
Thursday, January 20, 2011
Organized Crime Permeates Longshoremen
Union members need to pay especially close attention to this news. The leaders you trust to run your union may be trying to rip you off and sell you down the river. That is the lesson of the federal government's crackdown on Mafia influence in the International Longshoremen's Association:
I guess some union leaders are too busy shaking down their members for money and running illegal gambling parlors to fulfill their responsibilities. I won't be taking bets (no pun intended) on how long it will take to nail down corruption in other unions but this is a great start. I will give the ILA credit for trying to police up its own ranks by removing a questionable leader from his post, but the corruption vexing the union is so deep and longstanding that they were probably overwhelmed and needed help from law enforcement.
Union corruption probably amounts to a hefty hidden tax on commerce. It should go without saying that an organized crime presence in America's major ports is a national security threat.
Several current and former International Longshoremen's Association officials were among 18 waterfront figures charged as part of a federal crackdown that U.S. Attorney General Eric Holder labeled "one of the largest single-day operations against the Mafia in the FBI's history."
I guess some union leaders are too busy shaking down their members for money and running illegal gambling parlors to fulfill their responsibilities. I won't be taking bets (no pun intended) on how long it will take to nail down corruption in other unions but this is a great start. I will give the ILA credit for trying to police up its own ranks by removing a questionable leader from his post, but the corruption vexing the union is so deep and longstanding that they were probably overwhelmed and needed help from law enforcement.
Union corruption probably amounts to a hefty hidden tax on commerce. It should go without saying that an organized crime presence in America's major ports is a national security threat.
Monday, December 06, 2010
Newsreel for Monday 12/06/10
Scanning today's headlines brings us gems.
A sluggish housing sector drags down the transportation sector. You know how economists have been saying that housing recoveries typically lead recoveries from recessions? Here's what we get when that doesn't happen. There's no recovery folks!
The Teamsters tried to get two underperforming truckers to merge. See what happens when unions get too much power? They try to foist disastrous strategic decisions on their employers. I have no idea why any executive team would take a Teamster proposal seriously after seeing them try a stunt like this.
Uncle Sam's DOT is sending big bucks to the states for transportation. It's too bad that most of it goes to road projects. Rail and barge traffic is much more economical and energy efficient in moving tons per mile.
The U.S. and South Korea are almost free trade partners. There is more to this deal than meets the eye. America desperately needs to prevent Asian countries from falling into China's orbit as its military supremacy wanes. Kicking open a free trade door with an Asian tiger is one way to maintain a regional foothold.
U.S. lawmakers want to continue handouts of all kinds, whether tax cuts or jobless benefits. Stupidity still grips Capitol Hill. Our nation's leaders will never wake up to the unsustainability of deficit spending. Working on Capitol Hill must be like living inside a bubble, where the unpleasant realities of the outside world never intrude.
Unemployment is finally catching up to college grads. Now a whole bunch of liberal arts grads can learn their most important lesson in life: A bachelor's degree in anything except a hard skill is worth nothing. That degree in women's studies will come in handy when you're panhandling as long as you show some cleavage.
China raises the reserve requirement for its banks. This is what we should have done with our own banks! Once again China shows the world why it is a more responsible custodian of capital. Let's see if China has the guts to allow some overleveraged banks to implode.
A sluggish housing sector drags down the transportation sector. You know how economists have been saying that housing recoveries typically lead recoveries from recessions? Here's what we get when that doesn't happen. There's no recovery folks!
The Teamsters tried to get two underperforming truckers to merge. See what happens when unions get too much power? They try to foist disastrous strategic decisions on their employers. I have no idea why any executive team would take a Teamster proposal seriously after seeing them try a stunt like this.
Uncle Sam's DOT is sending big bucks to the states for transportation. It's too bad that most of it goes to road projects. Rail and barge traffic is much more economical and energy efficient in moving tons per mile.
The U.S. and South Korea are almost free trade partners. There is more to this deal than meets the eye. America desperately needs to prevent Asian countries from falling into China's orbit as its military supremacy wanes. Kicking open a free trade door with an Asian tiger is one way to maintain a regional foothold.
