SEPTEMBER 2023

WHATS NEW?

Good Morning, Good Evening, and Goodnight,

Welcome back to another market update, in this journal I’m going to talk about the supply chain events in a retrospect of this month. The sole purpose for me to do this is to spark a conversation with you in the future and maybe gain perspective of your thoughts and strategies.

“Money is a tool, not a goal”
In this journal I’m going to Daiiv into supply chain updates, market insights, and innovations. I promised this wouldn’t be as long as the other one so let’s jump straight to it. 

• Port congestion is easing. Global port congestion has been a major bottleneck in the supply chain for the past two years. However, there are signs that congestion is starting to ease. Ocean freight rates have also been falling in recent months. This is due to a combination of factors, including easing port congestion, slower demand for goods, and increased capacity from shipping lines. Thanksgiving and Christmas is around the corner, historically demand for products and goods will increase, so will the rates.
• Labor shortages persist. Labor shortages are still a major challenge for the supply chain. For example, Yellow logistics a trucking company that’s been in service for 99 years had more than 1B dollars in debt and had to say goodbye to 30,000 workers. This was all due to rising fuel costs, labor, and overall operation. They were the largest LTL (less than truckload) company in the United States.

If companies under/overestimate their forecasts, we can see more major companies filing for bankruptcy. By the EOY there are some companies on my watchlist that can hit the fan, causing an even bigger restructure on the economy and companies that fall in the similar industry. (Look at the last page for my watchlist)

The September PMI for the United States is 48.9. This is a slight improvement from the August PMI of 47.9, but it still indicates that the manufacturing sector is contracting. (PMI>50 indicates that the manufacturing sector is expanding, PMI< 50 indicates that the sector is contracting.)

SUPPLY CHAIN INNOVATIONS??

The talk of AI (artificial intelligence) has been hot and will only rise in discussion and implementation. Here are few ways AI is getting used in the supply chain industry:

• Demand forecasting: Used to forecast demand for products based on historical sales data, external factors such as economic trends, and social media data. This information can be used to optimize inventory levels and production schedules.
• Inventory optimization: Used to optimize inventory levels across the supply chain. Determines how much inventory to hold at each stage of the supply chain and how to allocate inventory to different customers.
• Transportation planning: Used to optimize transportation routes and schedules. Real time traffic conditions, weather, and fuel costs.
• Warehouse automation: Used to automate tasks in warehouses, such as picking and packing orders. This can help to improve efficiency and reduce costs. (When I worked at amazon this was huge and continues to trend up… Main goal is to replace warehouse workers and have operations running 24/7 Check UAW strike, and tell me what you think)

DAIIV BEAR WATCHLIST:

Trucking: Forward Air Corporation (FWRD), Werner Enterprises (WERN)

Logistics: XPO Logistics (XPO), Expeditors International of Washington (EXPD)

Warehousing & Space: Prologis (PLD)

Retail: Bed Bath & Beyond (BBY), Joann Fabrics (JOAN)

“In this world it’s a 0-sum game… Where there are losers, there are always winners.”

DAIIV BULL WATCHLIST:

Trucking: JB Hunt Transport Services (JBHT), ArcBest (ARCB)

Logistics: FedEx (FDX), United Parcel Service (UPS)

Warehousing & Space: Crown Castle International (CCI), American Tower Corporation (AMT)

Retail: Target (TGT), Walmart (WMT), Costco (COST)

These companies are all well-established and have strong financial positions. They are also well-positioned to take advantage of the opportunities that will arise from the potential bankruptcy of their competitors. *

* I am not a financial advisor, and this is not financial advice. Investing has risks associated with it, including the loss of principal.

Written by:

-DAIVIK SURESH-