Today’s trucking and logistics landscape is far from what it once was, but 2024 is one of the most pivotal years for this industry, as it’s forecasted to undergo a myriad of twists and turns. The coming months could create seismic waves across the sector, from strikes and layoffs to consolidation through mergers and acquisitions to the relentless rising costs.
But why are the strikes occurring? What’s causing the layoffs? And how big of an impact does technology have?
Labor Strikes in the Trucking Sector
Last year saw plenty of strikes in the trucking sector, including but not limited to the 1,100 unionized DHL-CVG workers who walked off the job at the Cincinnati/Northern Kentucky International Airport in December and the hunger strike staged by foreign truckers in Germany last September.
However, the striking trend may not be over yet — rumor states labor strikes could occur throughout the East Coast, disrupting prices, consumer confidence and the flow of goods.
But What’s Causing the Strikes?
Various reports and industry experts mention that the spate of strikes experienced in 2023 was triggered by protests against one-sided, harsh penalties for drivers involved in accidents, certain mandated vaccines for cross-border truck drivers, dwindling salary and a lack of overtime pay, decreasing layover rates, and deteriorating working conditions.
How are the Strikes Impacting Companies and the Wider Industry?
The immediate effects are shortages and delays — when truckers aren’t working, products can’t reach their destination. This impact ripples through the supply chain, affecting the directly involved companies, other businesses, and consumers.
On top of that, trucking strikes lead to hiked freight transportation costs. Work stoppages encourage firms to hire replacement drivers, with these individuals demanding higher wages to toil in the face of strikes. Even warehouse and storage fees can boom, reaching retailers and consumers.
Workforce Layoffs and Industry Dynamics
The WMU’s first-of-its-kind forward-looking assessment, Transport 2040: Automation Technology Employment – the Future of Work, focuses on the future of work and how technological changes will affect the industry’s dynamics.
It noted that both technologies and automation will impact sector workers through the displacement and creation of jobs, many of which may cause difficult transitions for drivers and other professionals in the trucking business.
The current layoff onslaught isn’t due to the impending technological revolution. Instead, they’re often caused by the five factors explained below:
5 Factors Contributing to Layoffs
- Manufacturing slowdown — According to a Reuters report from December 4, 2023, US manufacturing is stubbornly subdued, contributing to slow hiring and increased layoffs in the sector. Despite the lack of connection on the surface, this slowdown in manufacturing is reducing the amount of business for truckers, encouraging board members to enact layoffs.
- Business stoppages — Yellow laid off its 30,000 workers in the United States last year as it ceased operations. But this company isn’t the only one. Business stoppages are notorious for laying off thousands of individuals in the trucking sector. However, it’s one driving factor that very few have the power to control, arguably making it one of the most disastrous.
- Overhiring in 2018-2019 and post-pandemic — Trucking notoriously hires and fires swathes of individuals. Yet, the sheer amount of hiring seen from June 2018 to June 2019 and the later post-pandemic purchasing uptick reached all-new heights. As such, companies across the industry mitigate the negative impacts of past over-hiring endeavors by laying off employees, thus reducing operational costs.
- Market weakness — Some companies, including one of the United States’ largest trucking conglomerates, Knight-Swift Transportation, are laying off employees due to less-than-desirable financial results and weak forecasts for the next 12 months. While unfortunate for individuals impacted by the layoffs, it’s helpful for companies who need to cut costs during challenging monetary periods.
- Mergers — Mergers and acquisitions can have an adverse impact on employees of the previously separate companies. Upon merging/acquiring, there becomes an overabundance of drivers in one region, prompting layoffs to achieve balance and harmony among remaining workers. While this influential factor can be seen elsewhere in the sector, it’s more prominent in less-than-truckload companies like Conway.
How the Workforce Can Adapt and Reskill
Industry leaders must consider the skills in their talent pools and work to balance their findings with future requirements. But the workforce themselves can lead the charge.
Automation and digitalization are making waves in the space and are only set to continue. Therefore, the industry must invest in up-skilling and reskilling in all things digital. Proactive companies that embrace innovation now will experience more reinvigoration than those late to the metaphorical party.
The sector is relatively far from complete autonomy, but workforces, particularly warehouse workers, should look for reskilling opportunities ahead of industry-wide adoption.
Mergers and Consolidations
The transportation industry is seeing an uptick in mergers and consolidations, likely expected to continue over the coming months. The question is: why?
5 Driving Forces Behind Industry Consolidation
- Economies of scale and operational efficiencies — Larger firms often merge or acquire smaller trucking services to widen their geographic reach, simplify their market presence, and boost service offerings. By consolidating, companies can enhance route planning, optimize their fleet, and snag exceptional cost savings, thanks to volume fuel and maintenance discounts. As a result, they can compete more effectively.
- Diversification and specialization — Trucking companies sometimes merge with or acquire firms specializing in specific industry verticals or niches. Following the consolidation, they can cater to unique needs and broaden their service portfolio. For instance, a refrigerated transport enterprise may acquire a company with hazardous material transportation expertise, allowing it to diversify its offerings. Not only does this enhance competitiveness, but it also improves the value proposition of the consolidated entity.
- Environmental concerns — Both businesses and consumers are passionate about protecting natural habitats, reducing congestion, dampening noise, improving air quality, improving the safety of vulnerable road users, and limiting wear and tear on road surfaces. These green trucking initiatives lead to industry consolidation to make hitting sustainability and environmental goals possible.
- Urgency — As Spencer Tenney, the CEO of Tenney Group, stated, the market’s pain points, particularly increasing costs, have brought an air of urgency. This urgency has prompted buyers to enter negotiations with fair-minded offers and an insistence on closing deals, undeniably raising the industry’s consolidation level.
