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Transportation and Logistics

The Long Haul

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MCN Editor Beth Gainer Experts share their views on the freight-moving industry in the face of the coronavirus.

As with all industries, the trucking sector has its challenges. And the COVID-19 outbreak has affected the logistics of the freight business, proving that 2020 has not been business as usual.

The pandemic caught the U.S. economy off guard. “We’ve never had this happen before. I mean, first of all, the suddenness of it and the extremity of it. The contraction happened suddenly and uniformly across the entire economy,” says analyst Avery Vise, vice president of trucking research at FTR, Bloomington, Ind.

The country has been through recessions before, even surviving the Great Recession of 2008-09, but nothing like the 2020 pandemic. “The Great Recession does not compare to the coronavirus pandemic,” he says. “The difference between peak and trough is definitely comparable, but it took 10 months or more to get to [the former], as opposed to having [the latter] done in about 30 days, even less.”

Jeff  Bronson, senior director of transportation for Atlas Trucking Company LLC, Taylor, Mich., agrees with that take. Bronson marvels how quickly his business had to adjust in the short time the coronavirus took hold of the country. “We were told on March 16 to ‘Send everybody home. They’re not coming back.’ We had maybe a day and a half in upper management to react to it.”

Atlas was founded in 1999, as part of Eaton Steel Bar Company, Oak Park, Mich. The freight business was started to expedite the shipping of its products. “If you call at the end of a business day and say, ‘I need X amount of steel in Chicago by Monday,’ if they have it on the floor, they will find a way to get it out the door,” says Bronson. Before 1999, Eaton Steel couldn’t find this type of expedited service – for flatbed items in particular, so Atlas Trucking Company was born. While Eaton Steel remains the majority of Atlas’ customer base, 40 percent of the trucking company’s customer base is outside customers.

Not surprisingly, the coronavirus has significantly affected the trucking industry and the supply chain. “When you shut down manufacturing, you are shutting down the suppliers to manufacturing. [COVID-19] absolutely has disrupted the supply chain,” says Bronson. “In every industry that I know, the ripple effects will be going on for years. You’ll have people in the next quarter going out of business, filing for bankruptcy, consolidating and being absorbed – strictly because the hit’s been too hard for some of the smaller guys, and probably for some of the real big guys that just can’t rebound for various reasons.”

Especially hard hit during these dark times is the automotive industry, causing a disruption in the transport of products. “The biggest consumer of metals is automotive, and generally when you get to the late fall season, [manufacturers] have produced the bulk of what they’ve produced normally. We did not really have any automotive production to speak of in April and not very much in May,” Vise says, “But of course, this is a different year, and whatever has historically been the case almost certainly will not be the case this year.”

Understandably, shipping for the automotive supply chain has slowed down dramatically. “This year has been just enormously disrupted. We can basically just call the second quarter of this year a lost quarter in terms of anything remotely normal,” continues Vise. “Typically when you normally would be seeing a lot of dealers trying to sell excess supply through year-end sales – the Toyotathons of the world – it might be a different environment.”

Driving the Economy
“Drivers get less income because they’re paid on a productivity basis, typically by mile, and they get fewer miles as there is less freight to spread around, so what ends up happening is that [the drivers] are still getting jobs elsewhere, such as in construction and manufacturing,” says Vise. “This was true in the very beginning stages of the Great Recession, where we still had the housing market that hadn’t collapsed yet, and trucking started to decline.” Vise adds that during this pandemic, drivers have not necessarily left the workforce; rather, they have other positions in the freight industry or in other business sectors entirely, such as retail.

“By and large, they haven’t found permanent employment, so the big question on trucking as we look forward is, how fast will trucking companies be able to bring those drivers back and how fast will they want to bring them back. Normally, when we come out of a long recession, drivers are gone; they’ve been terminated, they’re not on the books anymore,” says Avery.

However, he notes that getting workers back this time may require nothing more than a simple email or text inviting them back to work. “And in that case, there may not be that much stress at all,” says Vise. “The fact that this happened across the entire economy raises a lot of uncertainty over how trucking will behave during the recovery.”

