The year 2024 was by all accounts one of struggle and perseverance for supply chain practitioners. No one was immune, from shippers and their third-party service providers, to the truckers providing freight capacity, brokers managing transportation, and technology providers seeking to deliver the next big tech innovation.
And while many in the industry this time last year thought the back half of 2024 would provide at least a ray of hope for a rebound, 2024 is coming to a close with many of the same pressures and challenges that marked its beginning.
Nevertheless, in a series of interviews with shippers, third-party logistics companies (3PLs), brokers, truck lines, industry associations, and analysts, there was a sense of cautious optimism about the coming year. It is, however, tempered by a tough market as well as macroeconomic and political realities. Challenges remain—among them persistent excess trucking capacity, particularly on the truckload side; businesses delaying decisions on investment and expansion; an industrial economy that’s stuck in neutral; shifting supply chain nodes and flows; and shippers focused intensely on cost and looking to winnow down their stable of service providers.
SURVIVING A FLAT FREIGHT MARKET ... AND NUCLEAR VERDICTS
Jeff Jackson, president of 3PL Penske Logistics, has seen many boom-and-bust cycles in his 30-plus years in the supply chain business. Today’s market “is one like I have never seen before. Some call it a freight recession, but [it’s] not really. Freight [volumes] have not retreated. It’s a capacity issue. There are still too many trucks out there chasing freight,” he says.
He points out as well that persistent excess capacity has kept pricing depressed to the point where “costs still exceed rates in the spot and contract markets. That can only last for so long,” he says. “I’m not sure how much more [truckers] can take.”
One segment of the trucking world that remains solid, Jackson says, is the dedicated market, where a shipper contracts with a 3PL for a full-service dedicated trucking solution, including trucks, drivers, technology, and management and operating personnel. Penske is a major provider of dedicated services.
Dedicated solutions, along with private fleets, are an attempt by shippers “to get more control over their supply chain” at a predicable cost and with consistently reliable service and capacity, Jackson notes. He is seeing a “migration” to dedicated, versus for-hire, that he believes will accelerate “as a result of nuclear verdicts [in trucking accident liability cases]” and the insurance crisis they’ve fueled.
“These nuclear verdicts are unsustainable,” he says. “You can’t listen to a big trucking company’s quarterly earnings call without hearing a reference to insurance premiums or claims being an issue. It’s a pretty steady conversation,” he’s observed.
Gary Petty, chief executive officer of the National Private Truck Council (NPTC), has a similar viewpoint on the rampant escalation of truck liability claims and awards. “There is no magic bullet to prevent getting sued at a nuclear-verdict level or beyond because the public views a truck accident as a driver-at-fault incident,” he says. Petty puts the blame elsewhere, noting that “the four-wheeled vehicles on the road are the ones causing the majority of accidents.”
One area the NPTC and its members have focused on to protect themselves has been truck safety technology, particularly in-cab two-way cameras. “Those have been transformative; we have almost 80% penetration on the private fleet side,” Petty says. The cameras provide evidence of both fault and innocence in an accident, he says, but more importantly, they are a critical training and education tool to help drivers eliminate bad habits, improve skills, and increase safety.
Like dedicated services, private fleets have seen significant growth, and Petty expects it to continue. Private fleets today are a $300 billion business. (By definition, a private fleet is a trucking operation owned by a company that primarily focuses on manufacturing or distributing its own products, not on the trucking service itself.)
According to NPTC’s most recent annual market survey, the percentage of outbound shipments that moved with private fleets hit 75% in 2023, the highest level in the survey’s history. Overall, private fleets manage about 40% of the freight moving in the U.S. Some 942,000 companies now operate private fleets (which account for 47% of all truck fleets). Growth as measured by the number of private fleet shipments has averaged a little over 8% annually for the past five years.
