Better days ahead—eventually—for U.S. trucking industry
Anyone who does business in or with the United States should be concerned that the last few years have not been kind to the for-hire trucking industry.
Keen observers of supply chain developments know that the state of the U.S. trucking industry offers clues to the overall health of the country?s economy. Moreover, motor carriers? problems are likely to have some impact on their customers? supply chain performance.
For those reasons, anyone who does business in or with the United States should be concerned that the last few years have not been kind to the for-hire trucking industry. High fuel prices exacerbated the effects of the recession even before the financial crisis began to unfold in September of 2008. Individual shippers—indeed, entire industries—have reduced their demand for transportation services as their own operations have felt the effects of the tough economy. IHS Global Insight has estimated that by the end of 2009, total freight tonnage moving on America?s highways will have dropped by some 20 percent from its peak in 2006.
Article Figures
[Figure 1] For-hire motor carrier tons forecast (2006-2015)Enlarge this image
[Figure 2] LTL yearly growth rate forecast (2009-2015)Enlarge this image
Figure 1 shows this decline as a percentage of total tonnage carried in 2006 by both less-thantruckload (LTL) and truckload (TL) carriers in the United States. As the graph indicates, the decline was very steep and unfolded quickly, giving carriers little time to react to rapidly changing market conditions.
Note that from 2006 to 2007 truckload carriers suffered a much worse decline in tonnage than did the LTL sector. During economic downturns, truckload operators are likely to suffer earlier than LTL carriers because the decline in order volumes makes it harder for shippers to move goods in full trailer loads. That is also the reason why LTL tonnage is expected to recover to 2006 levels before the truckload segment does.
Given such a significant decline in freight volumes, truckload carriers will have to be creative if they are to keep their trucks moving. In fact, there is some evidence that truckload companies are working in conjunction with third-party logistics providers to make a play for freight that traditionally has been handled as LTL. This development is one reason why LTL carriers are likely to experience a steeper drop-off in tonnage from 2008 to 2009 than is expected for truckload carriers.
Capacity continues to contract
At present, motor carriers are responding to the downturn by reducing capacity. One way they are doing so is through fleet reductions and delayed vehicle replacements. The poor economy has meant that carriers are unable to afford new equipment and there is not enough freight demand to justify fleet expansion. U.S. manufacturers have seen a dramatic drop in sales of Class 8 heavy-duty trucks since 2006, from 284,000 units to a projected 92,500 in 2009. Sales are projected to increase only slightly in 2010 before rebounding, albeit to levels that will remain below their 2006 peak.
The trucking industry is also losing not just jobs but entire companies. Donald Broughton, an analyst with the investment bank Avondale Partners, reported that in 2008, more than 3,600 trucking companies went out of business and an additional 480 closed their doors in the first quarter of 2009. In January of 2009 alone, the American Trucking Associations reported, the industry lost 25,000 jobs. The majority of these closures occurred through bankruptcies of smaller carriers, mostly in the truckload sector. All together, these losses account for more than 7 percent of the industry?s capacity that is no longer operating on U.S. highways.
The contraction has been particularly pronounced in the less-than-truckload sector. Because LTL carriers generally require more infrastructure than their full truckload compatriots, they often must do more than simply park trailers to reduce their capacity and expenses. YRC Worldwide, for instance, cut 10 percent of its work force in the first three months of the year and closed or consolidated nearly 200 terminals, including about 30 operated by its regional affiliates, USF Holland and USF Reddaway. YRC Chairman, President, and CEO William Zollars has said that the merged operation (which also reflected the integration of YRC?s Yellow Transportation and Roadway Express units) cut the company?s overall capacity by 35 percent.
Among the other top LTL carriers, Con-way Freight closed 40 terminals in the first quarter of 2009, and in February, FedEx Freight cut 900 positions at 150 of its facilities. All in all, about 8 percent of the LTL capacity in the United States has already left the market, according to analysts. This is still smaller than the 14-percent drop in LTL tonnage seen from 2006 to 2009.
