Nation’s supply chain crisis could be the Grinch that stole Christmas in 2021

October 25-31, 2021

By Wesley Brown

The hottest toys on Walmart and Amazon’s 2021 Christmas list could soon be out of stock or out of most people’s price range if the ongoing supply chain issues persist heading into the pre-holiday shopping season.

Those concerns were heightened last week as the White House discussed potentially deploying the National Guard to ease the nation’s supply chain issue. On Oct. 13, President Joe Biden met with industry leaders and members of his Supply Chain Disruptions Task Force, led by U.S. Transportation Secretary Pete Buttigieg, to urge Congress to adopt the administration’s $1 trillion “Build Back Better” infrastructure plan that has stalled during U.S. House talks.

“Strengthening our supply chains will continue to be my team’s focus. If federal support is needed, I will direct all appropriate action. And if the private sector doesn’t step up, we’re going to call them out and ask them to act,” said Biden. “Because our goal is not only to get through this immediate bottleneck, but to address the longstanding weaknesses in our transportation supply chain that this pandemic has exposed.”

Biden’s frantic White House meeting occurred after the Federal Reserve’s Open Market Committee’s meeting on Sept 22, where central bankers discussed the Fed’s plan for future interest rate hikes in 2022. In meeting minutes released last week, Fed Chair Jerome Powell and top U.S. economists expressed concerns that supply chain disruptions are already impacting inflation, unemployment levels, private investment, construction activity and consumer confidence ahead of the all-important holiday season.

For example, the FOMC reported that inflation, as measured by the U.S. Labor Department’s monthly consumer price index (CPI), had been boosted by a surge in demand as the economy reopened further from the pandemic, along with the effects of production bottlenecks and supply constraints. In August, the CPI index showed prices for all consumer goods have spiked by 5.3% over the past 12 months, which is well above the Fed’s 2% inflation target.

J.B. Hunt, Walmart lead global efforts to address supply chain disruptions, port congestion, and industry labor challenges

As the White and Federal Reserve look at policy and legislation to ongoing production bottlenecks and supply constraints that are impacting every sector of the economy, Northwest Arkansas has become ground-zero for global efforts to solve the persistent, pandemic-driven problem that could make this Christmas season the most expensive in U.S. history.

On Oct. 15, the top executive for J.B. Hunt Transport Services Inc. said the trucking, logistics, intermodal and supply chain industry will continue to face challenges in the fourth quarter and beyond due to “persistent irregularities in demand patterns substantially resulting from port, labor and inventory challenges with our customers.”

“The congestion at key inbound port locations has further challenged the desired smoothing of supply chains in preparation for the upcoming holiday season,” J.B. Hunt President and CEO John Roberts said during the Arkansas company’s third quarter conference call. “We find that the dialogue with our key customers reveals both a challenged labor market and a pent-up need to increase the in-stock levels across the system. Planned additions to our container and trailing fleet and the expansion in contract services both Final Mile and dedicated should all contribute positively as these headwinds abate.”

Now one of the largest supply chain solutions providers in North America, publicly traded J.B. Hunt today has total revenues exceeding $10 billion annual as the company marked its 60th anniversary. Earlier this year as news of shipping containers stacking up in West Coast ports due to COVID-19 related supply and demand problems, the Lowell-based trucking giant announced a $1.25 billion capital investment plan at the end of the first quarter to increase the company’s total container and trailer capacity by 12%. 

As part of that investment, J.B. Hunt said it was adding 12,000 new intermodal containers and 3,000 “360box” carriers from the company’s e-commerce marketplace that connects shippers and J.B. Hunt transporters by using real-time data and artificial intelligence to match freight with capacity.

That brings J.B. Hunt’s total intermodal count to more than 100,000, as the Arkansas trucking firm founded by the late Johnnie Bryan (J.B.) Hunt and Johnelle Hunt in 1960 already operates one of the largest company-owned fleets in North America, with more than 18,500 tractors and 36,000 trailers in addition to intermodal containers. Still, Roberts said in the recent conference call with Wall Street analysts that the nation’s fragile supply chain dynamics are still at risk due to lack of truck drivers.

