The Great Freight Debate: What’s Next for the Industry?

Tags: Trucking, Risk Management, Technology

Several months into the pandemic, trends are emerging across the freight landscape that could shine a light on what the future may hold. The abrupt changes in demand of various items sent supply chains hurdling in different directions, with new, unforeseen consequences emerging from a world sheltering in place. Plans were quickly squashed, and forecasts proven unreliable.

With the initial shock wearing off and operations starting to stabilize, organizations are shifting focus from the present to the future. But the overwhelming challenge is navigating the uncertainty surrounding the situation. Here are four freight trends worth paying attention to moving forward:

1. The ups and downs of inbound and outbound freight

Even with supplies in many industries no longer in demand due to closures and restrictions, as of mid-May, trucking’s outbound freight was 7% higher year over year. The demand for certain essential supplies, such as personal protective equipment, groceries, and other items that are needed for sheltering in place, has been so high that it resulted in an overall increase. This may seem like a shock to many within the freight industry who have seen their supply lines slashed and outputs drastically reduced. Inbound freight, for example, dropped by nearly 50% from late March to mid-May.

However, it’s a clear sign that certain organizations moving freight in specific industries are at far greater than full capacity during the pandemic. The economic variability based on industry and supplier could be leaving some companies overworked and unable to keep up, while others struggle to stay open or shut down operations. Freight shippers will need to focus on supplier diversification in the future to avoid rapid surges, or lapses, in operations.

2. Returning the returns

With the absence of access to physical stores, and a general hesitation to shop in-person where available, consumers are ordering more items online than ever before. A study from Capgemini in April surveyed 11,000 global consumers, with 40% saying they would have high interaction with online retail channels over the next 6-9 months, up from 30% pre-pandemic. But one result of increased online purchases is the discovery upon arrival that the item you ordered isn’t what you needed, or perhaps doesn’t fit correctly.

In addition to not seeing an item in person ahead of time, the in-transit toll on items as they’re shipped and delivered could result in incorrect deliveries or damages. This increase in online orders also leads to more online returns, as people ordering online likely aren’t eager to go into physical stores to return their items. This has created a large increase in reverse logistics, an area largely ignored before the current situation. A survey from Gartner back in February revealed that only 27% of respondents were using digital technology to improve their reverse logistics capabilities. This could include things like the Control Tower concept to gain real-time visibility. How will shippers handle that influx, and will it be a mainstay if these online ordering trends last post-pandemic? It will be a big area to watch in the next 9-12 months.

3. Sights set on 2021

Many organizations quickly optimized their budgets for short-term gains when the current crisis first emerged, but now, their sights are set on long-term planning. In a survey from Shipping and Freight Resource of more than 300 shipping and freight professionals, 42% said they plan to change their supply chain strategies when the current situation subsides. For many freight companies, 2020 budgets and plans are no longer realistic and applicable.

Initiatives and progress that were on target for this year are now being slated for 2021, and even next year, budgets could be thinner than they were pre-pandemic. With so many in the industry gearing up for next year when its still so far away, there will be enormous pressure to execute a successful 2021.

4. Innovation delays

Delayed progress and initiatives due to budget constraints could also impact industry-wide innovations. Autonomous freight is one to monitor. With costs tight, will its development take a back seat to higher, more immediate priorities, turning a breakthrough that was one year away to something that may not be widely operational until three years from now?

On the other hand, if companies can prove the long-term cost-cutting impacts that autonomous freight could provide, it may accelerate the development timeline. 67% of those surveyed by Shipping and Freight Resource said they plan to invest in technology to improve adaptability, setting them up to be more prepared for the next disruption.

 

While this unprecedented situation makes it hard to turn to past experiences to predict future outcomes, those within the freight industry should pay attention to these early trends from the current crisis to form their next decisions. The moves made now can put organizations—and the industry as a whole—on the path toward recovery.






Visit Our Sponsors