U.S. lawmakers want to continue handouts of all kinds, whether tax cuts or jobless benefits. Stupidity still grips Capitol Hill. Our nation's leaders will never wake up to the unsustainability of deficit spending. Working on Capitol Hill must be like living inside a bubble, where the unpleasant realities of the outside world never intrude.
Unemployment is finally catching up to college grads. Now a whole bunch of liberal arts grads can learn their most important lesson in life: A bachelor's degree in anything except a hard skill is worth nothing. That degree in women's studies will come in handy when you're panhandling as long as you show some cleavage.
China raises the reserve requirement for its banks. This is what we should have done with our own banks! Once again China shows the world why it is a more responsible custodian of capital. Let's see if China has the guts to allow some overleveraged banks to implode.
Tuesday, November 02, 2010
Friday, October 22, 2010
Friday's News In Brief
Prepare yourself. Here it comes.
Shippers won't be held hostage to trucking costs and are looking for intermodal shortcuts. This is bad news for truckers who raised rates thinking they had pricing power (yes, YRC Worldwide, I'm thinking of you but you're not alone in that folly). It's good news for rail and barge carriers.
Speaking of YRCW, it's preparing to triage New Penn if greedy union drivers won't vote for its survival. I wish I had shorted this stock last year. Now I just get to watch it spiral down the drain. I wonder if the asset-backed securitization facility they just renewed will have seniority over other debt holders in the event of liquidation.
Market observers think trade with the Middle East and Africa will drive Chinese growth. No argument there, but consider what Chinese strategy demands of this trade. Their plan is to send value-added finished goods from China to their new resource colonies, primarily in exchange for oil.
It's a bumper crop for grain exports through the Great Lakes to points across the Atlantic. Name me some publicly-traded barge operators on the St. Lawrence Seaway so I can have new companies to blog about.
The whopper of the day is the astronomically high expected tab for Phoney and Fraudie - at least $154B. This presumably excludes the costs of servicing or foreclosing all of these fraudulently securitized mortgages we're just now discovering. Another TARP is politically impossible, as even folks in Ireland are catching on to bailout scams. This leads to inevitable big-bank collapses and forced resolutions. Equity owners and bond investors will eat a big fat mud pie. Investors who've been sitting this spectacle out - like me - will buy up tracts upon tracts for a song. Bring it on.
Remember how the stimulus was supposed to fix America's dilapidated infrastructure? Surprise! It never happened and now we have to live with reduced future prosperity thanks to that lack of foresight. This is the one thing that will cement America's descent into the world's economic basement. I take issue with the Economist's statement that there is "no urgent need" for high-speed passenger rail. Excuse me, but Peak Oil will price air travel out of reach of the shrinking middle class. That's why people will be screaming for an alternative to cars and planes in about a decade. Nothing could be more urgent, and there is plenty of rail capacity available for both freight and passengers when rail carriers are double-stacking containers.
I hope you enjoyed reading all of this wonderful news about your immediate future. Have a great weekend everybody!
Full disclosure: No position in YRCW, FNM, or FRE.
Shippers won't be held hostage to trucking costs and are looking for intermodal shortcuts. This is bad news for truckers who raised rates thinking they had pricing power (yes, YRC Worldwide, I'm thinking of you but you're not alone in that folly). It's good news for rail and barge carriers.
Speaking of YRCW, it's preparing to triage New Penn if greedy union drivers won't vote for its survival. I wish I had shorted this stock last year. Now I just get to watch it spiral down the drain. I wonder if the asset-backed securitization facility they just renewed will have seniority over other debt holders in the event of liquidation.
Market observers think trade with the Middle East and Africa will drive Chinese growth. No argument there, but consider what Chinese strategy demands of this trade. Their plan is to send value-added finished goods from China to their new resource colonies, primarily in exchange for oil.
It's a bumper crop for grain exports through the Great Lakes to points across the Atlantic. Name me some publicly-traded barge operators on the St. Lawrence Seaway so I can have new companies to blog about.
