Rethinking Logistics Amid COVID19: The New Freight Paradigm

One of the most well-established industries in America, logistics has experienced few true industry disrupters, from the introduction of air freight to last-mile delivery.  With each market shift, logistics companies were able to plan and integrate over time.  In recent history, crises have been regionalized, from hurricanes to earthquakes, maintaining capacity and regular freight schedules in other parts of the country.  Then the coronavirus happened.

With a global pandemic came a network-wide disruption with manufacturing and distribution lagging behind customer demand, and a dramatic shift in products being shipped.  From Seattle, WA to Pittsburgh, PA, the contents, cadence, and pricing of freight has been in flux since early March.  Some analysts have compared the market conditions to simultaneous landfall of several hurricanes.  Let’s examine the factors and how the market has responded:

Shift Of Goods Delivered

While restaurants are still in operation at limited capacity, nearly every state of the union has imposed take-out or delivery-only services, closing all dining rooms.  This dramatic shift has caused restaurants to certainly lose revenue as customer demand has fallen dramatically, and with it, demand for bulk goods from paper products to fresh food.  For consumers, this has meant a higher consumption of goods in the home, and thereby an increase in demand of consumer-packaged goods.  This shift has impacted everyone from manufacturers who must now ramp up production of consumer-packaged goods to distribution centers (DCs) where allocations must be adjusted to account for the change.

Unfortunately, the upstream changes are not immediate, creating a lag between supply and demand from local distributors, requiring logistics companies to reroute trucks to DCs farther out, increasing the delivery time and cost.

The Cost Of Doing Business

With longer routes, one-way freight, and sometimes fixed pricing on the retail end, logistics companies are finding themselves squeezed in the middle of a highly-competitive, lower-margin freight market.  It’s not all doom and gloom, however.  Substantially lower-than-normal traffic patterns equals lower stress and in many instances greater distance/more loads hauled in the same amount of time.  An additional benefit has been the precipitous fall of petroleum as consumer demand plummets, easing losses over the reduced freight billing.

Financial Support During The Pandemic

The federal government and SBA continue to augment existing borrowing programs for small to mid-sized companies; from low-interest to forgivable loans.  While the first round of Paycheck Protection Program as part of the CARES Act totaling nearly $350 billion has since been exhausted, a second wave of funding with a current budget set at $310 billion began funding in the last week of April, offering financial assistance to a wide range of small businesses.  ENGS has been committed and dedicated to the transportation industry since 1952 and we are here to guide vendors and customers through this period of uncertainty.  Whether it’s equipment financing, insurance, or working capital, we are here to provide for your business to keep moving forward.  Contact us today.