Vise acknowledges the vast uncertainty that the trucking industry faces. “We keep watching the tea leaves every day, every week for new data that gives us an indication of how [the pandemic] affects trucking,” he says. “Right now it’s sort of in flux because the trucking companies furloughed a lot of workers during April and probably during May. But those workers are probably for the most part still available and can come back once there is demand, but the revenues, the rates have been low.

“What we don’t know, really, is how many drivers are gone.”

“The freight volumes have been very low,” he continues. “There are some reasons for that, one of which is that a lot of states have put moratoriums on canceling insurance policies for non-payment. Those moratoriums are starting to end and have ended for the most part, so we may see a spike soon of trucking companies going out of business.”

Atlas Trucking Company faces another challenge regarding drivers: finding the right ones – those who can skillfully load, ship and unload heavy freight. “From our standpoint in the trucking industry, we have a very small pool of qualified professional drivers to choose from to haul our products,” says Bronson, who, with his recruiting staff, looks for qualified workers daily.

The coronavirus has also heralded in even more regulations in a regulation-rich industry, presenting a greater challenge to trucking companies. “The processes of COVID-19 and what you do and don’t do when you go into facilities is changing the industry,” says Bronson. “In our case in particular at Atlas Trucking, we are over the top on safety, so not only being a flatbed reduces the pool of drivers you can pick from, we also have very strict regulations on how many points they can have on their licenses.”

Dealing with the pandemic has posed other logistical challenges – one of which was ensuring staff and customers were as safe as possible from COVID-19, precautions that would have been unthinkable just a year ago. “The biggest challenge we’re facing with the pandemic has been the personal protection equipment. I think that’s been at the forefront of everyone’s mind. I know it is for us,” says Allan Welch, corporate transportation manager at Olympic Steel Inc., Bedford Heights, Ohio.

“We wanted to make sure that we were in full compliance with all necessary local, state and federal regulations, and also complying with our customers’ wishes,” he says. “We focus on protecting our employees and protecting those we come in contact with, including our customers. We’ve always had PPE, but it’s always been hard hats, gloves and things of that nature.”

Serving the Midwest, Olympic Steel has had its own fleet since 2006. The company started with two trucks in 2006 and now has 74 semis – 54 for the flat-roll side of the business and 20 for its pipe and tube operations.

Before the company established its fleet, Welch researched the market to discover the most cost-effective and efficient way to transport its steel. “I felt that the market was going to change, and truck capacity was going to get extremely tight,” he says. “It was very difficult and expensive for us to hire a contract carrier for anything less than 200 miles. We could control 100 percent of deliveries within that 200-mile radius in any direction and provide a premium service to the customers by having our own company drivers.” He adds that having its fleet would also help market the company.

Welch notes that customers each have different requirements and it is important to ensure the company complies with their customers’ requests. “A lot of customers required that our drivers not leave their trucks. Or they would unchain and untarp outside the building away from all the customers’ personnel,” he says.

“It was the combination of gathering all that information and making sure we communicated all that to our drivers, which we did. I remember those were very, very long days. We operate our logistics transportation according to our customers’ needs, and we pride ourselves on our ability to be extremely flexible and fluid to meet any customer’s needs. We’ve done everything possible to make sure we protect everyone during the pandemic and, at the same time, service customers.”

While it’s a shipper’s market, Welch believes this will level out somewhat. “As the states open up, and industry gets back to work, we’re starting to see that change,” he says. “It’s still a shipper’s market at this point, but not as much so as before. As more states get up and manufacturing gets back on line, I think that it’ll even out. I don’t think we’re going to see any shortage; I just think the rates will become flat. We’re just like everyone else; we are hoping there will be a recovery, and we’re hoping there’s going to be some sort of vaccine.”
 
Bronson also believes there’s a recovery in sight. “Yes, there’s definitely a recovery. Americans are way too smart, especially in the business sectors, to stay down. We’re going to see a spike here for at least in June and July; then I think it will flatten out. Our volumes on the trucking side and volumes on the fleet-repair side have already started climbing, so we’re going to have a spike. I’m not an economist, but I would say the third and fourth quarter will be pretty decent.” ?

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