The whopper of the day is the astronomically high expected tab for Phoney and Fraudie - at least $154B. This presumably excludes the costs of servicing or foreclosing all of these fraudulently securitized mortgages we're just now discovering. Another TARP is politically impossible, as even folks in Ireland are catching on to bailout scams. This leads to inevitable big-bank collapses and forced resolutions. Equity owners and bond investors will eat a big fat mud pie. Investors who've been sitting this spectacle out - like me - will buy up tracts upon tracts for a song. Bring it on.
Remember how the stimulus was supposed to fix America's dilapidated infrastructure? Surprise! It never happened and now we have to live with reduced future prosperity thanks to that lack of foresight. This is the one thing that will cement America's descent into the world's economic basement. I take issue with the Economist's statement that there is "no urgent need" for high-speed passenger rail. Excuse me, but Peak Oil will price air travel out of reach of the shrinking middle class. That's why people will be screaming for an alternative to cars and planes in about a decade. Nothing could be more urgent, and there is plenty of rail capacity available for both freight and passengers when rail carriers are double-stacking containers.
I hope you enjoyed reading all of this wonderful news about your immediate future. Have a great weekend everybody!
Full disclosure: No position in YRCW, FNM, or FRE.
Tuesday, October 19, 2010
Hire Veterans In Logistics
Here's another of my rare career-focused blog posts, but this one's aimed at employers. Logistics providers who want experienced professionals need look no further than military veterans. They understand supply chains and quality control. They come to work drama-free and will put in long hours with realistic salary expectations (i.e., they work cheaper than MBA prima donnas because they're accustomed to being underpaid by Uncle Sam). They know how to motivate an unskilled workforce using both carrots and sticks when appropriate. They can handle a great deal of stress without complaint even if that stress is caused just for fun by the person who signs their paycheck. Most importantly, they know their private sector career options are very limited and will gladly stay with an employer who offers them a halfway-decent career path. Veterans have families to raise and bills to pay too, and they are willing to go the extra mile even for an unappreciative employer.
Hire a veteran for a logistics job. You won't regret it.
Full disclosure: I am a veteran.
Hire a veteran for a logistics job. You won't regret it.
Full disclosure: I am a veteran.
Sunday, September 12, 2010
India Prepares For Trade Growth
Here's a brief note on one of the BRIC economies. India's government is getting ready to spend some serious money to expand capacity at its ports. They'll need all of that throughput ability if the recently signed Japan-India free trade agreement results in more cargo traffic through South Asia's sea lanes.
I've been a China bull up to now but India deserves further study. These two ancient cultures are IMHO soon to become serious regional rivals.
Full disclosure: No holdings in any Indian investments.
I've been a China bull up to now but India deserves further study. These two ancient cultures are IMHO soon to become serious regional rivals.
Full disclosure: No holdings in any Indian investments.
Wednesday, September 08, 2010
YRCW Headed For Delisting Decision
Here comes another non-surprise in the continuing FAIL that is YRCW. The NASDAQ has officially notified YRC Worldwide that its stock is about to be delisted from the exchange for its failure to consistently maintain a bid price over a buck. The company's management is of course doing the right thing for its shareholders by appealing this notice. Since the appeal is scheduled for Oct. 7, the final delisting decision will come about a month later. I'm pretty sure I know how that's going to turn out. The company's last 10-Q was published on Aug. 9, so its next quarterly report will be due just about the time the appeals panel will be formulating its delisting decision in early November. YRCW will need to show a massive upward earnings surprise in that report for its share price to make any meaningful recovery.
What are the chances of such a surprise? Slim to none, but Slim hasn't left town just yet. Steadily falling fuel costs can give truckers like YRCW some healthy tailwind. Executing a long-rumored reverse stock split would be the Hail Mary pass that buys YRCW a little time, perhaps another quarter at best, but management will have to pull the trigger right about now for the split to take effect by the time the NASDAQ panel meets.
Watching YRCW continue its slow march to dissolution is about as painful as watching one of its big rigs jackknife on the highway. If you don't own its stock, just be glad you're not along for the ride.
Full disclosure: No position in YRCW.
What are the chances of such a surprise? Slim to none, but Slim hasn't left town just yet. Steadily falling fuel costs can give truckers like YRCW some healthy tailwind. Executing a long-rumored reverse stock split would be the Hail Mary pass that buys YRCW a little time, perhaps another quarter at best, but management will have to pull the trigger right about now for the split to take effect by the time the NASDAQ panel meets.