- Heightened competition — Echoing the statements above, Dan Carpenter, Trimac’s vice president of finance and business development, noted that the industry has never seen more competition in the space, especially where new buyers are concerned. Such renewed competitive vigor is one of the influential factors spurring the recent spate of mergers and consolidations.
How Mergers and Consolidations Impact Competition, Cost, and Quality
The larger companies formed from consolidations and mergers can offer more comprehensive service coverages, boosted quality of service, and enhanced capabilities, providing customers with a more robust network and competitive pricing. However, consolidation can also reduce market competition, reducing choices and damaging customers’ negotiating power.
Escalating Costs in the Trucking Sector
Rising costs aren’t exclusive to the trucking industry — almost every sector of the economy is experiencing the ongoing impacts of hiked prices. However, trucking fleets in this particular market do have a lot to contend with, including repairs, maintenance, insurance premiums, and fuel costs, as outlined below:
9 Cost Factors Affecting Trucking Companies
- Fuel costs — Ever-changing (typically ever-rising) gas prices put immense stress on trucking companies, pressuring them to complete increased workloads and rake in cash. An Insider article highlighted the issues caused by fuel costs, citing owners’ complaints of struggling to make profits from regular field jobs. Every extra dollar spent on fuel is a tighter notch on profit margins’ belts.
- Repairs and maintenance — While preventative maintenance and regular inspections can prevent potentially expensive breakdowns, the general maintenance required by a fleet of trucks is growing costlier to combat inflationary pressures, placing additional strain on company wallets. Not to mention that aging fleets typically require more frequent and intricate maintenance. Such costs include brakes, oil changes, inspections, tires, etc.
- Insurance — Available insurance capacity, increased road accidents involving trucks, more challenging legal defenses, driver shortages, and expensive medical advances contribute to the elevated insurance premiums’ elevated costs. Couple that with the hordes of inexperienced drivers entering the workforce, and the prices keep rising. Despite common perception, heightened premiums aren’t only affecting smaller trucking companies and impacting leading brands.
- Salaries and benefits — Trucking enterprises have to rely on the skills of their drivers to transport goods from one place to another. Therefore, the salaries and benefits (e.g., 401k contributions, healthcare, sick pay, and vacations) are the unavoidable costs of guaranteeing company assets are in good hands and customers are satisfied.
- Truck leases or payments — Naturally, companies in this industry need trucks, so lease or purchase costs are inevitable. The leasing or financing expense will directly impact the bottom line. However, swallowing the often-high investment of acquiring new, reliable trucks may save money on repairs and maintenance, reducing the likelihood of client loss and missed deliveries.
- Taxes and licenses — Trucking businesses must adhere to many federal and state regulations. More often than not, such legislations require licensing and permitting fees, including permits, registration costs, and fuel taxes. Like most factors on this list, they’re unavoidable yet put a sometimes-large strain on budgets.
- Technology — Efficient operation relies on technology. Dispatch software, GPS tracking, electronic logging, and communication systems are critical tools that track fuel usage, optimize routes, and establish clear communication channels between drivers and dispatchers. But these technologies aren’t accessible. Granted, systems offer free trials but once ended; companies must pay for their usage privilege.
- Tolls and fees — Tollways, road usage, and bridge fees don’t affect every trucking enterprise. However, businesses operating in certain regions will need to include such charges in their budgets. Otherwise, tolls and fees will eat into profit margins without decision-makers realizing before it’s too late.
- Depreciation and amortization — Fleet depreciation is one of the most significant costs most trucking companies face. As time passes, rolling capital accumulates damage, loses value, and necessitates replacement at whoppingly high costs. Many managers consider this a “fact of life” expense.
How Companies Can Manage Costs and Achieve Operational Efficiency
The abovementioned costs may seem overwhelming, but some strategies are proven to manage expenses while ensuring operational efficiency.
Firstly, organizations should use technology that leverages artificial intelligence and machine learning to improve freight demand, forecasting and decision-making. Businesses can enjoy near-immediate value through better transportation efficiency and minimized costs upon implementation.
Secondly, companies should review their current pricing and negotiate with partners for more attractive rates. Hardballing is a bad idea in today’s freight market environment. Maintaining a positive working relationship with suppliers is just as important.
Thirdly, trucking fleet owners and managers everywhere should aim to maximize backhaul efficiency. There are lots of cost savings to be found in the number of deadhead trips.
Technological Innovations and Automation
As previously discussed, technology, particularly automation, is changing how the trucking industry continues and operates— now and in the future. While those resistant to digitization may believe otherwise, this shift presents new challenges and opportunities.
| Challenges with Technological Advancements | Opportunities with Technological Advancements |
|---|---|
| Implementing self-driving systems that are safe to operate on streets and highways Ensuring safety protocols scale with the capacity and volume of the fleets Handling resistance to change from industry participants | Potential for partnerships and collaboration between new and well-established businesses Industry-wide opinions taken into account for legislative reform and additions Reskilling opportunities for drivers and other professionals |
Environmental Sustainability Initiatives
The influx of technology is also poised to give the industry a much-needed environmental clean-up. Companies encourage each other to minimize pollution, consumption, and waste by using green initiatives, optimizing route efficiency with fleet management software, collaborating for more innovative supply chains, and reducing fuel prices by switching to alternative fuels.
Trucking Industry Predictions
2024 is a transformative year many trucking companies with incredible potential for continued consolidation and technological innovation. In such a dynamic environment, trucking organizations must remain abreast of current events, pain points, and advancements to mitigate challenges and maximize opportunities to remain competitive throughout.
From supply chain disruptions to the advent of electric trucks becoming a predominant force for many private fleets, there is certainly an evolving landscape that the American trucking industry will have to content with in the year ahead.
