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.
The launch is based on “Amazon Nova,” the company’s new generation of foundation models, the company said in a blog post. Data scientists use foundation models (FMs) to develop machine learning (ML) platforms more quickly than starting from scratch, allowing them to create artificial intelligence applications capable of performing a wide variety of general tasks, since they were trained on a broad spectrum of generalized data, Amazon says.
The new models are integrated with Amazon Bedrock, a managed service that makes FMs from AI companies and Amazon available for use through a single API. Using Amazon Bedrock, customers can experiment with and evaluate Amazon Nova models, as well as other FMs, to determine the best model for an application.
Calling the launch “the next step in our AI journey,” the company says Amazon Nova has the ability to process text, image, and video as prompts, so customers can use Amazon Nova-powered generative AI applications to understand videos, charts, and documents, or to generate videos and other multimedia content.
“Inside Amazon, we have about 1,000 Gen AI applications in motion, and we’ve had a bird’s-eye view of what application builders are still grappling with,” Rohit Prasad, SVP of Amazon Artificial General Intelligence, said in a release. “Our new Amazon Nova models are intended to help with these challenges for internal and external builders, and provide compelling intelligence and content generation while also delivering meaningful progress on latency, cost-effectiveness, customization, information grounding, and agentic capabilities.”
The new Amazon Nova models available in Amazon Bedrock include:
Amazon Nova Micro, a text-only model that delivers the lowest latency responses at very low cost.
Amazon Nova Lite, a very low-cost multimodal model that is lightning fast for processing image, video, and text inputs.
Amazon Nova Pro, a highly capable multimodal model with the best combination of accuracy, speed, and cost for a wide range of tasks.
Amazon Nova Premier, the most capable of Amazon’s multimodal models for complex reasoning tasks and for use as the best teacher for distilling custom models
Amazon Nova Canvas, a state-of-the-art image generation model.
Amazon Nova Reel, a state-of-the-art video generation model that can transform a single image input into a brief video with the prompt: dolly forward.
Economic activity in the logistics industry expanded in November, continuing a steady growth pattern that began earlier this year and signaling a return to seasonality after several years of fluctuating conditions, according to the latest Logistics Managers’ Index report (LMI), released today.
The November LMI registered 58.4, down slightly from October’s reading of 58.9, which was the highest level in two years. The LMI is a monthly gauge of business conditions across warehousing and logistics markets; a reading above 50 indicates growth and a reading below 50 indicates contraction.
“The overall index has been very consistent in the past three months, with readings of 58.6, 58.9, and 58.4,” LMI analyst Zac Rogers, associate professor of supply chain management at Colorado State University, wrote in the November LMI report. “This plateau is slightly higher than a similar plateau of consistency earlier in the year when May to August saw four readings between 55.3 and 56.4. Seasonally speaking, it is consistent that this later year run of readings would be the highest all year.”
Separately, Rogers said the end-of-year growth reflects the return to a healthy holiday peak, which started when inventory levels expanded in late summer and early fall as retailers began stocking up to meet consumer demand. Pandemic-driven shifts in consumer buying behavior, inflation, and economic uncertainty contributed to volatile peak season conditions over the past four years, with the LMI swinging from record-high growth in late 2020 and 2021 to slower growth in 2022 and contraction in 2023.
“The LMI contracted at this time a year ago, so basically [there was] no peak season,” Rogers said, citing inflation as a drag on demand. “To have a normal November … [really] for the first time in five years, justifies what we’ve seen all these companies doing—building up inventory in a sustainable, seasonal way.
“Based on what we’re seeing, a lot of supply chains called it right and were ready for healthy holiday season, so far.”
The LMI has remained in the mid to high 50s range since January—with the exception of April, when the index dipped to 52.9—signaling strong and consistent demand for warehousing and transportation services.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
"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.
Specifically, 48% of respondents identified rising tariffs and trade barriers as their top concern, followed by supply chain disruptions at 45% and geopolitical instability at 41%. Moreover, tariffs and trade barriers ranked as the priority issue regardless of company size, as respondents at companies with less than 250 employees, 251-500, 501-1,000, 1,001-50,000 and 50,000+ employees all cited it as the most significant issue they are currently facing.
“Evolving tariffs and trade policies are one of a number of complex issues requiring organizations to build more resilience into their supply chains through compliance, technology and strategic planning,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “With the potential for the incoming U.S. administration to impose new and additional tariffs on a wide variety of goods and countries of origin, U.S. importers may need to significantly re-engineer their sourcing strategies to mitigate potentially higher costs.”
Grocers and retailers are struggling to get their systems back online just before the winter holiday peak, following a software hack that hit the supply chain software provider Blue Yonder this week.
The ransomware attack is snarling inventory distribution patterns because of its impact on systems such as the employee scheduling system for coffee stalwart Starbucks, according to a published report. Scottsdale, Arizona-based Blue Yonder provides a wide range of supply chain software, including warehouse management system (WMS), transportation management system (TMS), order management and commerce, network and control tower, returns management, and others.
Blue Yonder today acknowledged the disruptions, saying they were the result of a ransomware incident affecting its managed services hosted environment. The company has established a dedicated cybersecurity incident update webpage to communicate its recovery progress, but it had not been updated for nearly two days as of Tuesday afternoon. “Since learning of the incident, the Blue Yonder team has been working diligently together with external cybersecurity firms to make progress in their recovery process. We have implemented several defensive and forensic protocols,” a Blue Yonder spokesperson said in an email.
The timing of the attack suggests that hackers may have targeted Blue Yonder in a calculated attack based on the upcoming Thanksgiving break, since many U.S. organizations downsize their security staffing on holidays and weekends, according to a statement from Dan Lattimer, VP of Semperis, a New Jersey-based computer and network security firm.
“While details on the specifics of the Blue Yonder attack are scant, it is yet another reminder how damaging supply chain disruptions become when suppliers are taken offline. Kudos to Blue Yonder for dealing with this cyberattack head on but we still don’t know how far reaching the business disruptions will be in the UK, U.S. and other countries,” Lattimer said. “Now is time for organizations to fight back against threat actors. Deciding whether or not to pay a ransom is a personal decision that each company has to make, but paying emboldens threat actors and throws more fuel onto an already burning inferno. Simply, it doesn’t pay-to-pay,” he said.
The incident closely followed an unrelated cybersecurity issue at the grocery giant Ahold Delhaize, which has been recovering from impacts to the Stop & Shop chain that it across the U.S. Northeast region. In a statement apologizing to customers for the inconvenience of the cybersecurity issue, Netherlands-based Ahold Delhaize said its top priority is the security of its customers, associates and partners, and that the company’s internal IT security staff was working with external cybersecurity experts and law enforcement to speed recovery. “Our teams are taking steps to assess and mitigate the issue. This includes taking some systems offline to help protect them. This issue and subsequent mitigating actions have affected certain Ahold Delhaize USA brands and services including a number of pharmacies and certain e-commerce operations,” the company said.
Editor's note:This article was revised on November 27 to indicate that the cybersecurity issue at Ahold Delhaize was unrelated to the Blue Yonder hack.