Watching YRCW continue its slow march to dissolution is about as painful as watching one of its big rigs jackknife on the highway. If you don't own its stock, just be glad you're not along for the ride.
Full disclosure: No position in YRCW.
Wednesday, July 28, 2010
Healthy Logistics Carriers Can Thank Constrained Shippers
Most railroads and some truckers are doing all right. Kansas City Southern just posted a massive jump in net income. Norfolk Southern reported a significant percentage jump in net income that far exceeded its topline growth rate. Even the German railroad Deutsche Bahn posted healthy income gains, indicating that whatever is driving this industry to renewed health isn't confined to the U.S. Not to be ignored, 3PL provider C.H. Robinson benefited from healthier air forwarding revenue and trucker Old Dominion doubled its net income thanks to enormous tonnage growth.
Such impressive all-around logistics success ought to herald a global economic rebound. Results like this make sector-rotation investors submit "buy" orders like mad to get in before more bulls do. Before we get all excited about railroads and other carriers, let's consider the effects of constrained capacity in another link in the global supply chain - shippers. Ocean-going carriers trimmed a lot of capacity in the first leg of this Great Recession. Container ships joined ghost fleets that sat idle near Singapore while shippers waited for rates to turn up again. Now shippers are faced with a mad scramble to add boats, containers, and crews to meet order backlogs.
This leaves carriers in land-based logistics modes - trucking and rail - with a temporary boost to their pricing power. They now have a short window of opportunity to set rates and accept higher-paying customers while ocean cargo carriers add back lost capacity. The smart carriers are raising prices now while retailers are frustrated. There is no telling how long these new salad days will last.
Full disclosure: No positions in any companies mentioned in this post.
Such impressive all-around logistics success ought to herald a global economic rebound. Results like this make sector-rotation investors submit "buy" orders like mad to get in before more bulls do. Before we get all excited about railroads and other carriers, let's consider the effects of constrained capacity in another link in the global supply chain - shippers. Ocean-going carriers trimmed a lot of capacity in the first leg of this Great Recession. Container ships joined ghost fleets that sat idle near Singapore while shippers waited for rates to turn up again. Now shippers are faced with a mad scramble to add boats, containers, and crews to meet order backlogs.
This leaves carriers in land-based logistics modes - trucking and rail - with a temporary boost to their pricing power. They now have a short window of opportunity to set rates and accept higher-paying customers while ocean cargo carriers add back lost capacity. The smart carriers are raising prices now while retailers are frustrated. There is no telling how long these new salad days will last.
Full disclosure: No positions in any companies mentioned in this post.
Monday, July 19, 2010
Handling Unions Right In Montreal and Wrong At YRCW
Productive enterprises at the Port of Montreal show us the right way to handle unions - lock them out of their jobs when they get unruly:
Take that, fat slobs! Big-time kudos to the Maritime Employers Association up north for doing right by their shareholders and customers. Diverting traffic will cost them some business in the short run but will earn them the respect of the business community over the long run. No one wants commerce to be held hostage to the limited work hours of workers who don't really want to work.
It would be terrific if American companies could adopt the same common-sense approach. Let's start with YRC Worldwide, where shareholders concerned about the firm's survival have to contend with whining from unions about lost pay and benefits. Some time spent walking a picket line might actually be good for drivers if it helps them burn calories and lose weight.
While they're painting their protest signs (replete with spelling errors), they should note that last week's news release from YRCW trumpeting a "confirmed expected positive EBITDA" for Q2 comes with a bunch of caveats that render it meaningless. The biggest warning is the net cash usage from operating activities. Less cash on hand means less ability to pay bills. Even union drivers should be able to figure that one out. Furthermore, amending their loan facility netted the company $22mm worth of flexibility against a looming bond payment of $21.7mm due in August. Learning-impaired drivers who flunked high school math might not realize that this hole will prove hard to fill, as any creditor willing to grant such a facility probably covets the assets securitized against the loan. That's a bet on bankruptcy, folks. The rest of the bullet points in the news release amount to little more than hope; begging customers for a few more loads, stretching out negotiations with its lending group, selling more assets, and other tactics will only stall for time. They will not materially change business conditions on the cusp of a double-dip recession.
