The COVID-19 pandemic has not only flipped the script on this year’s freight market projections but has altered the lives of most Americans, who find themselves sheltered at home.
Donna Kintop, senior vice president of Client Experience, North America, at DDC FPO (of The DDC Group), said that although the coronavirus has devastated the freight landscape, the less-than-truckload (LTL) industry is well equipped to adapt effectively to the stricken market.
“It’s going to be a day-to-day, week-to-week recovery,” Kintop said. “This industry is excellent at adapting to changing volumes and different circumstances. For instance, we deal with weather-related activities all the time. I’m sure each carrier will be looking out for their customer mix.”
FreightWaves market expert and analyst Zach Strickland discussed with Kintop the unforeseen challenges the industry faced in the first quarter, as well as the factors that will help jump-start a recovery.
The logistics industry has experienced inconsistency over the past two years, with each year possessing its own quirks.
A bull market characterized the first half of 2018, with load volumes much greater than trucking capacity. The latter half of the year saw tender rejections drop steeply, and the downward trend continued through most of 2019. Despite the expected holiday spike, rejections proceeded on a downhill trajectory until the coronavirus outbreak hit the U.S.
SONAR’s U.S. Outbound Tender Reject Index (OTRI.USA) has measured market capacity since January 2018. The chart moves closely with spot rates and provides a good representation of the state of the market.
OTRI.USA for 2020 shows that the tender rejection rate spiked in March from around 6% to 19% in just 21 days. This surge can be attributed to the sudden rush of consumer purchases of food and other essentials.
Conditions are still uncertain but for now consumer panic has declined and more capacity is projected to be available as April progresses. Current rates are still higher than anticipated but have decreased to 14% and look to fall further.
The industry has taken a hit in many ways, but Kintop highlighted the cancellation and rescheduling of trade shows and conferences as a factor that’s had a particularly devastating impact. Carriers that rely on moving freight to and from convention centers and entertainment venues are struggling to cope with the sudden loss of jobs.
On the flip side, Kintop noted that carriers hauling medical supplies and other essentials haven’t seemed to be negatively affected by the pandemic. Even carriers in the home and garden industries are still running smoothly, as hardware stores and garden centers remain open.
DDC, which supports a large segment of the trucking industry, has continued to serve partners throughout the coronavirus crisis. As the company stated on social media, “One thing that hasn’t changed due to the COVID-19 global pandemic: Our commitment to our people and to our partners.”
“Even with everything going on, DDC has been essential to help us keep things moving,” Central Freight Lines Vice President of Shared Services Joseph Lain said. “They have gone above and beyond, and they’ve upheld their commitments to us this entire time.”
Central Freight Lines is a DDC partner. Lain noted that communication is key.
“DDC has been in constant contact with us, every day and at all hours,” he said. “Even on the weekends, they are in touch with us and help us plan as necessary. I can’t tell you how grateful we are. Having DDC through this has been vital.”
As the pandemic recovery period nears, Kintop suggests that recovery will rely greatly on international trade and consumer behavior.
“Recovery will depend a lot on consumer behavior by how people feel coming out of this crisis,” Kintop said. “It will also depend on how soon we can start importing products from the Far East.”
Ultimately, though, Kintop has faith that carriers will adapt to the needs of their customers regardless of how fast or slow the market recovers.
Central Freight Lines, which recently announced the purchase of Volunteer Express, has also rolled out a socially distant delivery option. By removing its reliance on signatures, the company has significantly reduced face-to-face interactions for the safety of their personnel and customers.
“We’re changing processes in order to keep everyone as healthy and safe as possible, while still getting the freight delivered successfully,” Lain said.