TOUGH CUSTOMERS
As for the less-than-truckload (LTL) segment, while the industrial economy has remained in retraction mode for 21 out of the last 22 months, the rise in nearshoring and reshoring is providing a welcome bump. “I definitely think we will continue to see growth [along the U.S.-Mexico border] in 2025,” says Chris Kelley, senior vice president of operations for trucker Old Dominion Freight Line (ODFL). “During Covid, shippers found out that having products on the water for weeks or months at a time puts their business at risk. So shortening the supply chain became an imperative.”
ODFL has border terminals in Brownsville, Laredo, El Paso, and Del Rio, Texas, as well as Otay Mesa, California. While Laredo is the largest operation, the company earlier this year launched its Mexico Direct Distribution service out of Del Rio. Shippers can bring full truckloads from a Mexican manufacturing site across the border to ODFL’s terminal, where the truckloads are deconsolidated into LTL shipments and are cross-docked into ODFL’s network and moved throughout the U.S.
Kelley expects to see shippers become increasingly demanding—particularly about timely, accurate information and precision service—in 2025. “The rigors of delivery to retailers have become far more stringent,” he notes. “They want freight delivered within specific windows and times. Specific purchase orders delivered on a specific day. Certain freight arriving in certain trailers.”
Delivering early is just as bad as delivering late, sometimes worse, he says. And delivering late is not an option. “They can’t afford to have their product languishing somewhere, missing a sales window. It has to be at the warehouse or on the shelf on time,” he notes, adding that retailers give ODFL’s customers a delivery performance scorecard “and they lean on us to make sure they score well.”
“If you don’t meet those expectations, they will take their freight somewhere else,” he adds.
WHERE’S THE WAREHOUSE?
Over on the warehousing side, Melinda McLaughlin, global head of research at Prologis, one of the world’s largest operators of commercial warehousing space, believes the logistics market is reverting to one more like 2015–2019, “where supply chains still have more uncertainty than in the past, but that’s becoming less of an issue.”
“Freight is about the flow of goods. Warehousing is the flow **ital{and} storage of goods,” she notes. Looking to 2025, the base case for recovery hinges on the prospect of an economic soft landing, McLaughlin says. “Any volatility that interrupts what the Fed [Federal Reserve Board] is trying to engineer would change that,” she notes. “But given a soft landing, we see a gradual recovery [in the freight and logistics markets] in 2025.” Reduced uncertainty in the market “could help unlock decision-making” on things like expansion plans and fleet and facility investments. “We have seen a slowdown in decisions” in 2023 and 2024 to date, she adds.
For Prologis customers, there remains a focus on cost. Energy, wages, and construction costs continue to rise. Companies are increasingly pressured to incorporate active sustainability measures. Volatility from geopolitics, natural disasters, and labor disruptions “points to a more disruptive future for supply chains,” she says.
Consumers’ habits also will play a role, contributing to volatility in the multiple ways they choose to shop and how they receive goods, McLaughlin adds. “We will have productivity enhancements, but at the same time, service levels really need to rise because that has defined the industry long term.”
Lastly, McLaughlin sees the trend toward goods—and the warehouses that handle storage and fulfillment—being staged closer to end-consumers. And that portends even more of a focus on the last mile. “It is about bringing scale as close to the end-consumer as possible,” she notes. “There are tremendous benefits and cost savings, as well as carbon emissions savings. You have fewer miles traveled.”
Overall, McLaughlin is hopeful the industry will be “navigating clearer skies in 2025. In 2024, we saw restocking and [some] freight recovery. Some companies are still conservative and remain pretty defensive in how they are running their supply chains. They are waiting for more clarity and hope to see that in 2025.”
A BOUNCE-BACK ON THE HORIZON?
While the coming year will certainly remain one of challenges and uncertainty for a variety of reasons, prospects for a turnaround of some substance are a recurring theme among service providers and shippers.
