On the evening of March 19, California Governor Gavin Newsom announced the state was closing most non-essential businesses and ordering people to stay home unless necessary. That followed a similar declaration from Pennsylvania earlier in the day. By Friday, March 20, New York had ordered all non-essential businesses to close. And by Monday morning, eight states had issued similar declarations.
While these measures are being encouraged by medical professionals as a way to slow the COVID-19 coronavirus, they are not doing much for all the people who work in the freight world. With stores closed and manufacturers shutting down, the need to reposition goods is going to drop and that could put thousands of jobs in the industry in jeopardy, at least temporarily. It also could trigger a wave of freight this summer and fall, ensuring a capacity crunch and high rates as businesses reopen.
For fleets that move essential goods – food, medicine, etc. – times are good right now. For those that move other types of goods, struggles are likely ahead. The automakers have shut down assembly plants and other manufacturers have been shutting down, either voluntarily or under executive orders from state governors. Freight flows are going to be impacted, but by how much is unknown. For fleets that can adapt, the impact may be minimal.
“How adept are you at being able to shift goods?” asked David Heller, vice president of government relations for the Truckload Carriers Association. “Automotive is one with all the automotive plants shutting down; all those parts move on trucks. Carriers need to shift to essential goods.”
Those that can, may be okay, but others won’t be able to. On the plus side, panic buying has set in with Americans who are snapping up goods in large quantities, so volumes of some goods have increased.
According to Convey, which tracks retail freight shipping, shipping volume for cleaning and household supplies is up 52%, but delays in order fulfillment and delivery are increasing. The firm said that, as of March 19, 40% of retail and supply chain leaders were seeing disruptions upstream in the supply chain, and another 26% expected to see disruptions as the situation continues.
Heller said carriers are still trying to play catch-up with demand, backing up the Convey analysis.
“I know the White House is urging people not to buy in bulk, but I’ve been in my Costco and that doesn’t seem to be happening because things are flying off the shelves,” Heller said. “I can see a massive shift in [what] goods are hauled until we return to business as usual, whatever that may look like.”
Convey said order fulfillment times have increased 40% over the past three weeks, going from 15.1 hours to 21.2 hours.
“The increase in the order fulfillment trend has been even more noticeable in large-format deliveries, indicating supply chain slowdowns as these are ‘made to order’ items and not typically held in inventory,” Convey said.
For those carriers that are unable to switch to essential goods, driver layoffs could be inevitable. As of now, the potential impact is uncertain and there are a lot of unanswered questions, Heller said.
“We’re three to four days into this massive change of what the world looks like, so I think [carriers] are having these conversations … that ‘hey, we’re delivering the essentials today, but what does that look like when restaurants start opening, businesses start opening,” Heller said. “Time will tell.”
If layoffs cut into the driver force, Heller had no doubt that the industry would be able to quickly ramp up once volumes return.
“We as an industry have gotten great at hiring drivers, and made that into a science if you will, so there will be a rapid response,” he said.
The one concern Heller does have is what the impact will be if truckers are not deemed essential, and the services available to them are cut.
“This is a time where emergency services as essential and truck drivers should be viewed as essential and impediments should not be there,” he said. “Things like closing rest stops… and other impediments. We need to make sure they have services available to them. If their state licensing services are shutting down, and they need to get their CDL renewed, how can they do that so they can keep driving?”
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