“The company is not insulated from the labor dynamics mentioned above for our customers. This year, we have reached all-time highs in the need for company drivers in all segments as well as openings we have on our office and field teams,” said Roberts. “We have done comprehensive and exhaustive research on our current compensation and benefits programs, along with our incentives plans to help better position our job going forward. Progress in closing the gaps for both driver and non-driver positions has been made during the quarter and we’re optimistic these gaps will continue to shrink for us.”

In addition to J.B. Hunt’s big capital investment, a former startup founded by the Northwest Arkansas trucking giant is also making big strides to solve the nation’s supply chain issues. Earlier this summer, Gov. Asa Hutchinson and Arkansas Secretary of State Mike Preston held the official grand-opening for Transplace’s new $50 million headquarters in Rogers.

The ultra-modern facility extends logistics solutions and supply chain strategies for top Fortune 500 trucking and transportation companies across the U.S. Founded in 2000 by J.B. Hunt Transport Services, Swift Transportation, U.S. Xpress Enterprises, Covenant Transportation Group Inc., M.S. Carriers and Werner Enterprises, Transplace has gone through several ownerships in the past 20 years.

J.B. Hunt maintained majority ownership of Transplace until 2009, when private investment firm CI Capital Partners LLC of New York acquired it. In 2017, the company was purchased from Greenbriar Equity Group by TPG Capital, a $75 billion private equity firm based in San Francisco that was also behind the blockbuster $25 billion deal that took Alltel Corp. private in 2007.

Formerly located near J.B. Hunt’s headquarters in Lowell, a globally recognized logistics hub, the company’s 150,000 square foot state-of-the-art facility is now situated closer to Walmart global offices and other Fortune 500 suppliers and shipping customers with expectations for exponential growth.

In 2019, company officials said the move to Rogers would increase the firm’s payroll by 1,200 and contribute an estimated $60 million boost to the local economy. According to Forbes.com, Transplace had revenues exceeding $3 billion and more than 5,000 employees at the end of 2019.

“Northwest Arkansas is a focal point for innovation, commerce and new business opportunities,” Hutchinson said during the privately held logistics and supply chain giant’s grand opening. “Transplace is an industry leader and longtime business partner in this community. We anticipate even more progress as they expand to include hundreds of future new hires.”

According to company officials, as one of the world’s largest managed transportation services providers, Transplace offers shippers network scale and flexibility, while lowering operational risks and supply chain costs. The new operations center will extend Transplace’s investments in artificial intelligence (AI), machine learning and predictive analytics. Transplace will also continue innovations to its transportation management system, SaaS application, Logistics Solutions Platform and other solutions to support shippers in Northwest Arkansas, across North America and Europe.

“For over 20 years, Transplace has made a commitment to Northwest Arkansas and our new center of excellence will infuse leading-edge logistics technology, as well as new job opportunities,” said Transplace CEO Frank McGuigan. “Our proximity to iconic brands that are among the largest, most prolific shippers, enhances communications, streamlines multi-shipper collaborations and optimizes transportation budgets.”

In late July, Transplace announced it was going through another interaction after Uber Freight announced plans to acquire the logistics and supply chain tech firm with offices in Frisco, Texas and Northwest Arkansas for nearly $2.25 billion in stock and cash. Under the deal, Uber Freight will acquire Transplace from TPG Capital, creating one of the top logistics technology platforms in the world. The transaction is subject to regulatory approval and other customary closing conditions.

“The acquisition will combine the world’s premier shipper network platform with one of the industry’s most innovative supply platforms, to the benefit of all stakeholders,” said McGuigan. “Our expectation is that shippers will see greater efficiency and transparency and carriers will benefit from the scale to drive improved operating ratios. All in all, we expect to significantly reduce shipper and carrier empty miles to the benefit of highway and road infrastructures and the environment.”

Walmart and J.B. Hunt is also leading other industry efforts in Northwest Arkansas to solve the nation’s supply chain congestion problem. In late 2019, Silicon Valley investor Mike Zayonc announced plans to open a supply chain and logistics accelerator program in Northwest Arkansas to bring innovative startups from around the world to Northwest Arkansas to focus on developing new supply chain technologies.

