Home Latest Freight industry alters budgets, embraces technology amid pandemic – Talk Business & Politics

Freight industry alters budgets, embraces technology amid pandemic – Talk Business & Politics

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Freight industry alters budgets, embraces technology amid pandemic – Talk Business & Politics

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Companies have modified their supply chains in the wake of the COVID-19 pandemic that’s led to layoffs, bankruptcies and business closures. Yet, the freight industry adapted to the pandemic by making changes to planned spending and resource allocation.

Recent reports highlight some of the changes the industry made. A report from DDC FPO, a freight-focused division of The DDC Group, showed that almost every business had been impacted in some way by COVID. And a whitepaper by Flock Freight explains technology has been critical to success for shippers, carriers and freight brokers during the pandemic.

The DDC FPO report included a survey of several freight industry segments, including carriers, brokerages, technology, manufacturers and warehousing. It showed more than three-quarters of respondents had shifted spending since they set their 2020 budgets. More than half of respondents said the shifts impacted up to 25% of their budgets. One-third said up to 50% of their budgets were affected.

Technology providers reported the most significant changes to budgets, with 84.6% making changes to budget allocation priorities. Warehousing respondents were least likely to make changes at 50%. However, 78% of freight carriers and 80% of brokerages changed their budgets.

According to the DDC report, the freight industry is designed to adjust quickly to rapid changes, and this need for agility can be attributed to multiple factors, including consumer behavior seasonality, weather issues, and political changes. Industry professionals already have systems in place to adapt to the changes in transportation and logistics.

At the start of the pandemic, freight volumes fell without an understanding of when they might return to normal. Respondents said fewer operations employees, warehousing and dock staff, and drivers were needed due to the volume decrease. Also, most put hiring on hold.

Operations and staffing/recruitment were the most affected areas, likely because of the need to manage the non-variable fixed costs of assets, according to the report. Conventional strategies in an economic downturn include improving efficiency and reducing payroll and human resources costs. Respondents noted a fundamental staffing-related change was employees working from home or remotely instead of on-site. Some also laid off employees or reduced working hours and restructured departments.

Nearly 70% of freight carriers made changes to operations spending.

In March, Tontitown-based carrier P.A.M. Transportation Services Inc. laid off more than 50 employees, including office staff and drivers, resulting in automotive plant closures in Michigan amid the pandemic.

Along with the budget adjustments, 41.5% of respondents made significant changes to their underlying business processes, according to the DDC report. Respondents focused on adapting existing processes and seeking operational efficiencies. They also downsized staff, services or investment.

“Our research indicates that, as a result of the pandemic, many companies are now pursuing operational efficiency with vigor,” said Donna Kintop, senior vice president of client experience, North America, for DDC FPO. “This includes moving away from manual processes and looking for ways to increase connectivity and communication with external resources.”

Many companies have looked to shift strategies, improve operations and consider technology to increase operational efficiency, the report shows. This might include streamlining paper-based processes and incorporating more automation.

In May, Lowell-based carrier J.B. Hunt Transport Services Inc. announced a new electronic bill of lading feature to allow businesses and carriers to digitally sign bills of lading and reduce contact during the delivery process.

“The current environment is challenging every aspect of the supply chain, from securing capacity to completing deliveries,” said Shelley Simpson, executive vice president, chief commercial officer and president of highway services for J.B. Hunt. “This new electronic bill of lading feature offers simplicity, efficiency, and most importantly, a safer option for drivers and front-line employees to sign load documents.”

In the carrier’s second-quarter earnings call, John Kuhlow, interim chief financial officer, said the company spent $25 million in unplanned expenses related to COVID through the first half of 2020. On March 26, the company disclosed a $12.3 million cost for one-time bonuses for employee drivers and other operational personnel. The company also reduced its planned capital spending to between $600 million and $625 million for the year, down from $700 million as initially planned.

J.B. Hunt eliminated travel spending and suspended hiring unless there was a need, Kuhlow said.

“We were pleased with our ability to redeploy our people and assets from shuttered to surging accounts,” he said. “And while most of that is reverted to normal operations, we’ll continue to use that strength as conditions warrant.

“We focus on our driver productivity using our people and assets as efficiently as possible, avoiding furloughs and layoffs to set us up to be in the best position as the economy comes back online.”

CEO John Roberts noted that the company’s need to hire more drivers could be a sign of reaching a freight volume bottom.

“This is particularly encouraging because we have experienced some of the lowest driver turnover in the past four months,” Roberts said. “While still too early to call, at least we have some potential signs of inflection in the demand curve. We will look for more direction from import data, inventory levels and retail sales information, and thoughtful input from our customers to build confidence in the trends into the second half of the year.

“Until that confidence firms, we maintain our current state of cost control efforts, a conservative capital expenditure approach and contain payroll and hiring practices.”

Some shippers have experienced business slowdowns and the inefficiency with shipping less freight. In contrast, others have faced increased demand for their products and accelerated shipping schedules, according to the Flock Freight whitepaper.

Like shippers, carriers have changed their business models to adapt to the pandemic. As the market returns, some carriers have benefited from increased rates.

In July, dry van spot rates rose 12.5%, from June, and are up 10.6% from July 2019, according to DAT Solutions. Prices in July reached the highest point of the year as capacity tightened.

“Supply chain disruptions caused by COVID-19 pushed more freight to the spot market, with national average truckload rates for vans, reefers and flatbeds each hitting their highest marks of the year in July,” according to DAT Solutions. “Tighter capacity also pushed load-to-truck ratios higher in the last week of the month, keeping pressure on prices.”

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