I'll be happy to watch YRCW's flame-out from the sidelines if it forces unions to take a hard look at their bleak futures. The next market crash (perhaps precipitated by a Hungarian insolvency contagion) will be a hard wake-up call. The Port of Montreal is attempting to answer that call successfully before it arrives. There's still time for YRCW to do the same. Hammer your unions hard if you want to survive.
Full disclosure: No position in Canadian logistics providers or YRCW.
The action at 8 a.m. EDT followed mounting tensions that began with the Maritime Employers Association's call for a new labor agreement and the union's refusal in recent weeks to work overtime hours aimed at clearing cargo at Montreal. The lockout was intended to pressure union leaders “to look more realistically" at the jobs situation ahead, said the Montreal branch of the Maritime Employers Association.
Take that, fat slobs! Big-time kudos to the Maritime Employers Association up north for doing right by their shareholders and customers. Diverting traffic will cost them some business in the short run but will earn them the respect of the business community over the long run. No one wants commerce to be held hostage to the limited work hours of workers who don't really want to work.
It would be terrific if American companies could adopt the same common-sense approach. Let's start with YRC Worldwide, where shareholders concerned about the firm's survival have to contend with whining from unions about lost pay and benefits. Some time spent walking a picket line might actually be good for drivers if it helps them burn calories and lose weight.
While they're painting their protest signs (replete with spelling errors), they should note that last week's news release from YRCW trumpeting a "confirmed expected positive EBITDA" for Q2 comes with a bunch of caveats that render it meaningless. The biggest warning is the net cash usage from operating activities. Less cash on hand means less ability to pay bills. Even union drivers should be able to figure that one out. Furthermore, amending their loan facility netted the company $22mm worth of flexibility against a looming bond payment of $21.7mm due in August. Learning-impaired drivers who flunked high school math might not realize that this hole will prove hard to fill, as any creditor willing to grant such a facility probably covets the assets securitized against the loan. That's a bet on bankruptcy, folks. The rest of the bullet points in the news release amount to little more than hope; begging customers for a few more loads, stretching out negotiations with its lending group, selling more assets, and other tactics will only stall for time. They will not materially change business conditions on the cusp of a double-dip recession.
I'll be happy to watch YRCW's flame-out from the sidelines if it forces unions to take a hard look at their bleak futures. The next market crash (perhaps precipitated by a Hungarian insolvency contagion) will be a hard wake-up call. The Port of Montreal is attempting to answer that call successfully before it arrives. There's still time for YRCW to do the same. Hammer your unions hard if you want to survive.
Full disclosure: No position in Canadian logistics providers or YRCW.
Tuesday, July 06, 2010
Unions Turn Up Pressure On Weakened YRCW
I've written recently about my disgust for organized labor in the United States. I briefly thought that union truck drivers were capable of doing the right thing when they agreed to wage givebacks at YRCW. I had set my hopes too high. The Teamsters can't wait to get their greedy paws on YRCW's cash and are willing to place that company's cash flow at risk:
I don't care whether they're only looking for a partial resumption of payments. Once that camel's nose gets under the tent, they won't hesitate to bite the whole burrito and demand full resumption even if it destroys the company. Someone should tell the Teamsters that YRCW isn't remotely close to being out of the woods yet. The sale of YRCW's logistics unit won't raise nearly as much cash as expected due to termination costs. Good luck trying to tell uneducated union schmucks to look at numbers. We can look at YRCW's own short-term estimates for confirmation that their situation is still tenuous:
Using EBITDA is a bit of an optimistic stretch, as many analysts learned to their chagrin during the dot-com era. More bad news may be on the way for truckers if they have to compete against rapidly-strengthening railroads. Railroads kept up their capital spending while truckers like YRCW were forced to sell assets. Wanna bet who's going to win that race in the short term? That's especially noteworthy if the short term is all YRCW has to make itself profitable but union workers just can't think that far ahead.
