The 2:00 Minute Warning

The last couple of weeks have not been pretty for executives at large publicly traded transportation companies. After releasing their earnings reports, the financial analysts are highlighting the fact that there have been a lot of "BIG MISSES!"

Unfortunately, this is not limited to one segment of the transportation marketplace. With the exception of some LTL carriers that have benefitted from Yellow's closure, the earnings reports for publicly traded truckload carriers, intermodal companies, ocean providers and 3PLs paint a very sobering picture: The freight recession is real and it's longer and deeper than anyone predicted.

When this freight recession will end is still unclear with some estimates noting that a recovery won't materialize any sooner than the second quarter of 2024. What is particularly noteworthy is that even in a recession many of the carriers are seeing their costs continue to rise. Whether it is the increased costs for insurance, equipment, or how the price for diesel fuel impacts the cost of empty miles and repositioning their fleet, these are very challenging times for carriers.

Against that backdrop, several carriers are taking steps to aggressively cut costs and eliminate waste within their organization. For example, when Maersk recently announced that they will reduce their workforce by 10,000, it sent a very powerful message to the marketplace. After trying various methods such as blank sailings and slow steaming their vessels to temporarily reduce capacity and drive up rates, they are in essence shrinking their capacity because they don't think demand is coming back anytime soon.

This recession is not just hitting ocean carriers. Two weeks ago, Convoy went out of business. When Convoy burst on the market as a digital freight brokerage, they had a lot of big time financial backers and last year, after another round of financing, they had a valuation in excess of $3 billion. This freight recession showed the flaws in their business model.

What does all this mean for shippers? 

Here is a message we have gleaned after reaching into our outstanding network and talking with the leaders of several large transportation companies: If the carriers are eliminating waste in their operations, then shippers must also eliminate waste in their transportation and logistics areas. The carriers have made it abundantly clear: Shippers who work collaboratively with carriers and are committed to eliminating their own waste that affects carriers will get better rates and lower costs.

If you could use help identifying and reducing waste within your logistics department, we encourage you to get in touch to discuss our LTL Strategic Assessment. We’ll look at your operations from a tactical and a strategic perspective in order to reduce waste and build a collaborative relationship with carriers. Let’s identify opportunities to improve efficiency and to reduce transportation costs regardless of the market. Simply give us a call at 630-833-0890, send us an email or schedule a time to meet.

And if you're looking for other resources to understand the current market and freight recession, I’d recommend looking at the monthly Georgia Logistics Market Snapshot. In their reports, there’s a wealth of data that covers what’s happening overall and by mode.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT

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