“We are excited to accelerate and invest in startups in Northwest Arkansas as it is the birthplace of some of the world’s largest companies like Walmart, Tyson Foods, and J.B. Hunt,” said Zayonc, founder of Plug and Play’s Supply Chain & Logistics program. “The founding partners in this program will be able to collaborate with our worldwide startup network right in their own backyard.”

Today, Plug and Play is responsible accelerating and investing in startups in the areas of analytics, AI, machine learning, augmented reality, smart warehousing, blockchain for supply chain, customer support solutions, inventory management, IoT sensors, drones, last mile delivery, disruption of the freight brokerage model, end-to-end supply chain optimization, autonomous driving, predictive analytics for demand planning, and transportation management systems.

Plug and Play and Transplace have also collaborated with the Supply Chain Management Research Center (SCMRC) at the Sam M. Walton College of Business to sponsor and promote supply chain, logistics, and transportation research and education. That program at the University of Arkansas in Fayetteville is considered the top supply chain undergraduate program in North America, according to Gartner, the Stamford, Conn.-based global technology and research firm.

Pre-Halloween shopping season underway

Despite all the industry challenges, the nation’s largest retail trade group that represents retailers of all sizes and categories from Walmart and Amazon to local main street merchants is still optimistic about robust sales this Christmas. On. Oct. 13, the National Retail Federation said U.S. retail sales increased again in September as worries about the COVID-19 delta variant pushed consumer spending toward merchandise rather than services like dining, entertainment or travel despite supply chain disruptions.

“Today’s retail sales data confirms the sheer power of the consumer to spend, and we expect this to continue,” NRF President and CEO Matthew Shay said. “Despite persistent challenges related to the global pandemic, supply chain and labor shortages, retailers and their partners have shown resilience and ingenuity in getting the workforce, goods and systems in place to serve their customers and the communities where they operate. We welcomed the chance to collaborate with the Biden administration and industry partners this week to address supply chain and labor force issues. We have seen record imports this year and are confident that collectively we can work through these challenges to ensure a healthy and happy holiday season.”

According to NRF, the U.S. Census Bureau data shows overall retail sales in September were up 0.7 percent seasonally adjusted from August and up 13.9 percent year-over-year. That compares with increases of 0.9 percent month-over-month and 15.4 percent year-over-year in August. Despite occasional month-over-month declines, sales have grown year-over-year every month since June 2020, according to Census data.

NRF’s calculation of retail sales – which excludes automobile dealers, gasoline stations and restaurants to focus on core retail – also showed September was up 0.7 percent seasonally adjusted from August and that September was up 11 percent unadjusted year-over-year. That compared with increases of 2.4 percent month-over-month and 12.2 percent year-over-year increase in August. NRF’s numbers were up 10.7 percent unadjusted year-over-year on a three-month moving average.

For the first nine months of the year, sales as calculated by NRF were up 14.5 percent over the same period in 2020. That is consistent with NRF’s revised forecast that 2021 retail sales should grow between 10.5 and 13.5 percent over 2020 to between $4.44 trillion and $4.56 trillion.  

PHOTO CAPTIONS:

1./2. Supply chain pain - As the White House and Federal Reserve address growing concerns about U.S. port congestion and production bottlenecks, J.B. Hunt leads efforts to make Northwest Arkansas global supply chain hub.

3. U.S ports are currently facing one of the worst congestion scenarios ever in the nation's history. Ports on the east and west coast are causing bottlenecks along all modes of freight transportation, delaying deliveries for retailers and manufacturers, sapping capacity, and driving cargo costs to record highs. U.S ports are currently facing one of the worst congestion scenarios ever in the nation's history. 

4. Lowell-based J.B. Hunt Transport has invested more than $1.25 billion in 2022 to increase its intermodal capacity to more than 100,000.

5. On July 15, Gov. Asa Hutchinson held the $50 million grand-opening of Transplace's new headquarters in Rogers. The ultra-modern facility extends logistics solutions and supply chain strategies for the world’s leading brands and most active shippers. 

6. J.B. Hunt's launched its 360box technology platform in 2019, which includes a pool of 500, 53-foot trailers that businesses can reserve online for drop shipping purposes.