Hey, what's this about unions getting a say in picking a board member? If YRCW's shareholders are dumb enough to let unions get a say in board leadership then maybe they deserve to see their share price drop to zero. Union pick Dr. Ghilarducci (who taught at my undergrad alma mater, Notre Dame) is an advocate for replacing self-directed retirement accounts with government-guaranteed annuities. I have no problem with government-mandated savings programs (like Australia's superannuation accounts or Uncle Sam's Thrift Savings Plan) so long as they truly operate as investment management programs. The problem with Dr. Ghilarducci's reform program - and others that rely on government-directed investments - is that they can too easily become permanent deficit funding mechanisms. Try living on that guaranteed "3% above inflation" when the government controls the measurement of inflation and the schedule for indexing your inflation-tracking portfolios. I'll bet union workers think that's just great.
Trying to explain any of this to a typical union member is probably a waste of intellectual energy. Thankfully, ports in SoCal remain open despite greedy striking secretarial pools, so we should be grateful that unions don't always get to bully the rest of us around. The day of the union is long past. Executives in unionized firms need to get tough and push these dinosaurs out to pasture.
I avoid investing in unionized companies because they have a hard time doing what they need to do - cut costs, discipline unproductive employees, shut down unprofitable business units - thanks to union interference. It's time to break up unions before they break the United States economy with their greed and stupidity.
The Teamsters union is aiming to get YRC Worldwide to resume some pension contributions starting in January 2011, union officials said Tuesday.
(snip)
The $5.3 billion trucking operator won an 18-month suspension of pension contributions from the Teamsters last August, along with a 15 percent wage cut.
I don't care whether they're only looking for a partial resumption of payments. Once that camel's nose gets under the tent, they won't hesitate to bite the whole burrito and demand full resumption even if it destroys the company. Someone should tell the Teamsters that YRCW isn't remotely close to being out of the woods yet. The sale of YRCW's logistics unit won't raise nearly as much cash as expected due to termination costs. Good luck trying to tell uneducated union schmucks to look at numbers. We can look at YRCW's own short-term estimates for confirmation that their situation is still tenuous:
YRC Worldwide still believes it will "generate positive adjusted EBITDA" in the second quarter, the company said June 29, as it concluded its annual stockholder meeting.
(snip)
At its annual stockholder meeting June 29, the company replaced outgoing director Carl W. Vogt with Teresa Ghilarducci, the Teamster pick for YRC's board of directors.
Using EBITDA is a bit of an optimistic stretch, as many analysts learned to their chagrin during the dot-com era. More bad news may be on the way for truckers if they have to compete against rapidly-strengthening railroads. Railroads kept up their capital spending while truckers like YRCW were forced to sell assets. Wanna bet who's going to win that race in the short term? That's especially noteworthy if the short term is all YRCW has to make itself profitable but union workers just can't think that far ahead.
Hey, what's this about unions getting a say in picking a board member? If YRCW's shareholders are dumb enough to let unions get a say in board leadership then maybe they deserve to see their share price drop to zero. Union pick Dr. Ghilarducci (who taught at my undergrad alma mater, Notre Dame) is an advocate for replacing self-directed retirement accounts with government-guaranteed annuities. I have no problem with government-mandated savings programs (like Australia's superannuation accounts or Uncle Sam's Thrift Savings Plan) so long as they truly operate as investment management programs. The problem with Dr. Ghilarducci's reform program - and others that rely on government-directed investments - is that they can too easily become permanent deficit funding mechanisms. Try living on that guaranteed "3% above inflation" when the government controls the measurement of inflation and the schedule for indexing your inflation-tracking portfolios. I'll bet union workers think that's just great.
Trying to explain any of this to a typical union member is probably a waste of intellectual energy. Thankfully, ports in SoCal remain open despite greedy striking secretarial pools, so we should be grateful that unions don't always get to bully the rest of us around. The day of the union is long past. Executives in unionized firms need to get tough and push these dinosaurs out to pasture.
I avoid investing in unionized companies because they have a hard time doing what they need to do - cut costs, discipline unproductive employees, shut down unprofitable business units - thanks to union interference. It's time to break up unions before they break the United States economy with their greed and stupidity.
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