At the onset, there was no predicting just how large-scale the effects of the COVID-19 pandemic would be as the illness spread across the globe, the variants of the virus that keep developing, or just how much it continues to impact the economy. For example, in the first quarter of 2020, the first months in which the United States was truly affected by COVID-19, the U.S. economy shrank by 1.2 percent, or a 4.8 percent annual rate of decline.
In other words, the COVID-19 pandemic led to the worst economic result on record since the Great Recession of 2009.
Every industry and certainly almost every corner of the world was impacted by the pandemic, and trucking businesses were no exception. Seemingly overnight, the nation had to find safe ways to respond to the emergency, which greatly affected the day-to-day realities of owner-operators and small carriers. There are always ups and downs when it comes to the freight transport industry, but the challenges COVID-19 has presented are different.
COVID-19 is still widely prevalent in our nation and across the globe, but with over 20 months of perspective, learning, and monumental shifts and changes throughout the freight industry, we have a clearer understanding of the true impact of COVID-19 on small carriers and independent owner-operators. Here’s what you need to know about how the pandemic has affected trucking businesses.
The Onset of COVID-19 and the Freight Workforce
With approximately 3.5 million drivers delivering more than 71 percent of all freight across the U.S., adding up to $797.7 billion in gross revenue, the freight industry is a key component of the American economy. The industry is also known to be very resilient, and often offers critical support during natural disasters and man-made events—and the pandemic has been no exception to both of these facts.
In times of challenge, carriers and owner-operators are relied upon to deliver crucial supplies, and drivers often travel directly into danger to deliver necessary emergency responses. Freight is essential for providing support and relief before, during, and after events like hurricanes, tornadoes, flooding, wildfires, and earthquakes.
As the COVID-19 pandemic spread, illnesses among carriers began to increase alongside the nation’s infection rates, which exacerbated the already stressed supply chain. While the early weeks of the pandemic meant more carriers than freight, increasing infection rates took a toll on carriers, sometimes resulting in a complete pause of operations and a carrier shortage across the nation.
Initially dealing with too many drivers and not enough freight, shipping rates plummeted at the beginning of the pandemic. This, paired with uneven consumer demands and disruptions in the supply chain, made for a significant decline in freight rates, impacting business continuity for carriers and owner-operators alike. In particular, the spot market, which refers to 20 percent of the commercial freight-hauling industry that partners available carriers with excess freight, was affected, creating disturbances in the supply chain that led to low earnings and unemployment for some carriers.
Other Early Effects
The pandemic impacted the freight industry in many ways. While some are quantifiable, others were less so. However, one thing we know, routes and travel times shifted considerably.
Findings presented by the Transportation Research Board showed that average trip lengths decreased during the start of the pandemic. Routes were shorter and travel speeds at the worst traffic checkpoints increased. The likely reason? Reduced roadway congestion while motorists sheltered in place.
Also, during the height of the pandemic, some warehouses and distribution centers closed to mitigate the spread of illness. This meant that many small carriers and owner-operators had disrupted routes since they could not deliver freight to the intended destination.
It’s also highly likely that small carriers and owner-operators were more negatively affected by social distancing orders, employee infections, and other challenges compared to large fleets. In fact, before the onset of COVID-19 the vast majority of owner-operators had no kind of disaster plan in place.
On the other hand, the majority of large fleets did have disaster plans in place to support business continuity. Small carriers and owner-operators should consider developing this type of plan for the future, as it can make all the difference when disaster strikes and everything changes.
Additionally, while most Americans began to shelter in place, the freight industry soldiered on. Even so, carriers encountered many obstacles as they did. States closed public rest areas, which dramatically reduced the number of safe locations where drivers could rest and use the facilities.
Broadly, it can be said that the COVID-19 pandemic impacted the freight industry across the board. Transport Topics reported that all ten of their most-read articles of 2020 were related to the pandemic in one way or another, proving that the effects of the pandemic were on the minds of carriers everywhere. For example, Transport Topics reported on the following changes or newsworthy items in trucking business news:
The Federal Motor Carrier Safety Administration (FMCSA) issued a waiver to help combat the carrier shortage by allowing drivers with Commercial Driver’s License (CDL) learner’s permits to drive.
The FMCSA also delayed compliance with a new rule ensuring new drivers meet minimum training requirements before receiving their CDL. The Entry Level Driver Training rule was supposed to go into effect on February 7, 2020, and now goes into effect on February 7, 2022.
The FMCSA also relaxed certain Hours of Service (HOS) regulations for carriers who are aiding in Coronavirus relief efforts. This declaration was issued shortly after the pandemic was declared a national emergency and marked the first time the FMCSA granted nationwide HOS relief.