Ryder, through its dedicated transportation and brokerage operations, procures and manages some $11 billion of freight annually for its customers. Steve Sensing, Ryder’s president of supply chain and dedicated transportation solutions, characterizes the freight markets as being “in our ninth quarter of freight recession.” Nevertheless, he sees the tide turning. “It’s reasonable to expect we will see a bounce-back in 2025; it is just a matter of when,” he says. “If it’s earlier in the year, that’s great.” But if it’s later in the year, he cautions, the environment will be more challenging.
Customers are coming to Ryder with two primary requests as they plan for the coming year, he shares. “Right now, it is around continuous improvement, helping them drive out costs. Their volumes are down, and they have challenges in key markets. So it’s really about helping them manage costs in a down market. And they are equally as eager to make sure we are prepared to support them when the volume returns.”
The other area of demand is technology. “There is always going to be new technology, so we have to make sure we innovate and stay on top of it. Automation is becoming a bigger part of what we do, especially in the omnichannel area,” Sensing notes. And as labor costs continue to rise and the labor market tightens, “customers are concerned about getting people, so they look to us for both technology and automation solutions as well as innovative hiring and retention programs.”
The biggest challenge ahead? Anticipating where the rebound will come and when, says Sensing. “The good thing about our story is that we have a very diverse set of customers and industry verticals. We can leverage lessons from one vertical across others, which enables us to develop and deploy solutions faster. We are well-positioned to give our customers options as they come up against their challenges.”
VIEW FROM THE TRENCHES
Kenneth Clark Co. is a 3PL that specializes in heavyweight, oversized, and project cargo logistics. Among its customers are makers of heavy machinery for the construction industry. “We work mostly within the large construction equipment arena,” says President Ken Clark, whose grandfather founded the family-owned company in 1960. “What we are hearing is there is a lot of inventory glut at dealers, which is reducing demand for transportation in the heavy specialized world,” he notes. “We do think there will be a recovery [in 2025], but [the turnaround won’t come] as quickly as everyone hopes.”
He’s also detected a shift in how shippers are planning for and managing their freight needs. “Whether it is using sophisticated technology or just good tactical execution to [boost] efficiency, shippers want to drive down costs. They are looking for how I as a broker or 3PL can make it as cost-effective as possible and still manage my freight with good service,” he notes.
Another issue demanding attention, says Clark, is fraud, such as double-brokering as well as cargo theft and other nefarious practices. “We have to prevent unlicensed brokers, working from places not friendly to the U.S., from operating in the U.S.,” he stresses. “We have been fighting this for years. It’s a huge problem. Brokerages in Eastern Europe, Asia, and South America [are] directing the movement of goods in the U.S. Some are commodities but others are sensitive goods we probably don’t want our adversaries to know about.”
Clark, along with Chris Burroughs, the incoming president and CEO of the Transportation Intermediaries Association, is working with association members, government agencies, and other parties to shore up and tighten the licensing process, establish tougher requirements, and bring more transparency to who is directing freight. “It’s an existential threat to the industry, and shippers are looking to the brokerage community to come together and solve the problem,” says Burroughs.
MAKE IT SIMPLE
Outside of solving the fraud issue, deploying more and better technology, and lowering logistics costs, shippers want logistics partners that are agile and efficient, provide consistent service, and can quickly solve problems, notes Dylan Rexing, president of 3PL PFL Logistics. They also want to deal with fewer suppliers. Rexing cites one shipper who last year went from a stable of 500 carriers and multiple brokers down to 250. “And they are planning to reduce that even further,” he says.
“From the customer’s perspective, they are always looking to us for ways we can make their lives easier, whether it’s integrating new tools, optimizing their freight and onboarding carriers, [providing] real-time visibility, or simply doing the blocking and tackling of the business flawlessly,” he says.
“Trucking is not all that sexy, in my opinion, but it is perhaps the most critical piece of the supply chain, and we want our customers to have confidence their goods are moving safely and efficiently, and are showing up when and where they expect them,” he concludes.
