AGX Freight COO Ike Sherlock “kind of lives” the global supply chain.
Sherlock monitors daily how efficiently freight is moving through world trade routes, U.S. ports and on the ground to its domestic destination for AGX clients.
That role became more important since 2020 as events like the pandemic and Russia’s war in Ukraine have choked some commodity supplies and backed up the world supply chain.
Economic impacts like shortages in grain, oil and natural gas and higher interest rates persist, but Sherlock says there are signs U.S. supply chain issues are starting to improve.
As of May 4, about 38 containerships waited in line to unload at major West Coast ports, according to Sherlock.
Compared with pre-pandemic levels, that still is a lot, he said. In early 2020, the line at a West Coast port was eight to 10 vessels at any given time, he said.
Sherlock said those seaports had a 100-ship backlog waiting to unload freight earlier in 2022.
“We’ll call it progress, we’ll call it wins,” Sherlock said.
“We definitely are improving. We’re seeing the supply chain loosen. We’re seeing freight moving through better.”
Containerships and other maritime cargo carriers also are starting to diversify port destinations, Sherlock said.
Carriers are reworking contracts to lift requirements that containers unload at specific ports in order to send more product to uncongested U.S. East Coast ports.
According to Sherlock, it can take 30 to 90 days for carriers to renegotiate contracts with ports and customers.
Sherlock says this will be advantageous for JaxPort in Jacksonville, which doesn’t have a wait to unload containers and soon will be able to support larger post-Panamax ships when the harbor deepening project is completed.
Shipping to East Coast ports adds 20 to 30 days of transport time and requires operators to build relationships with truckers and third-party logistics customers in the region.
Sherlock says big-box retailers like Target, Walmart and Costco are starting to lease smaller vessels that were dry-docked and taken out of service as carriers began using more high-capacity containerships.
He said that allows companies and manufacturers to call on secondary ports like New Orleans, Panama City and Mobile, Alabama, to avoid the West Coast backlog.
Sherlock says East Coast ports also are geographically closer to a majority of U.S. consumers.
How AGX operates
Jacksonville-based AGX, founded in 2016, operates 22 agent offices throughout the U.S. and a motor carrier and has access to a network of 140 trucks and more than 25,000 carriers.
It is based in East Park Business Park.
The logistics company works with third-party freight brokers to advise its clients on the most efficient shipping modes, intermodal routes, trade and supply lanes to deliver its products to consumers.
“If we can bring value to our clients by advertising different trade lanes, different supply lanes, different modes of transportation, that’s what we want to do,” Sherlock said.
Sherlock has been with AGX since October 2021 and has been a logistics professional for 22 years. He tracks cargo volumes for AGX as it leaves countries of origin.
He said there is a “tsunami” of freight waiting to be shipped from Asian markets to the West Coast.
He said U.S. big-box retailers placed larger back-to-school orders earlier this year after experiencing long lead times in 2021.
That could slow improvements at domestic Pacific ports, Sherlock said.
“So that freight is coming much sooner than it typically would, and we hope it doesn’t swamp the California ports’ boat,” he said.
Despite the pressure to move from West Coast ports, Sherlock says shipping hubs like Los Angeles, Long Beach, Seattle and Oakland always will be key components to the U.S. supply chain and AGX assets will remain in that region.
Labor “headwinds”
There is one headwind that Sherlock says keeps him up at night. The International Brotherhood of Teamsters union is scheduled to start negotiations with global company United Parcel Service later this summer.
According to Sherlock, UPS “touches, moves or is associated with” 6% of total U.S. gross domestic product and 2% of global GDP.
According to its website, the Teamsters Union has 1.2 million members. It organizes nearly every U.S. seaport.
“Even a temporary work stoppage by the Teamsters could really hurt the supply chain and hurt a lot of the recovery we’ve made in the country,” Sherlock said.
He projects a brief stoppage at the West Coast ports could lengthen the containership queue to more than 50 waiting to unload.
He expects work stoppages would be port-specific. AGX does not expect to see an issue at JaxPort because of what Sherlock characterizes as the port’s good relationship with organized labor.
Too many truckers?
The influx of freight in the past 18 months drove demand for more truck drivers, causing shippers to raise rates to move products.
Sherlock said the potential for high returns had another consequence. For-hire truck drivers and equity firms started buying their own trucks and small fleets to launch new trucking companies.
The U.S. has more truck drivers on the road today than at any point since 2008, he said.
“All these new trucking companies that entered the market, they all were chasing the gold rush. The spot market went through the roof. The rates were unprecedentedly high,” Sherlock said.
Sherlock said the individual drivers and equity firms paid too much for equipment because those prices also spiked.
According to Sherlock, many of the new companies built business models based on unrealistic revenue assumptions.
As the supply chain starts to normalize and rates and volume-per-truck drop or level off, Sherlock worries many of the startups might fail.
“A lot of those new trucking companies that are not adequately capitalized are getting caught in that pitch and will exit the market as quickly as they entered the market,” he said.
For example, AGX Freight’s data shows there were 154 loads per truck in February. In March, Sherlock said that dropped to 135 loads.
Rates have dropped by 33% since January, Sherlock said.
He said that indicates the supply chain is catching up. Sherlock predicts some of the commercial driver license holders will revert to being for-hire drivers at larger companies and others could leave the industry for a skilled trade.
“I think it’s going to constrain capacity which is going to exacerbate the (supply chain) problem,” he said.
Like many other transportation and logistics professionals, Sherlock thinks Jacksonville’s healthy job market, JaxPort’s harbor deepening and the area’s logistics infrastructure will continue to insulate the region from some of the economic fallout related to the supply chain.
“Any time there’s chaos, there’s a ton of opportunity to be had,” he said.
“And our company in Jacksonville, a lot of companies in Jacksonville and a lot of East Coast companies really capitalize in a positive manner on this chaos.”