Even though the short-term situation looks grim, less-than-truckload tonnage is expected to rebound to 2006 levels within the next five years. Nationally, the sector should grow at an average rate of roughly 3 percent per year until 2015. But as Figure 2 illustrates, that growth will not occur uniformly throughout the United States. IHS Global Insight?s forecast for total originating and terminating LTL tonnage growth rates, broken down by U.S. Census division, calls for the fastest growth to occur in the Mountain states— almost a full percentage point higher (3.9 percent) than for the country as a whole.
Should LTL carriers shed more capacity, as seems likely, they would do well to avoid closing facilities in the faster-growing regions and avoid ceding markets they may have to re-enter as the economy recovers. Instead, they can focus on scaling down in those regions where growth is likely to be slower, such as the Northeast or Upper Plains states. Perhaps more importantly, as more carriers shed terminals, those properties will become available at lower cost than in the past. By paying attention to regional and local freight trends, a carrier may be able to pick up a bargain-priced terminal in a growth area.
The current situation is not very promising for motor carriers, but a crisis can also provide an opportunity for the enterprising trucker. It will be interesting to see how many motor carriers seize the opportunity to prepare for the upturn, and at what point they choose to do so. For as soon as carriers begin making such moves, it will indicate that they believe the economy is about to bounce back.
"After several years of mitigating inflation, disruption, supply shocks, conflicts, and uncertainty, we are currently in a relative period of calm," John Paitek, vice president, GEP, said in a release. "But it is very much the calm before the coming storm. This report provides procurement and supply chain leaders with a prescriptive guide to weathering the gale force headwinds of protectionism, tariffs, trade wars, regulatory pressures, uncertainty, and the AI revolution that we will face in 2025."
A report from the company released today offers predictions and strategies for the upcoming year, organized into six major predictions in GEP’s “Outlook 2025: Procurement & Supply Chain.”
Advanced AI agents will play a key role in demand forecasting, risk monitoring, and supply chain optimization, shifting procurement's mandate from tactical to strategic. Companies should invest in the technology now to to streamline processes and enhance decision-making.
Expanded value metrics will drive decisions, as success will be measured by resilience, sustainability, and compliance… not just cost efficiency. Companies should communicate value beyond cost savings to stakeholders, and develop new KPIs.
Increasing regulatory demands will necessitate heightened supply chain transparency and accountability. So companies should strengthen supplier audits, adopt ESG tracking tools, and integrate compliance into strategic procurement decisions.
Widening tariffs and trade restrictions will force companies to reassess total cost of ownership (TCO) metrics to include geopolitical and environmental risks, as nearshoring and friendshoring attempt to balance resilience with cost.
Rising energy costs and regulatory demands will accelerate the shift to sustainable operations, pushing companies to invest in renewable energy and redesign supply chains to align with ESG commitments.
New tariffs could drive prices higher, just as inflation has come under control and interest rates are returning to near-zero levels. That means companies must continue to secure cost savings as their primary responsibility.
The new funding brings Amazon's total investment in Anthropic to $8 billion, while maintaining the e-commerce giant’s position as a minority investor, according to Anthropic. The partnership was launched in 2023, when Amazon invested its first $4 billion round in the firm.
Anthropic’s “Claude” family of AI assistant models is available on AWS’s Amazon Bedrock, which is a cloud-based managed service that lets companies build specialized generative AI applications by choosing from an array of foundation models (FMs) developed by AI providers like AI21 Labs, Anthropic, Cohere, Meta, Mistral AI, Stability AI, and Amazon itself.
According to Amazon, tens of thousands of customers, from startups to enterprises and government institutions, are currently running their generative AI workloads using Anthropic’s models in the AWS cloud. Those GenAI tools are powering tasks such as customer service chatbots, coding assistants, translation applications, drug discovery, engineering design, and complex business processes.
"The response from AWS customers who are developing generative AI applications powered by Anthropic in Amazon Bedrock has been remarkable," Matt Garman, AWS CEO, said in a release. "By continuing to deploy Anthropic models in Amazon Bedrock and collaborating with Anthropic on the development of our custom Trainium chips, we’ll keep pushing the boundaries of what customers can achieve with generative AI technologies. We’ve been impressed by Anthropic’s pace of innovation and commitment to responsible development of generative AI, and look forward to deepening our collaboration."
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.