Shipping Supply Chains Don’t Follow Old Rules

by Carolyn Mathas

On the heels of the shutdown of the largest less-than-truckload (LTL) trucking company of its kind in America (it delivered nearly 50,000 shipments/day in 2022 and has approximately 10% of the LTL market share), one has to question the impact on shipping woes on supply chains?

Naturally, there is a potential for higher shipping rates which impact smaller companies the most, especially since Yellow had the cheapest rates in the industry.

There’s a bigger picture than the Yellow shutdown, however. Truck drivers are leaving their jobs en masse. Suddenly, the boon to trucking that started with the pandemic and free spending of consumers on computers, TVs, and everything else, has slowed. Fewer boxes and containers are moving, so there’s less work for drivers. Given the high expenses involved with trucking, there’s no longer an incentive to stay.

This looks like it will be one of the harshest freight recessions in memory. Yellow’s failure, for example, will impact 30,000 workers.

The impact of the pandemic is visible, considering that approximately 8,000 trucking companies entered the market in a single month, compared with the long-term monthly average of about 700.

There will be less waiting for goods and materials, and as merchandise consumption returns to normal, the U.S. supply chain has more capacity than it needs. The freight recession will impact air, trucking, and rail. Shipping containers arriving at the Port of Los Angeles are down 23% from last year. Truckers are seeing a reduction of more than 50% of their per-mile peak earnings. Major freight carriers such as Knight-Swift’s profits fell by 71% in the second quarter, and Union Pacific’s profits fell more than 11% in the most recent quarter.

Consumer spending is pivoting from merchandise to services. Lower freight volume is usually followed by lower gas prices – not true today. While down from a year ago, they are still high. And rampant inflation pushed equipment prices higher.

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