Transportation Trends & Best Practices

The global pandemic, ecommerce boom and high demand across most transportation modes right now have all impacted Midwest transportation providers. Here’s how companies are adapting to the shifting environment and planning for the future.

A center of logistics and transportation activity, the Midwest is not only a control hub for many US manufacturers, distributors and retailers, but it’s also a hotspot for the carriers, trucking companies, parcel carriers, last-mile delivery services and third-party logistics providers (3PLs) tasked with getting shipments from origin to final destination.

With easy access to inland waterways, a top-ranked cargo airport and extensive highway structure, Chicago has long been known as a prime logistics center for a wide array of companies.

A Force to be Reckoned with

Based on shipment value and total weight, trucks carry more freight throughout the US than any other mode combined, according to the Bureau of Transportation Statistics (BTS). The BTS estimates that there are currently 1.8 million heavy and tractor-trailer truck drivers operating in the U.S. 

As with all industries, the transportation sector faces its share of opportunities and challenges during any given year. Pre-pandemic, the American Trucking Association was already projecting a potential shortage of 160,000 truck drivers by 2028[bm1] —a shortfall that’s worsened due to the pandemic.

While 2020’s shutdowns directly impacted companies and their employees, the massive uptick in ecommerce sales placed new demands on the nation’s transportation networks. According to eMarketer, US consumers will buy $933.3 billion in goods online in 2021, up nearly 18% over 2020’s total ecommerce sales. [bm2] 

Redirecting Focus

Once states began reopening, consumer demand for goods escalated—a double-edged sword that placed even higher demands on the country’s transportation providers. Business was brisk for carriers across most transportation modes, but escalating supply chain shortages increased the pressure on trucking companies, carriers, final-mile delivery services and other providers.

“Trucking has emerged as one of the most acute bottlenecks in a supply chain that has all but unraveled amid the pandemic,” Transport Topics reports, “worsening supply shortages across industries, further fanning inflation and threatening a broader economic recovery.”

Now, companies are redirecting their focus on solving immediate challenges while also preparing for what’s next. They’re also taking the “lessons learned” from the past 20 months and factoring them into their future plans.

This includes ensuring the safety and security of the goods they’re transporting; recruiting new drivers and logistics/warehouse personnel, both of which have been difficult to attract and retain during the pandemic; managing COVID protocols and restrictions; and adopting technology that helps them improve throughput, productivity and efficiency.

Other strategies that transportation providers are using include assessing their supply lines; expanding their management teams; deciding whether to rent or own their facilities and/or equipment; and assessing potential acquisitions of or mergers with other entities. Specific to the driver shortage, organizations are also:  

• Recruiting more female drivers. According to Global Trade, some trucking companies are working to recruit more female drivers while also ensuring that their leadership ranks also include more women. Skelton Truck Lines of Canada, for instance, says its nine female department managers have helped it develop a driver workforce that’s 30% female. Global Trade says the transportation provider also offers “team freight” opportunities, whereby women can do runs with their spouses. These efforts help drivers achieve work-life balance while also contributing to a workforce that needs the extra hands.
• Setting up in-house driver training programs. In Iowa, Hirschbach Motor Lines has hired about 50% more recruiters this year than it did in 2020. The company is also spending more than twice as much on advertising. Transport Topics says the refrigerated carrier has also set up its own training program for commercial driver students.
• Upping driver pay rates. Companies are also reassessing their driver pay structures. SHRM says trucking companies and recruiters have increased pay and sign-on bonuses, for example, with private fleet drivers seeing their pay rise in 2020 to an average of more than $86,000 a year—a gain of almost 18% compared to 2014.
• Widening the recruiting net. Recruiters are also widening their potential applicant pools. For example, SHRM says vehicle transporter CFR Rinkens is working to attract military veterans, women and younger drivers by posting ads on job boards and using social media and competitive benefits packages to target those new recruits.

Deal-Making in Transportation & Logistics

With transportation companies experiencing historically-strong business conditions right now, demand for their services isn’t expected to wane anytime soon. “After navigating the disruption and uncertainty wrought by the coronavirus pandemic last year,” Transport Topics points out, “the trucking industry has entered a historically-strong business environment that many analysts expect to endure for the rest of 2021 and beyond.”

As transportation providers work to improve their own capabilities, efficiencies and scale, PwC says more of them are merging with or being acquired by other firms or taking on outside investment. Deal activity in the logistics subsector has been particularly strong in 2021, the global consultancy says, with volume through May 15, 2021 up by 86% over the same period in 2020.

Keep on Truckin’

With all product-oriented companies impacted by the current supply chain shortages, lack of drivers and transportation capacity constraints, providers are well positioned to help ease these pain points by emphasizing driver recruitment, re-deploying assets that have been sitting idle since 2020, and/or investing in the equipment they need to be able to leverage new opportunities in the sector.  

As the national economy continues to improve and as the world emerges from the pandemic, the combination of consumer confidence and brisk business activity may create even more opportunities for Midwestern transportation and logistics providers. With nearly 73% of all [bm4] goods transported from one location to the next by truck in the US, now more than ever trucking is keeping the nation’s businesses running.

The Old National Commercial Banking Team's bankers are actively involved in the Transportation industry and our market knowledge will guide you in growing your business. Talk with Michael Bromfield or Chris Hannon to discuss financing options for your business at Michael.Bromfield@oldnational.com, or Chris.Hannon@oldnational.com.