Winners and Losers in the Trucking Industry During COVID-19

Trucking has been one of the most impacted industries during this public health crisis-induced depression. Nearly 90,000 truck drivers lost their jobs during the first month of the pandemic in April. The biggest loss of employment by the industry that has ever been recorded, with data dating back as far as 1990. In the United States, trucking is responsible for employing 5% of all Americans, and moving over 75% of all freight, constituting over $800 billion in market value. Trucking is critical to our country’s economy and as a result the industry and its employees have been declared “essential.” However, businesses attempting to continue operations during these troubling times have been met with multiple challenges. Only a select few are managing to balance each and every new variable successfully. Below is a short list and overview of various players within the industry:

Winners

  • Residental Consumer Product Stockers
  • Food and Food Service Deliverers
  • Essential Construction Suppliers
  • Spot Market Truckers (especially Refrigerated)
  • Ecommerce Warehouse Suppliers
  • Companies with Government/Utility Contracts

Losers

  • Commercial Business Deliveries
  • Trucking Focused on Hospitality/Entertainment
  • Restaurant Suppliers
  • Companies with Oil & Gas Customers
  • University and Educational Material Stockers
  • Automaker and Entertainment Suppliers

Among the “winners” are those focused on supplying industries that are seeing steeply increasing demand; notably, ecommerce and grocery. Many consumer product and general retail sales are moving online, which is causing a scramble for previously unneeded stocking services. Food and grocery chain stores are also looking to fill voids that are arising in their supply chains. Spot market truckers, who make their money capitalizing on market inefficiencies, are in a perfect position to fill the need and profit right now. As much of this increased demand was unforeseen, the rise in last-minute orders – refrigerated and otherwise – drives a contract premium. Additional “essential” businesses that remain robust are those engaged with subsidized entities and utility companies. General infrastructure spending is on the rise as one of the primary tools available to the government to stimulate a prompt economic rebound. Any operator that has contracts within this space/industry will partake in the presumed upside. Though being declared “essential critical infrastructure” allows one to conduct business, it does not necessarily mean that it will be profitable. 

Standout “losers” are undoubtedly those with customer concentrations in the hospitality, restaurant and entertainment industries. With travel at a virtual deadlock, tourism has tanked, and large gatherings of people are now outlawed in certain states or shunned. Furthermore, this leaves educational institutions reeling as they still grapple with academic best practice policies for the upcoming fall. Even upon “opening” they will be operating at a large capacity deficit. Automaker suppliers are also suffering because with many workers staying at home, the demand for cars has fallen. As domestic oil & gas production has tanked, logistics for the industry has furthermore become practically nonexistent. A complete reversal from its previous highs this time last year, April brought an oil shock where futures prices briefly turned negative for the first time in history. Additionally, brick-and-mortar store stockers are largely out of business, but a few resilient locations remain operational. Driven by inelastic consumer demand, stores focused on alcohol or related goods have successfully continued operating. 

Operators can still address non-customer specific issues such as health concerns where many employees are worried that their wellbeing will not be given adequate attention. Management teams are instilling measures such as dedicated medical hotlines – yet many workers are refusing to drive due to familial requirements or pressures, especially in high-impact areas. This has forced trucking companies to provide flexible employee hours and acknowledge emotional concerns. But even when the truckers are on the road, they are met with additional challenges. Many policy decisions are left up to individual states and the inconsistency in available resources is a significant complication. For example, the unforeseen closure of various rest areas has led to increased wait times at pick-up and drop-off locations due to lack of personnel at these brick and mortar sites. This is resulting in unpredictable schedules, changeovers and other metrics that used to be deemed formulaic. 

Trucking was among one of the hardest-hit activities at the beginning of COVID-19. However, due to its critical economic contributions and a few resilient and flexible operators in insulated industries, it is already showing signs of recovery. According to FreightWave’s Outbound Tender Indexes, rejection percentages are finally rising again, and volume has just hit a 3-year high as of June. In May, only 1,200 jobs were lost – which effectively stems the bleeding and primes the industry to resume growth. This increase will be largely driven by the “winners” listed above. But any company that is actively adapting to the environment, unforeseen changes, new employee sentiment, rising health requirements, and differing demand sources will be poised to capitalize on the aggressive rebound progress that is on the horizon. 

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