2020 – The Freight Transportation Year in Review – Part 1

The Covid-19 pandemic, and the response of the Canadian and U.S. governments and citizens to the virus, is clearly the major story of 2020. The pandemic did not just have impacts on the health of many Americans (i.e. over 11 million cases, 250,000 deaths) and Canadians (i.e. over 306,000 cases, 11,000 deaths); it also had significant impacts on our personal lives, business operations, and freight transportation. This blog will highlight the huge effect of Covid-19 on so many aspects of our lives; an upcoming blog will capture some of the other top freight stories of the past year.

1. Covid-19 – The Impact on our Health and Personal Lives

Millions of Americans and Canadians have been infected and continue to be infected at an escalating rate. Personal reactions have ranged from mild flu-like symptoms to significant health issues to death. To protect oneself from contracting the virus, many citizens have begun wearing masks and other PPE, limiting the size of groups with whom they interact and trying to maintain six feet or more of distance between themselves and others.

The lack of national strategies in Canada and the USA on testing, tracing, and quarantining have resulted in a protracted and extensive virus spread. Varying guidelines on mask utilization, industry sector lockdowns and re-openings, and varying leadership approaches have created confusion, fragmented responses, and disappointing results. Many citizens must stay home if they tested positive, if they had symptoms, or if they had to be quarantined. Many primary, secondary and university students are now participating in online learning rather than attending schools. The year is ending with at least two potentially effective vaccines, which will likely be distributed during the first six months of 2021.

2. Covid-19 – The Impact on Business

Essential workers (that includes medical workers, transit workers, in store and distribution facility employees, truckers, police, firefighters and numerous others) were required to perform their jobs, despite the dangers of potential contact with people who contracted the virus. Employers directed many white color employees to work from home. Zoom and Microsoft Team meetings throughout the day have become the norm. For many workers and students, working and studying at home is likely to remain with us for many years to come. Working families with school age children face a dilemma as to how and when to return to work, if requested to do so. Some white-collar employees living and working in downtown urban locations have moved or are considering moving to larger spaces in less densely populated areas. Time will tell how many will physically move their residence to suburban areas.

Covid-19 had a range of impacts on many businesses. Some industries such as travel, cruise lines, restaurants and hotels were dealt a major blow. The risks of travel and restrictions on indoor dining caused a significant downturn in these industries and a loss of millions of jobs. While some jobs returned after the initial easing of restrictions, there are in the range of 7 to 9 million Americans and 1.1 million Canadians who are still out of work. Government subsidies helped for several months, but these have largely been removed without satisfactory replacements; this has limited economic revival as has the upswing in cases and hospitalizations. The long food lines across North America highlight how many people are still having trouble feeding their families and paying their rent and mortgages.

3. Covid-19 – The Impact on Buyer Behavior and Retailing

As consumers began working from home (and not traveling to meetings), some invested in home offices and upgraded electronics. The fear of shortages of supplies created surges in demand for toilet paper, food, beverages, masks, hand sanitizers and other products during the early part of the year. This gave the trucking industry a significant boost. This was followed by a drastic turndown in volumes as millions of people became unemployed or under employed.

To protect consumers, retailers created indoor signage to direct one-way movements, new screening processes and hand sanitizing routines. They opened early to serve seniors, they set up curbside pick-ups of online orders and in many cases created delivery procedures if they had not existed in the past. This created huge opportunities for Amazon since they offer one stop service for an extraordinary array of products. To deliver their freight, retailers and restaurants had to hire their own drivers or contract with Door Dash, Uber Freight or other courier companies operating in the last-mile delivery space.

As the pandemic forced many businesses to close, traditional operations that did not have an e-commerce solution could not take advantage of consumers who made most of their purchases online. Many companies invested in their multi-channel retailing operations to offer a seamless approach to the consumer experience through all available shopping channels. Because of this, omni-channel necessitated changes to warehouse operations and capabilities. Due in large part to the influence of online retailers that are continually raising the bar, the entire transportation management system of a modern omni-channel retailer now operates on a 24/7 delivery basis. To supply a holistic, effective solution, retailers require multiple transportation services from traditional fleets to truckload and parcel carriers to big and bulky last mile delivery.

4. Covid-19 – The Impact on Freight Transportation

Covid-19 has impacted shippers and carriers throughout North America. As an essential service, domestic and cross-border freight transportation operations continued this year, albeit with significant challenges. Many dock workers and truck workers became infected with the virus. Some trucking personnel did not return to the freight industry.

The industry went through four distinct phases in 2020.

a) Phase 1 – Panic Buying and Industry Disruption

In March, consumers resorted to panic buying of what were deemed to be essential products. Loading and unloading times increased due in part to roadblocks and social distancing mandates but highways were reasonably empty as many white-collar employees worked from home.

b) Phase 2 – Industry Collapse

In April, 46 states and the District of Columbia ordered non-essential businesses to close to reduce the spread of the virus. North American Intermodal volumes fell to the lowest level in a decade as container imports sank. This resulted in depressed volumes of trailers and domestic containers. Dry van spot truckload rates fell significantly. Contract negotiations were put on hold or shippers opted for shorter contract periods (i.e. 90 days). In June, carriers were cutting capacity by parking and/or selling equipment or reducing their number of owner-operators.

As the capacity was being reduced drivers left the industry. This was a result of several factors. Some drivers got sick and/or died and did not return. Despite rising driver pay, truckers were unable to attract enough drivers. Thousands of drivers failed the drug test mandated by the Federal Motor Carrier Safety Administration. Training of new drivers was curtailed as twenty-five percent of driving schools were shut down. Several other issues (i.e. driver detention, Hours-of-Service, and Insurance) also were a hindrance in driver retention. Finally, government assistance began to run out.

c) Phase 3 – Industry Rebound / Demand Surge and Capacity Shortages

As truck capacity was removed and drivers left the industry, government lockdowns were lifted. At the same time, retailers upgraded their online sales options and sought to replenish their inventories. Consumer familiarity with online purchasing, particularly of food, beverages, and clothing, coupled with government subsidies, resulted in a spike in demand. Consumers with strong carrier relationships and contract rates fared reasonably well. Carriers rejected 1 in 4 loads, a significant increase over previous years. By August, shippers who rely on the spot market saw their van and reefer rates hit their highest levels in two years.

d) Phase 4 – A Plateau in Demand

In November, trucking companies are seeing a “plateau” in demand. However, the driver shortage has kept freight rates at elevated levels.

It should be noted that as there was a decline in long haul drivers, many people accepted jobs as dock workers, curbside attendants and local city drivers with Amazon, Door dash, Uber Freight and with the many grocery chains and courier companies that established more robust delivery operations in the geographic areas that they serve. This helped mitigate some of the job losses in the traditional trucking industry.

2020 – A Year to Remember and Forget

Unlike some less remarkable years, we will all remember 2020 for the rest of our lives. What made it significant is not just how much the pandemic impacted our lives in so many ways, but the way it will transform our lives for years to come. Clearly, Covid-19 will continue to have lasting effects on manufacturers, distributors, retailers, consumers, logistics and transportation companies.

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