2024 has been off to a rough start in many ways for the transportation industry, with carriers still feeling the lingering effects of a labor shortage, rising prices, and supply chain disruptions.
To top it off, the freight recession that began in 2023 has continued to affect carriers of all sizes, with layoffs and closings increasing across the country.
However, as the economy begins to stabilize and consumer spending returns to pre-Covid rates, some industry experts are predicting a turnaround and return to normalcy by the end of the year.
Although the future is unpredictable, there are some tools that every carrier should utilize to navigate the ongoing freight recession. Keep reading to find out what’s causing the recession, and how your carrier can cut costs and optimize operational efficiency to stay ahead of the curve and weather these challenging times.
Understanding the Landscape
In order to deal with the impacts of the ongoing freight recession, it’s essential to understand why it began in the first place.
The first two years of the pandemic saw a rapid increase in consumer spending, leading many carriers to enter the market while shippers prepared for the trend to continue. However, the freight boom was relatively short lived, and there was soon an oversupply of trucks with a decreasing amount of available freight.
This quick change had an dramatic impact on carriers nationwide, with FreightWaves estimating that 35,000 recently opened trucking companies had shut down by the end of 2023. The effects weren’t just limited to new businesses though, as seen when long-standing transportation company Yellow Corporation filed for bankruptcy in the same year.
These factors, combined with high fuel prices and a fluctuating global economy, have made it imperative for carriers to prepare for the future and position themselves for success.
Operational Efficiency is Key
The best way to safeguard your carrier against the negative impacts of the freight recession is to ensure that you are effectively and efficiently utilizing both your equipment and team members.
Carriers of any size cannot afford unnecessary expenses in today’s market, with the American Transportation Research Institute finding that operational costs rose over 53% per mile from 2022 to 2023. Fuel alone accounted for 28% of total operating costs on average, making efficiency a priority for every driver.
Investing in transportation management systems and route optimization tools might come with an upfront cost, but the payoff is immediate as carriers can save on time, fuel expenses, and vehicle repairs.
Fleet telematics and tracking systems, such as Electronic Logging Devices and GPS tracking, provide real-time data on vehicle location, fuel consumption, driver behavior, and maintenance needs. This allows carriers to optimize routes, reduce idle time, and improve fuel efficiency while increasing driver safety.
Predictive analytics and AI-based technology work by analyzing existing data to forecast demand, optimize pricing, and prevent supply chain disruptions. These algorithms can also adjust capacity according to anticipated market trends and set competitive rates based on demand fluctuations.
Digital freight matching is another tool many carriers are using to efficiently connect drivers with available freight while saving time on paperwork, optimizing space, and cutting costs.
Instead of the traditional methods of freight brokerages and third-party logistics (3PL) businesses, digital freight matching uses predictive analytics and algorithms to optimize matches for service, efficiency, capacity, and cost. Since most DFM platforms are available as mobile apps or online websites, this also provides a single access point for every step of the matching process.
Prioritize Driver Engagement and Retention
Another ongoing problem that is likely familiar to every carrier is driver turnover and low retention rates. This issue can make the effects of the freight recession worse, leading to high recruitment costs, training expenses, and disruptions in service.
By focusing on creating a driver-centric work environment and engaging existing employees, carriers can avoid additional expenses and cultivate a culture of hardwork and dedication.
Consider offering frequent driver engagement surveys or one-one-one meetings to gather feedback and demonstrate your commitment to the needs of your drivers. Make sure to implement actual changes from the feedback to show that you really value their perspectives and experience.
Investing in your team by providing skill development training, certification programs, and career advancement opportunities is another way to raise retention rates while also attracting other qualified drivers.
Encouraging and rewarding driver milestones and safety accomplishments can also increase driver morale while saving money on fuel costs and vehicle repairs. Studies have shown that driving above 60 miles per hour lowers fuel efficiency, a behavior that can be changed by safety rewards and fleet telematics.
For more information on the state of the transportation industry and advice to recruitment and retain qualified drivers, be sure to check more of our Employer Blog posts and follow us on social media.
