U.S. Freight in the Post COVID-19 Era: A Look at the Road to Recovery

U.S. Freight in the Post COVID-19 Era: 
A Look at the Road to Recovery

Global economic losses due to COVID-19 estimated at $5.8 to $8.8 Trillion

U.S. freight saw an initial spike of 30% in activity triggered by panic buying, but it was quickly followed by a sudden plunge of around 20%. The pandemic affected all transportation segments detrimentally with an upsurge in ocean freight and air freight by 10.1% and 19% respectively. Road freight in the U.S. fared well below average. However, in other parts of the world, especially in the EU, trucks were seen forming 37-mile-long queues at European borders after authorities started closing them to stop the coronavirus spread.

What caused the downward spiral?

When the whole world was forced into a self-imposed lockdown that mandated the public to stay indoors, the demand for goods and services came to a standstill. Here are some reasons that further slowed down the U.S. logistics and freight industry to snail speed.

Fall in global production

As the pandemic started raging across the world, businesses started shutting down offices and physical operations in an effort to restrict contamination. As a result, the global production of goods and services hit a snag causing few goods to transport.

Restricted movement of goods

Region-wise lockdowns also resulted in inventories getting locked up in warehouses. Perishable goods with limited shelf life soon became unusable which stalled the supply chain activity.

Demand for non-essential items stalled

Face masks, surgical gloves, self-care items tripled if not quadrupled in demand with the COVID-19 situation while demand for non-essential items that constituted the larger chunk of global trade was stalled. Job cuts and uncertain futures also led to a fall in demand for non-essential items.

What does the road to recovery look like?

In the past, the world economy, especially the U.S. economy has gone through three major depression cycles. Each of these depression cycles were triggered by diverse reasons and each of them played a key role in denting the upward growth plans of the freight industry. However, the impact was always short term in nature, and the industry bounced back in a positive way. Over each of the past three recovery cycles, the share of services has ticked up by an average of 6% in the years following the recession’s end.

COVID and e-Commerce Reverse Logistics: The double trouble for US freight

During the COVID-19 crisis and most probably after its conclusion too, eCommerce returns of goods notably clothing, footwear, electronics and non-essential commodities are not expected to come down.

At least 30% of all the products ordered online are returned as compared to 8.89% in brick-and-mortar stores. In fact, some goods are expected to be returned faster during the recovery phase. The cost of returns would also increase to sanitize each product before they can be made suitable for resale and delivery.

Read More:Coping eCommerce Supply Pattern Changes During COVID-19

US freight after lockdown: Retooling post COVID-19

Coronavirus lockdown has scrambled the performance of freight as global supply chains face major disruptions. To keep the supply chain running, logistic players look further and plan for the new normal.

  • Optimizing every touchpoint of the supply chain for minimal physical contact and contamination
  • Ramping up fulfillment capacity to accommodate high-volume but low-margin freight-light orders.
  • Prepping the existing routes and physical infrastructure for nearshoring or reshoring production.
  • Reinstating small players who lacked the resources backup or business continuity plans to fight a pandemic.

What should US freight do to drive into the fast road to recovery?

There is no doubt that the pandemic is forcing the freight industry to prepare for a shift from freight-heavy to freight-light delivery which is likely to stay for the long-term. The current disruption re-equips the fleet size with a small-sized large number of trucks to meet same-day or shorter delivery spans. They proactively plan for a surge in eCommerce activity once the economy rebounds and also digitize operations such as - route mapping, fleet management, order fulfillment and other manual operations to stay agile. Nonetheless, establish data control towers to centrally monitor data of the physical movement of fleets on the ground, and strengthen last mile-delivery capacity to cope up with freight-light orders.

Pointers to measure the recovery-readiness

  • Is the supply chain equipped to deliver high-demand products like food, essentials, safety equipment?
  • Can the existing route maps be redrawn to better utilize last-mile deliveries?
  • Can the cost structure be optimized to book for the increase in cost for safety measures and unforeseen delays?
  • Does the organization as a whole have the digital advantage — digitized operations, working from home staff, and data analytics to ride over the tide?

Freight, which forms part of the bigger logistics industry is indispensable to any economy. In today’s market environment where eCommerce is filled by on-demand orders, freight plays a critical role. The COVID-19 crisis has definitely left the US freight industry with a flat tire. However, all flat tires can be fixed. The temporary stalling will be followed by restarting of the engine. Slowly, but steadily the engine will start rolling down the growth highway with a momentum that is typical to super-fast long-haul trucks.

Read More:Supply Chain Flexibility is Key to Survival in Uncertain Times

To know more about MAI's expertise in contact center and fulfillment services, please drop in an email now!

Recent Blogs