2020 drove that point home with a vengeance, upending nearly every facet of American life. With the trucking industry bearing a disproportionate amount of the impact, what’s the trucking industry outlook in 2021?
The Road to Now: How the Pandemic Disrupted the Supply Chain
Trucking and shipping have never been an easy nut to crack; according to Broughton Capital, 1,100 trucking companies closed in 2019 alone. Business closures, production slowdowns, and furloughs for everyone from drivers to freight loaders and unloaders that tanked every major index of trucking volume nearly tripled that number to 3,140 shuttered trucking companies in 2020, the majority of which were small carriers. While Paycheck Protection Program loans and other initiatives cushioned the blow, the industry and the customers it served all felt the impact as demand began to pick up again in Q3 and Q4 2020.
Trucking Industry Recovery After COVID-19 Disruption
So how are things looking a year and a half from the start of the pandemic? Signals are mixed.
A Promising Recovery
Right now, gross domestic product (GDP) is surging at a rate not seen in nearly forty years. However, like the initial hit from COVID-19, the recovery itself has been anything but even. According to a study by FTR, the projected 5.45% year-over-year growth in GDP will be far outstripped by even higher growth in the trucking industry, placing high demand on a sector that’s already stretched thin.
While GDP paints a rosy picture, a look beneath the numbers suggests that consumer behavior has changed. To begin with, many consumer purchases remain online rather than in-person. This forces many sectors of the logistics industry to pivot their entire model as we see a rise in warehousing, full service distribution centers and fial mile companies. A further wrinkle: after a long period of enforced isolation, we’re turning more to experiences rather than things. While purchasing is up, concerts, restaurant and bar attendance, tourism, and other social activities are a significant part of what’s fueling the recovery.
Challenges Faced by the Trucking Industry
What has this meant as trucking regains its footing?
Decreased Shipping Capacity
Earlier, we cited the numerous trucking companies that shut down over the course of the pandemic. A smaller number of carriers, combined with above-average demand for services like LTL freight and expedited shipping, has put significant strain on the industry. Trucking companies of all sizes are being forced to reconsider their priorities based on local conditions, which—depending on where their customers are located—may make certain types of transportation, and certain kinds of equipment capacity, much harder to come by.
Demand Outpacing Supply
There’s a further wrinkle. As you know, the cost of anything—trucks, truckers, fuel, and other commodities—is driven by the laws of supply and demand. After a long lockdown that drove supply up and demands down, the economy’s current trajectory is causing demand to rapidly outpace supply. And consumers aren’t the only ones feeling the pinch. In the transportation sector, we’re seeing car and truck parts shortages which are resulting in the dropping of certain features from options lists, but that’s only the beginning of the problem. Key raw materials are also getting more expensive, including steel, aluminum, rubber, and fuel. Rising costs and parts shortages, in turn, mean that orders for Class 8 trucks and trailers aren’t likely to open up fully until 2022, an issue that’s only compounded by a particularly ill-timed microchip shortage. The resultant rise in fuel and maintenance costs is putting additional pressure on fleets and individual owner-operators alike.
How Trucking is Pivoting to Respond to Demand
The changing landscape is forcing customers and shippers alike to adapt. Recruiting efforts have stepped up at major carriers, and even smaller companies and individual owner-operators are embracing data-driven decision-making in order to adjust to a major boom. While supply and demand are decidedly lopsided right now, it’s still possible to find the capacity you need at competitive rates; you just need to know where to look. With an extensive network, a 3PL freight company like Able Transport Solutions is better positioned than most to help, so we invite you to get a transport quote from a 3PL company you can trust to meet your shipping needs throughout the US and Canada.