Pandemic Erects Transportation Obstacles

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Pandemic Erects Transportation Obstacles
A truck driver with a face mask on emerges from his cab. One of the main obstacles presented by the pandemic has been large swings in demand for trucking jobs due to the economic shutdown. © Luca Santilli / shutterstock.com

The COVID-19 pandemic has birthed various challenges within the North American transportation sector, many of which affect transportation of lubricants by trucks, a panel of industry experts said during a webinar last week.

One of the main obstacles presented by the pandemic has been large swings in demand for trucking jobs due to the economic shutdown, Steve Raetz, director of research and market intelligence for logistics services provider C.H. Robinson, said during the Dec. 15 webinar hosted by the Independent Lubricant Manufacturers Association.

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Raetz explained that the United States truckload market can be gauged in large part by the spot market, which is generally considered to be account for 15%-25% of the overall trucking market. While most freight is traded in “committed relationships” between suppliers and shippers, the spot market is a good indicator of market conditions. In the trucking industry, the spot market is considered the price or rate that’s paid to move freight in the moment or in the immediate future.

When the pandemic ramped up in March and Americans prepared for lockdowns, “We had a 32% increase in spot market loads compared to January,” said Raetz. “That is about double what normally is done, so there was already tension being felt as freight had to migrate off of route guides to the spot market with that surge.”

A month later, load demand swung the other direction, falling to 50% below January’s rates. According to Raetz, “That switch is not normally something we see.”

The drop in demand led to a loss of 94,600 trucking jobs between March and April, according to the Bureau of Labor Statistics.

However, as the economy opened again, demand returned to the spot market because the lost trucking jobs did not return in the expected way, said Raetz. About 82% of trucking jobs have returned, but many of those jobs exist in the short-haul and specialized trucking markets, as opposed to the general long haul.

Because of this, transportation options were limited for many shippers. Raetz explained that “we didn’t get our normal seasonal growth of supply when demand [for transportation] was growing, so we really felt this tension. This is really a story of supply shortage, not that demand really surged.”

“On the bulk side,” said Adam Kroupa with C.H. Robinson, “we’re actually seeing a little bit more of an impact in drivers staying home because there is typically more interaction of those bulk drivers with a shipper or receiver than you’re seeing on the truckload side. Certainly those drivers in a lot of instances are helping to load or offload.”

Similarly, Jarrett Flegel of Boss Lubricants cited a shortage of truck drivers as a factor in the transportation shortage. “There is a large demographic of older drivers in Canada that are in the 65 plus category, so we’re having a tough time finding new drivers, younger drivers. There’s also a barrier to entry now. Drivers are retiring earlier.”

Raetz agreed, saying, “The retirement bubble really is part of the issue with the labor today and the return of capacity after the economic shutdown. Carriers are citing that while we’ve always had this retirement bubble coming at us, it’s been accelerated because of the average age of drivers and because of preexisting health conditions. And they’re fearful of COVID.”

Cross-border transportation has also been complicated by the pandemic. Flegel explained that delays at the borders became more prominent since the onslaught of COVID-19.

Raetz added, “The U.S.-Canada border is pretty fluid and operating pretty well. The Mexico-U.S. border is much more of a challenge with the imbalance of trade northbound and southbound.”

During the pandemic, he said, an exceptional amount of warehousing has opened up to put freight in to wait for available capacity to go north. “There are also new labeling requirements that went into play recently that are holding up a lot of cross-border activity,” he noted. “You definitely need to plan more lead time and, frankly, cost.”

Fortunately, a certain amount of relief from these COVID-induced challenges is in sight, and there are ways to alleviate some of the pressure. Next year is forecast to have a 35,000-tractor increase, according to Raetz. “The benefit of that is that we’ll have some expanded capacity to meet the tension that’s out there, understanding there is a five-month lag from the time trucks are ordered until they’re delivered,” he said.

Fleets are getting much higher utilization rates now as demand patterns are stabilizing and as recent rules changes concerning schedules afford drivers greater flexibility, Raetz said. “The new hours of service in the United States give real flexibility to drivers when it comes to their 30-minute break period and their 10-hour sleeper berth,” he explained. “These things help carriers to be more effective, meaning they can do more loads per month.”

The panelists also suggested that shippers can better navigate such uncertain times if they build in lead time. Allowing for some inventory buffers to account for variation in service could help to mitigate the transportation crisis, they said.

“We’ve seen a lot more suppliers planning production around [trucking] capacity,” said Kroupa. “As you’re planning your production, think of reaching out to your [truckload or bulk] suppliers prior to actually scheduling those production plans. Otherwise, you might be in a more difficult spot.”

Transportation management systems may help shippers, receivers and carriers to coordinate transportation more efficiently as well. According to Flegel, “The analytics you get alone have more than paid for the system.” Some of these analytics include driver behavior, fuel efficiency and maintenance costs.

“TMS is central to managing transportation these days,” said Raetz. “You can keep your relationships in there, you can manage your tender acceptance, you can hold your suppliers accountable, and you can handle the payment processes.”

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Logistics & Distribution    Market Topics    North America    Region