Operation Warp Speed, Changing Needs, and Carrier Shortages
The impact of COVID-19 has been “like a rollercoaster ride” when looking at the unemployment rate amongst truck drivers in the US and Canada. There has been a fluctuating demand for drivers throughout Peak Seasons of the year, heavily impacted by Operation Warp Speed in 2020.
The distribution of the vaccines only amplified existing capacity constraints that were already affecting so much of the country. Since these vaccines required refrigerated trucks, or “reefers,” it became harder and harder for shippers to find carriers. Most conventional reefer trailers can reach the -20° Celsius temperature needed to move the vaccines across the country, which created a bit of competition with traditional refrigerated freight.
As early as the end of December 2020, approximately 45 percent of contracted reefer freight was being rejected by carriers, indicating a major shortage of reefers. For supply chain managers and shippers, this means inflating costs. For carriers and owner-operators, this can mean it’s easier to negotiate better rates.
Facing Health Concerns
While many carriers and owner-operators scrambled to stay at full operation, keeping drivers healthy became an increasing concern. This was difficult to manage as continued demand for supplies to be distributed quickly increased as well.
Drivers were concerned not only about their finances but also about their physical well-being and the health of their families as they traveled across the country. Some drivers even self-quarantined in their tractors after detecting COVID-19-like symptoms, which opened the door to questions and concerns about business continuity for small carriers.
The food industry was hit hard by the COVID-19 pandemic, and those with dedicated routes to supply freight to the food-service industry. Since many bars and restaurants closed, some carriers found themselves in search of new routes and new hauls.
Other impacted groups included the automotive industry thanks to temporary manufacturer shutdowns, which not only impacted carriers hauling new vehicles, but also affected those who needed new parts for their tractor-trailers to perform critical repairs as parts shortages grew.
Freight and Industries Benefiting from the Pandemic
Amidst so much loss and pain, it’s hard to discuss the positive outcomes of the COVID-19 pandemic, but some sectors found an increased consumer need for their products. As a result, many carriers and owner-operators had to be flexible and shift to support changes in demand.
Who can forget the intense desperation for hand sanitizer, toilet paper, groceries, and sanitizing wipes at the beginning of the pandemic? Since so many families are cooking more often these days, there’s an increased freight demand for grocery and food-related freight—which, during Operation Warp Speed, was challenging as reefer trucks were in short supply.
Also, more and more people are shopping online, or shopping online and picking their orders up in stores, which means that large retailers like Amazon and Walmart require more carriers to deliver freight, and shippers like USPS, FedEx, and UPS struggle to keep up with the increase in packages.
The Positive Pandemic Economic Impact: Higher Freight Rates, More Technology, and Better Pay
Not all the effects of the COVID-19 Coronavirus on the transportation industry are bad for owner-operators and small carriers. In fact, there have been many positives that will impact the transportation industry for quite some time. One of the best descriptions of the pandemic impact on the freight industry is that currently, it has both “pockets of strength and weakness,” according to Talk Business & Politics. We are currently witnessing a “K-shape recovery,” as some parts of the economy are not doing well at all—but some others are.
Those in the transportation and logistics industries know that without carriers and owner-operators, supply chains across the nation could very quickly crumble. To combat labor shortages, many carriers are boosting pay to maintain their teams. CNN reported an estimated increase in pay somewhere between 9 and 11 percent.
One important effect of the pandemic has been more widespread adoption of technology. Contactless and paperless billing, payments, and communication not only protect carriers and shippers alike, but they streamline operations. Carriers, brokers, and shippers are all embracing innovative tools like mobile apps that can be used to post and secure freight, negotiate rates, communicate with brokers, and more.
The Xpress Technologies App even curates personalized suggestions to help small carriers and owner-operators find better freight. Users can furthermore use the mobile app to choose routes on a map to optimize planning and avoid dead hauling.
These kinds of changes will be important moving forward. The pandemic advanced digital transformation at a breakneck pace, and while COVID-19 has certainly been a learning experience for those in the transportation industry, it can also be a growing experience for small carriers and independent owner-operators.
Xpress Technologies: Accessible, Intuitive Solutions that Make Sense
If there’s one major takeaway for carriers and owner-operators, it’s that there’s predictability in the unpredictable.
While you can’t plan for everything, using the Xpress Technologies App allows owner-operators to keep track of their schedule and book loads easily on their own time. With just the tap of a finger, owner-operators can secure freight and keep their business moving.
Whether you want to communicate with a traditional brokerage or use emerging, innovative technology to find and book freight and get personalized recommendations that hone in on your preferences over time, Xpress Technologies can make it happen. Secure freight based on routes on a map or connect with our Carrier Xperience Team to speak with a broker; it’s all up to you.
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