2021 Truck industry disruption factors: how to continue with operational excellence and profitability (part 2)

Jason VanoverFreight Market Blog

Disruption is the new normal of supply chain management. Everyone knows disruption is coming, and many try to plan carrier freight pricing based on the impacts of disruption. Unfortunately, those plans often fall short of meaningful improvements and fail to consider the big picture. Yet, truck industry analyses and insight into existing conditions can help safeguard against uncertainty. In part one, we explored the political side of things. But now, let’s take a closer look at how a vaccine distribution will play into final mile delivery, why and how e-commerce will still change the narrative, and what to expect from pent-up customer demand.

COVID-19 vaccine distribution impacts the final mile and pressures carriers to act

The distribution of COVID-19 vaccine has been a focal point of media coverage in recent weeks. And while the vaccine does represent a major undertaking, it doesn’t necessarily amount to massive truckload changes on a national scale. With Pfizer and other manufacturers focused on getting vaccine doses out through the big three carriers, there’s simply not a lasting need to worry at present. 

But that comes with a significant caveat. The changes highlighted in part one of this series emphasize the uncertainty relating to political change. As the Biden administration begins to build out the final mile distribution of the vaccine, it could result in fewer available drivers and even the diversion of other resources. Therefore, the pressures placed on last mile delivery may have a compounding effect,  forcing truck industry participants to grapple with inefficiencies and grow more strategic.  And it comes down to seeing the full shipment lifecycle from its past, descriptive state, through its likely costs in the future.

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The unprecedented demands of e-commerce continue to accelerate

E-commerce has enjoyed years of sustained growth, but 2020 was a game-changer. It accelerated e-commerce expansion, unlike anything in history. Unfortunately, the demand for more e-commerce coincides with an expectation for fast, free shipping. According to Shopify, “free shipping is just the tip of the iceberg: 39% of U.S. shoppers expect two-day shipping to be free, while the same-day shipping market in the U.S. is forecast to top $9.6 billion in 2022.” The problem derives from the fact that fast, free shipping incurs a cost, even a cost to the environment. And as such, the urgency remains. For carriers to stay strategic, they must recognize that demand is growing and apply trucking data to plan accordingly.

Yes, those are processes standard among any transportation service provider. However, it does represent a need to have more accurate and timely data when making any decision. Part of that data includes invaluable indices, such as the Outbound Tender Reject Index (OTRI) in FreightWaves SONAR.

Pent-up demand for services and travel will add new pressures to the industry

Another factor affecting the truck industry goes back to the “cabin fever” that arose through the lockdown and recent months. The uncertainty following the COVID-19 vaccine roll-out and increased demands on e-commerce have a breaking point. People want out of their homes and the opportunity to enjoy life once again. That includes taking advantage of more in-person dining services, traveling to new locations and reconnecting with family in-person. Those may not seem like significant factors, but each carries a demand for more throughput in the food supply chain. It amounts to an increased demand for fuel, which could cause a net effect of higher rack prices for truckers. 

Still, the demands do not end there. They continue through more appointments with beauticians and hair stylists, more lavish spending in renovations, and well beyond the idea of simple dining and travel. Think about it. Savings accounts have reached an all-time high, and that money needs to go somewhere. In part one of this series, that mention evoked a marked tick upward in truck orders. But it will also amount to an increased strain on the industry. After all, capacity remains finite without ample drivers and equipment. There’s much to be discerned, and it’s essential for truck industry participants to gauge the market conditions and respond accordingly.

Surcharges and rate fluctuations remain a threat to the industry  for the foreseeable future

Responsiveness to truck industry conditions does not end with merely knowing what’s happening right now; it includes recognizing future fluctuations. SONAR carries that capability in predictive modeling across rates, various indices and more. Combining that data with the probable trends among all carriers to levy surcharges after the seasonal peak ends leaves a lasting threat. If the pandemic continues unchecked and pressures remain at current levels, surcharges will not simply vanish. Instead, major carriers will extend COVID-related measures or even implement additional rate increases.

Unlock insight into truck industry conditions to plan your resources and create strategic value as a carrier

The truck industry remains subject to various influences that extend beyond retail supply chains. And throughout the first quarter of 2021, the surcharges and uncertainty will be highest. But stability should begin to return during the second half of the year. Unfortunately, the writing is on the wall for that time as well. The past year taught consumers that they could do much more online than previously thought. And while the gig economy tries to keep pace, the demand is on for truck industry participants and carriers to make the best decisions and keep the shelves, whether digital or virtual, stocked. Schedule a FreightWaves SONAR demo by clicking the link below today.