For some truckers, it's the best of times, a golden age in which they find their trucks packed, their revenues solid and their profits at record levels. For others, it's the worst of times, a nightmarish period in which they scarcely emerge from one crisis before being battered by the next round of fuel price hikes or staffing shortages.
But whichever type they may be, truckers at least agree on this: their industry is going through an unprecedented period of upheaval, one marked by mergers, acquisitions and closures. In the words of Ted Scherck, president of the research consultancy Colography Group, "There is no shortage of turmoil in the trucking industry."
By all accounts, that turmoil will result in a wholesale reduction in the ranks of truckers. "There are going to be fewer carriers to deal with and fewer options in the marketplace," says Cliff Lynch, principal of C.F. Lynch & Associates (a logistics advisory service) and a DC VELOCITY columnist. "There will be lots more acquisitions in LTL. This industry is consolidating," adds Mike Regan, chairman and CEO of Tranzact, a freight payment and audit company. The message is not going unheard on Wall Street. In a report issued in May, Bear Stearns research analysts Edward Wolfe and Thomas Wadewitz called the surface transportation sector "ripe for consolidation"—an assessment that was validated just days later when UPS announced its bid to buy less-than-truckload carrier Overnite Transportation.
As for what's causing the shrinkage, the reasons are numerous and varied. Skyrocketing operating costs—for drivers, for fuel, for equipment and insurance—have taken their toll on truckers in recent years, leading to a rash of business failures (or absorptions by other carriers). And the carriers exiting the market aren't being replaced. The days when an entrepreneur with $50,000 in the bank could go out and start a trucking company are long gone, thanks to entry barriers such as insurance costs and the need to invest in high-priced technology like state-of-the-art tracking systems.
But there's more to the story than just economics. It's also true that the transportation market as a whole has been undergoing a structural shift, partly as a result of the explosion in international sourcing and continued pressures to keep inventories lean. And many expect demand for regional service to soar as more companies invest in regional DCs to insulate their operations from the kinds of disruptions that have rocked global supply chains in recent years.
Diversify, diversify
In the meantime, the traditional lines between industry segments continue to blur—parcel, express, LTL and logistics providers are becoming one and the same. That's largely a reflection of customer demand. Shippers today expect their carriers to offer multiple services—they want domestic service and they want international service. They want long-distance service. And increasingly, in response to pressures from their own customers, they want speedy regional moves to increase the velocity of inventory through their systems. It's that pressure to diversify—to offer both longhaul and regional service, express deliveries and whatever else the customer might want—that has led to some of the more high-profile mergers and acquisitions in the trucking industry. Both big integrated carriers looking to branch out into new types of service and large trucking companies hoping to bolster their competitive positions have snapped up LTL carriers in recent years. And it appears that the consolidation is far from over.
Take Yellow-Roadway, for instance, a company that has been particularly aggressive in its expansion drive and shows no signs of slowing down. First came the Yellow-Roadway merger in December 2003, which brought together the two largest national LTL carriers. That was followed by the recently completed purchase of USF Corp., a group of regional carriers, which gives Yellow-Roadway an important stake in the critical next- and second-day delivery business.
"What Yellow-Roadway is trying to do [by acquiring USF] is build a more robust network [that] will not only handle long-distance loads, but have more integration with regional business," says Bill Rennicke, a managing director of Mercer Management Consulting. Yellow-Roadway already owned New Penn, a regional carrier in the Northeast, and the USF purchase gives it a nationwide regional network. Beyond that, Rennicke sees Yellow-Roadway building broad international capabilities.
FedEx Corp., too, has followed a carefully plotted strategy for diversifying its operations. It started out by purchasing Caliber System from the then independent Roadway in 1998, and later acquired American Freightways. Those acquisitions gave FedEx important stakes in LTL, ground parcel and contract logistics.
Not to be outdone by rival FedEx, United Parcel Service in May announced its intention to acquire Overnite Transportation, an LTL carrier. Though its choice of Overnite took some by surprise, UPS's purchase of an LTL business to round out its portfolio was widely expected. The UPS acquisition of Overnite makes particular sense considering that UPS's main competitor is FedEx, whose businesses include LTL carrier FedEx Freight, a next- and second-day company. "FedEx showed that customers do value an integrated product," Rennicke says. "From the UPS standpoint, they had the Hundredweight program, but having an LTL carrier in their portfolio was important for them."
Regan believes that UPS is not finished shopping. "UPS is going to have to buy more trucking companies," he says. "They're not done. Overnite does not give it the critical mass [it needs] to compete with FedEx."
As the industry continues to consolidate, it's anybody's guess who will be left standing. Rennicke has identified a number of carriers as potential acquisition targets, including ABF Freight System, the only remaining long-haul unionized LTL carrier outside of Yellow-Roadway; Con-Way Transportation, which boasts a network of regional carriers plus logistics services; and regional carriers like Estes Express and Saia Motor Freight. Regan adds that he wouldn't rule out the possibility that someone will gobble up multi-regional carrier Old Dominion and regional LTL specialist New England Motor Freight.
No cause for alarm?
But what does all this consolidation mean for shippers? Though conventional wisdom holds that buyers—in this case, shippers—suffer when suppliers' ranks thin (thus decreasing competition), that may not apply here. Rennicke, for example, doesn't believe the Overnite deal will hamper competition. It may even make the LTL market more competitive, he says. "Overnite will be a stronger LTL competitor. The Overnite customer will get access to an array of top-notch services. I think it is very positive."
He's equally optimistic about Yellow-Roadway's acquisition of USF. "I think it's the same with Yellow-Roadway," Rennicke says. "USF was never able to integrate even basic information services. I think just the customer service and technology overlay that Yellow has eventually will migrate to USF."
Regan agrees that there's no cause for alarm. "If I were a shipper, I wouldn't necessarily be fretting [about the prospect of] consolidation of the industry," he says. "I think in the LTL sector, you have to focus less on price than on customization of services. That's what will drive more significant savings in the supply chain."
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.