Transformation has become the transportation and logistics sector’s unavoidable new buzzword. However, it is good to remember that the industry is spearheaded by countless ingenious problem solvers who have kept companies going through tremendously perilous times in the past and who will do so, again, because COVID-19 is neither its first crisis nor its last.
Steep uphill battles inevitably follow economic declines. One such decline has been the drop in the Cass Freight Index, a market indicator for freight trends across North America that has been showing a decrease for a while. While the transportation and logistics market drop appears counterintuitive in light of growing consumer spending, the industry has been dealing with several issues prohibitive to its immediate growth.
Some of the issues that existed pre-COVID-19 include weak shipping rates and lower demand for shipments due to a decline in fabrication and manufacturing as a result of depressed global economics. The domino effect was reported by Reuters to be spurred by major international events such as the United Kingdom’s prolonged Brexit discussions, the U.S. government’s thirty-five-day shutdown of 2018-2019, and numerous other negative influences. Railways have also experienced a lack of financial support, while cargo prices have dipped too.
Another challenge presented itself last year when California announced its new labour law aimed at registering people working in the new gig-economy as employees rather than independent contributors. The California Assembly Bill 5 (2019) reclassifies to protect, for example, independent drivers by forcing rideshare companies like Uber and Lyft, and others to contribute to the country’s unemployment benefit coffers.
The issue originally faced by the transportation and logistics industries was that more than 69,000 of its independent freight drivers, who are also private truck owners, have no interest in becoming employees and would, therefore, be barred from working in California. The California Trucking Association (CTA) has argued that the law contravenes existing legislation governing commercial activity between states.
Granting a preliminary injunction on January 16, 2020, Judge Benitez stated that the State of California’s AB-5 indeed goes against Congress’ deregulation of interstate trucking, which forces drivers to pass what is known as the Borello test to establish whether they can be classed as staff members or independent operators.
Like with most industries, success for trucking companies during the COVID-19 pandemic has been dictated by consumer demand. Operators hauling medical stock and other necessities have been busier than ever, while industrial carriers’ loads have been far fewer as automotive and other manufacturing plants either shut down entirely or only run partially.
To complicate matters, limiting the spread of the virus meant that border security between the U.S. and Canada and even within Canada had to be prioritized. But moving between America and Canada appears to have been relatively simple for truckers with the correct documentation and a fourteen-day quarantine on either side only required in case of showing COVID-19 symptoms. The trucking industry was aided by the U.S. Department of Homeland Security and the Canadian Trucking Alliance (CTA) declaring the movement of cargo ‘essential travel.’
To ensure the quick flow of freight, trucks were allowed to pass freely between states within the U.S. “It’s smooth sailing for us. We’re so appreciative for our state and federal partners to keep the freight moving,” Alix Miller, vice president of the Florida Trucking Association, told FreightWaves.com in March.
But for trucking and logistics trade shows and other marketing events in both America and Canada, life has been put on hold. Large events by the British Columbia Trucking Association, Canadian Council of Motor Transport Administrators, Quebec Trucking Association, and others were called off while Truck World, Newcom Media’s national trade show, and The Private Motor Truck Council of Canada rescheduled. Others severely limited numbers to protect participants from contracting the virus.
Another concern is U.S.-China trade relations that have seen a move towards relocating American fabrication from China to other Asian countries. According to Avery Vise, vice president of trucking at FTR Transportation Intelligence, there are a few possible scenarios that await. “We’re not going to see the production of a lot of the things we import from China come to the U.S. because the margins on those goods are too low,” he told Transport Topics for its July 8 article: ‘What a Manufacturing Shift Away From China Could Mean for Trucking.’
In the same article, Bob Costello, American Trucking Associations (ATA) chief economist and senior vice president of international trade policy and cross-border operations, agrees that such a shift most probably will not happen, again due to low margins, but an even better possibility may exist if China-based manufacturing relocates to Mexico. According to Costello, this could impact American transportation very positively, with well over 80 percent of Mexican-produced goods moved by the trucking industry.
On June 1 this year, the U.S.-Mexico-Canada Agreement became active, taking the place of the North American Free Trade Agreement. The pact is set to support existing jobs in the trucking industry, and create over 89,000 new jobs. “Very little changes for trucking today, but going forward, USMCA will not only keep the industry in North America, benefiting trucking, but it will also likely attract new factories and economic activity, which will lead to more trucking activity,” said Bob Costello, as reported by Transport Topics when the deal was announced.
With delivery, the final link in the transportation chain, often being the slowest and most expensive for online goods, industry leaders are developing technology that will allow private operators in the gig economy to deliver parcels to customers with the help of platforms similar to Uber and Lyft.
But, rather than only taking business away from the industry, technology also offers trucking and logistics solutions. Recent launches include the Brazilian digital broker CargoX; French real-time freight tracker Shippeo; and the Texan outfit True North, which offers a software suite that allows private truck owners to bid against larger companies. These products improve efficiency, visibility, and service and provide forward-thinking freight operators with a wealth of tools to be as competitive as possible in a bustling market.
Another tool is the Rouch Clean Tech calculator, available online for free from Rouch Enterprises. This clean transportation and alternative fuel specialist is committed to manufacturing and installing clean fuel systems across the U.S. and Canada. The technology assists truck owners in calculating the energy efficiency and environmental impact of their vehicles, allowing them to make better and more sustainable purchasing choices. Such tools support trucking in its efforts to transform itself from a high-pollution industry into a responsible green trade that can be trusted to do the right thing when it comes to affecting the environment.
Much has been done to mitigate the impact of financial losses due to the overall economic downturn. While the Federal Coronavirus Aid, Relief, and Economic Security Act (CARES) offered $376 billion to save jobs and small traders, the Small Business Administration (SBA) program proved popular with transportation companies. Goodyear Tire & Rubber Co. collaborated with the Convoy digital freight network, doing their bit by offering discounts to partner carriers.
Smart transportation and logistics companies are opting to merge, bringing together their expertise and resources and enlarging their footprint to better suit the increasing online purchasing trend’s demand for warehousing. In this way, some companies are significantly increasing their profitability. The largest of 2020’s mergers is reported to be the Costco Wholesale Corporation’s purchase of Innovel Solutions Inc. for a whopping $1 billion.
While things are still looking drab for the trucking and logistics industry on several levels, the good news in terms of federal support and new technology means that we may well soon start seeing a surge in the evolution of creative early adopters.