Trucking is at the heart of the modern economy. It’s the core of freight transportation, ensuring businesses and consumers alike receive their goods promptly. But the sector has experienced everything but positive news in recent months — a fact that’s trickled down to markets that rely on their offerings.
Layoffs and bankruptcies are rife within the industry amid slowing manufacturing, countless mergers, and a general shift in provision type. Both impact sector participants, the companies they work for, and the customers they serve. But how long will this demoralizing pattern continue? And how can businesses learn from past economic mistakes?
Layoffs in the Trucking Industry
The past 20+ months have seen too many trucks for too little freight. The market is experiencing a shocking recession, sparking the recent trend of layoffs among truckers. From drivers to maintenance professionals to office workers, trucking companies are pushing people out the door at an unprecedented rate.
4 Reasons Behind Workforce Reductions
- Shift in service type — Dustin Ogden, Korn Ferry’s senior client partner, notes the layoff surge indicates the transition in the type of trucking services companies provides. They’re turning to same-day or next-day delivery for ecommerce, driving growth in specific industry segments while slashing others.
- Manufacturing slowdown — The ongoing US-China trade dispute caused a dramatic slowdown in manufacturing. As such, the sector is laying off trucking professionals to relieve the financial strain caused by a lack of business in this department.
- Mergers — Both mergers and acquisitions cause an overabundance of drivers in one region. Thus, the newly combined/acquired company lays off drivers to achieve balance. These layoffs generally happen in less-than-truckload companies like Conway and Yellow Roadway.
- Business stoppages or slowdowns — Private companies that experience a slowdown or stoppage of freight will lay off truck drivers to better handle the dip in income.
Impact on Employees and Morale
Layoffs are devastating emotionally and financially for the affected individual. Beyond the loss of income, they face the ever-difficult challenge of finding new employment, potentially leading to long-term unemployment.
But they even impact the remaining employees. Uncertainty and anxiety arise when people see their colleagues laid off. Company morale suffers greatly, decreasing productivity, lowering engagement, and damaging the bottom line.
Bankruptcies in the Trucking Sector
August 2023 saw the 91-year-old Yellow Freight Corp file for bankruptcy after losing profitability for several years. In October 2023, 12-year-old SEL Supply Chain Solutions of Ft. Worth shut its doors forever. Also, in October 2023, eight-year-old Convoy Inc. filed for bankruptcy protection despite financial backing from Bill Gates and Jeff Bezos.
Bankruptcies are sadly becoming commonplace in the industry. There are a few common reasons for this:
5 Reasons Behind Bankruptcies
- Failing to invest in tech — Tech stacks are imperative for businesses in the trucking sector. Neglecting to build one puts companies far behind their competition, decreases operational efficiency, diminishes customer services, prevents data-driven decision-making, and raises costs. When combined, these factors are the perfect recipe for bankruptcies.
- Losing track of costs — Trucking companies can quickly lose sight of their costs without a proper plan. Financial budgeting and forecasting are imperative for keeping spending on the straight and narrow. Businesses should keep operating ratios under 100. Those who struggle to do so often file for bankruptcy.
- Unable to retain drivers — Driver shortages are unsurprising, thanks to unappealing schedules, low pay, and time spent away from family. Companies that don’t offer benefits, a driver-focused environment, and attractive compensation will see high turnover, which can harm service quality and damage relationships, putting businesses in bankruptcy’s line of fire.
- Unprepared for downturns — Economic downturns can considerably affect the trucking industry. Consumers aren’t spending as much during recessions, and manufacturing slows, resulting in decreased freight demand. Depending on the sectors a trucking company serves, this decline can place immeasurable financial strain on them, eventually causing bankruptcy.
- Not diversifying — Generally, trucking businesses fail to notice impending bankruptcy. Why? Because their revenue streams don’t have any defenses. Those without a diversified customer portfolio are at a higher risk of bankruptcy than companies with multiple income sources.
The Economic Ripple Effect
Naturally, these layoffs and bankruptcies directly impact the overarching industry, creating short-term disruptions and potentially changing the labor dynamics. However, the effects aren’t limited to the trucking sector — they create a ripple effect over the rest of the economy and other industries.
For instance, sectors like retail and ecommerce that rely on the trucking industry to transport their goods will feel the diminished availability of services. Likewise, manufacturing facilities, oil and gas, and construction will notice the impacts.
Trucking is the entire economy’s backbone and has long been an indicator of a looming recession. When this industry goes down, so does the rest of the economy.
The Post-Layoff Employment Landscape
While layoffs aren’t positive, analysts say they considerably impact companies looking to hire — lots of unemployed but skilled labor looking for work. Those looking to harness these experienced, newly job-seeking individuals must update traditional hiring processes and adapt to the changing trucking culture.
How Companies Can Attract and Retain Talent Following Layoffs
In the post-layoff landscape, trucking companies can attract and retain talent by:
- making the recruitment process flexible for everyone.
- investing in completely digital end-to-end hiring solutions.
- creating employment bridges to help individuals find new opportunities.
- implementing better change management.
- crafting strong Environmental, Social, and Governance (ESG) plans.
- bettering time off schedules.
- offering competitive benefits and compensation.
Lessons from Previous Economic Downturns
This isn’t the first time economic downturns have affected operations in the trucking sector. Companies can follow the strategies those who came before them employed to stay afloat during harsh times, such as:
- implementing strong financial management practices.
- maintaining fuel efficiency and route optimization.
- investing in new technology.
- providing good customer service.
- diversifying their client base.
Trucking Impacts of Bankruptcies and Layoffs
The impacts of bankruptcies and layoffs in the trucking industry trickle down to sectors that rely on the service and the broader economy. But despite the unprecedented negativity surrounding the current downturn, the industry has proved resilient. With the right strategies, companies can keep themselves above water, protecting the sector’s future.
