Inflation Throws Wrench in Supply Chain as Freight Traffic Levels Off

The demand placed on the supply chain is returning to normal levels, but the industry still faces many challenges around capacity, executives at J.B. Hunt Transport Services said Tuesday (July 19) during the company’s quarterly earnings call.

J.B. Hunt, which provides supply chain solutions for a variety of customers throughout North America, reported that its revenue for the quarter ended June 30 was up 32% year-over-year and that all segments contributed to this growth. The company’s services include intermodal, dedicated, refrigerated, truckload, less-than-truckload, flatbed, single source and final mile.

“We are pleased with our performance in the second quarter despite challenges around key factors of our business, including labor, equipment availability and rail service,” J.B. Hunt President and CEO John Roberts said during the call.

Having a Seasonally Normal July

The demand on commercial transport is now at normal levels, after turbulence earlier in the pandemic and during current concerns about the macroeconomic situation.

“I think we’re having a seasonally normal July that might be the first July that we’ve seen in a seasonality perspective since COVID started,” said Shelley Simpson, chief commercial officer and executive vice president of people and human resources.

The company’s load count in the part of the business that moves goods from warehouses to stores is up and trending up, meaning that consumer demand is strong, said Nick Hobbs, chief operating officer and president of contract services.

Seeing Rising Costs Across the Board

However, many of the supply chain challenges that rose during the pandemic have continued and new ones have emerged due to rising costs across the board. Current pressures include higher costs for wages and benefits, recruitment of drivers, technology, purchased transportation, and parts and maintenance for tractors and trailers.

“The driver market remains competitive and challenging, but it feels more stable than it has in a while but at considerably higher cost,” Hobbs said. “That said, the equipment market remains extremely challenging, and we are having to manage intensely around the impact on our operations.”

The supply chain industry is also coping with inefficiencies in the rail and port networks that have affected both service reliability and velocity.

“I think the intensity at all of our rail providers is extraordinarily high today in all efforts to onboard new crews and find a pathway to a better service product,” said John Kuhlow, chief financial officer. “I think that, collectively, us and our rail providers all understand that there’s additional demand, additional revenue, additional volume waiting on us to improve our service.”

Enhancing Visibility With Real-Time Data

The company also continues to invest in its J.B. Hunt 360 digital platform, which connects shipments and available capacity and enhances visibility with real-time data.

“Freight has been moving inefficiently, creating additional cost, and we continue to see tremendous opportunity to eliminate waste in the system,” Simpson said. “Enhanced visibility, powered by the largest multimodal digital freight platform, J.B. Hunt 360, remains a tremendous opportunity for customers to effectively source their capacity needs.”

During the call, Roberts said the company’s direction is informed by real-time data from across the business and input from its customers.

“It’s about execution the rest of the year,” Roberts said. “As someone said, we know a lot about what we need to know about. We pay attention to our data, and I think that we are looking forward to the second half.”