The persistent decline in freight volumes has led to significant layoffs and restructuring across the U.S. logistics sector, as detailed by The Wall Street Journal. With the freight market reaching a critical low, the industry is bracing for a potential surge in trailer fees in 2024. This year is shaping up to be exceptionally challenging for global logistics.
Recent layoffs in the U.S. logistics sector include:
Universal Logistics has shut down two subsidiaries, resulting in 677 job losses.
Swissport Cargo Services laid off 235 employees following the loss of a contract with Amazon.
The Kroger Co. will cut over 230 jobs and permanently close distribution centers in San Antonio, Austin, and Miami, Texas.
RXO Logistics reduced its workforce by 114 employees at its Warren, Michigan facility. • Nosco Inc., a packaging solutions provider, has eliminated 51 jobs.
Ryder Integrated Logistics laid off 29 employees.
Tony’s Express, based in Fontana, California, has ceased operations abruptly.
The AFL-CIO Transport Trade Department announced a “furlough” plan, resulting in 362 job losses.
UPS is laying off 12,000 workers.
Flexe, a logistics unicorn, has reduced its workforce by an additional 38%.
FedEx implemented an early retirement plan, laying off up to 400 crew members and reducing minimum wages for pilots.
These significant workforce reductions and operational adjustments underscore the severe challenges facing the logistics industry. As companies navigate market fluctuations and economic pressures, the prospect of rising trailer fees looms large, reflecting the broader struggles within the sector.
According to preliminary data released by the U.S. Bureau of Labor Statistics (BLS) on May 7, the trucking industry experienced a significant decline of approximately 5,400 jobs in May. This marks the largest single-month decrease in the sector since August 2023, bringing the total job losses in the trucking industry over the past year to 29,600. Despite a broader addition of 272,000 jobs to the U.S. economy in April, the trucking industry continues to grapple with employment reductions.
Recent Prolonged Slump in the U.S. Domestic Freight Market
The U.S. trucking industry is currently facing one of its longest periods of stagnation in recent history. During the COVID-19 pandemic, a surge in freight demand led to an influx of drivers into the industry. However, post-pandemic, the market has experienced an oversupply, resulting in a decline in truck freight rates.
FreightWaves, a leading U.S. freight media outlet, provided some hopeful perspectives in its March “Freight Conditions” webinar. FreightWaves CEO and Founder Craig Fuller, along with Freight Market Intelligence Director Zach Strickland, shared that while there are no definitive signs of a major recovery in the overall freight market, certain indicators suggest potential improvements later this year.
Strickland pointed to the U.S. Outbound Tender Rejection Index (OTRI.USA) as a critical metric for evaluating current market conditions. This index measures carriers’ willingness to accept shipments offered by shippers under contract terms. Currently, the index stands at around 3.8%, which is slightly higher than the same period last year but shows only a marginal increase. Strickland emphasized that this index offers early insights into market trends.
Fuller noted that, based on OTRI.USA charts comparing this year to last year, the gap between the two periods is minimal. He expects this year to present market conditions that are closer to the norms of previous years. Traditionally, May is when the market begins to heat up, and this year is anticipated to follow a more typical pattern. Despite the challenges, there are reasons to be optimistic about the second half of the year, with the second quarter expected to reflect more standard conditions for May compared to the anomalies observed last year.
Profit Decline Leads to Market Exits
Industry observers have noted that the decline in trucking employment signals that small companies and independent owner-operators, who entered the market during periods of high demand, are now experiencing reduced profits and being forced to exit.
Paul Svindland, CEO of STG Logistics, a private logistics provider based in Bensonville, Illinois, commented that the exit of drivers from the market is actually beneficial, as it could help freight rates recover. The trucking industry has struggled with weak demand and low rates for nearly two years.
Derek Leathers, CEO of Werner Enterprises, highlighted at the Wolfe Research transportation conference in April that the downturn has lasted longer than expected. The prolonged economic strain has led to the closure of several major companies, including Yellow, one of the oldest carriers in the U.S., and Convoy, a prominent internet freight platform. Additionally, many smaller companies have shut down, with Arnold Transportation, a Texas-based trucking company with a 92-year history and over 300 drivers, ceasing operations in April.
The American Trucking Associations’ (ATA) Truckload Tonnage Index dropped by 1.5% in April, marking the 14th consecutive year-over-year decline. Bob Costello, ATA’s chief economist, reported that with a rebound in freight volumes still uncertain, more poorly managed capacity is likely to exit the industry as the market remains weak.
However, a recent report from transportation research firm ACT Research suggests a potential rebound in freight demand. Growth in consumer goods spending and retailer restocking indicate that recovery could be on the horizon within a few months.
In the face of significant operational pressures, successful trucking logistics companies are emerging by focusing on strategies such as balancing market supply and demand, enhancing operational efficiency, driving technological innovation, offering diversified services, implementing dynamic pricing strategies, strengthening collaboration and integration, and building more resilient business chains. These approaches help them better navigate challenges and offer cost-saving and efficiency benefits for shippers.
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