There is absolutely no doubt that the COVID-19 Pandemic has changed the landscape of our economy; especially logistics. When the pandemic started, our logistics network in the United States was strong and growing at a fast rate. Trucking, especially LTL has been robust while Truckload began to slow down.
Now the pandemic!!!! – What will logistics look like after the Pandemic? It is my view that we will have a shortage of Truckload capacity as many owner/operators have shutdown due to COVID-19. This will bring an imbalance as the demand for consumer products continues to rise. One can argue that, we have experienced a shortage prior to the pandemic. Although this is true, I believe the problem will get worse as we get through this current situation.
LTL (Less than Truckload) and parcel are different. We are experiencing an uptake in demand for both modes driven by the increase in consumer spending on e-commerce and home delivery. The LTL continues to “shuttle” product to forward stocking locations (let us say “mini distribution centers”) in the large metropolitan areas. From there, the courier (local delivery) takes over. During the next few months, we will continue to see high growth in both the LTL and small parcel – more localized delivery.
Businesses are moving more to e-commerce (online shopping) as the brick and mortar store foot traffic continues to be weak. I believe this will continue to be the trend through 2020 and the first quarter of 2021. The need for more localized delivery coupled with greater LTL movement will continue to grow.
Let us spend a couple of minutes on the Truckload movement. The need to “reposition” medical supplies and other inventory from city to city will require a higher demand for truckload. The problem that we are experiencing is the lack of Truckload carrier supply. Naturally, this shortage is going to drive the price for Truckload upwards; notwithstanding this, I do not see a lot of new entries into the truckload supply anytime soon. Most of our truckload movements have been handled by owner-operators. With exit of many of them, we are going to continue to see a shortage of supply.
So, what does all this mean:
- The shortage of truckload carriers will see pricing increase and delivery times become longer
- The increase demand for LTL will see delivery times become longer causing some frustration for the consumer.
- The courier (small parcel) local delivery will grow exponentially. Again, without a surge in new carriers in this mode, the delivery times to the consumer’s home will be longer.
- There will be continued growth in forward stocking locations for “key” items. Using advanced technologies, such as Artificial Intelligence and Predictive Analytics, companies will be able to determine which items need to be moved to a forward stocking location (mini, localized distribution center)
In conclusion, the future of logistics is strong; but, we have challenges to overcome as explained above. Nonetheless, it Is my belief that the industry is up to the challenge.
Most importantly, NEVER GIVE UP!!!!
By M. Dave Malenfant.