The COVID-19 pandemic has changed the landscape of the trucking industry, both in the short-term and long-term futures. The short-term outlook is for certain supply chains (grocery, household supplies, medical equipment, etc.) to run well over capacity, while others slow to a crawl or stop altogether. Supply chain managers have had to reorganize and redeploy freight professionals at a breakneck pace to accommodate those changes. The long-term outlook suggests that the pandemic has accelerated some changes in consumer behavior, particularly a shift toward more ecommerce. That could make some of the recent supply chain reorganizations permanent. But what are the practical effects and implications of the shift in the freight industry?

The Short-Term Outlook

Trucking companies have seen an overall decline in new freight contracts since the start of the pandemic, and those that are still running their full fleets are often doing so with a significant number of empty or underloaded miles on their vehicles. On the other hand, the supply chains for essential consumer goods are backlogged to the point that farmers are plowing harvestable crops into their fields and dumping thousands of gallons of dairy. Supply chain managers are working to realign and redeploy trucking resources, but the hard truth is that there are fewer contracts available now than a year ago—and the contracts that are available pay less thanks to reduced freight rates and empty or underloaded miles.

The trucking industry, unlike some others, is safe from total shutdown. Freight can’t be shipped digitally, and truckers will be the logical intermediary between port/rail and inland warehouse facilities until roads are obsolete. But the realignment of resources to booming supply chains is a disorganized process, and some trucking companies are feeling that disorganization financially. New and renewed contracts are sure to tick up as Americans go back to work, of course. For most trucking companies and independent operators, the financial squeeze won’t last forever. But the landscape of the industry may never be what it was pre-pandemic.

The Long-Term Outlook

The long-term effects of COVID-19 will have on trucking are more difficult to sort out, partially because most of the industries that truckers support haven’t resumed in full yet. But we can certainly make some educated guesses. Ecommerce has been steadily growing its market share for two decades, and the pandemic accelerated that trend. At least a portion of that growth will be permanent. Last-mile and home delivery driving will probably be a larger piece of the pie moving forward, and delivery to retail outlets/warehouses will be a smaller piece.

It’s also likely that drivers who depend on international routes moving goods into and out of Mexico will have to re-evaluate their business plans. The typical 3-to-1 ratio—three full loads moving north for every full load going south—may not be possible for quite some time, as Mexico has seen record layoffs and reduction in demand for freight hauling. Drivers still making cross-border runs are reporting a current ratio closer to 7-to-1—that’s one full load south for every 7 north, which equates to double the number of empty trips and miles. Those ratios don’t make financial sense on a prolonged basis, so if production in Mexico doesn’t recover at a rate commensurate with that of the US then the number of viable cross-border contracts and spot runs may decrease.

Final Thoughts

It’s impossible to deny the effects of COVID-19 on the freight industry. Some of the impact can be quantified in terms of what’s already happened, but most of the effects are just starting to become apparent. Planning for long-term success, now more than ever, includes paying attention to the credit scores of both your company and your partners. Let TransCredit help you with your credit needs. Contact us today.