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Caution: What to Expect in 2021 in the Transportation Industry

It would be hard to find anyone who would disagree that 2020 was a year unlike any other. It would be equally difficult to find anyone who isn’t looking to leave in the rearview mirror a year marked by economic upheaval, a global pandemic with wide-ranging impact and a tumultuous US election cycle.

In late 2019 and into early 2020, freight and logistics companies were wrestling with several challenges. It proved to be a feast-and-famine cycle. It led to freight carrying capacity shortages and gluts driven by tariffs, trade wars and disputes and their influence on manufacturing activity and inventory volumes. Also in the mix—consumer and business spending and demand for goods. 

Other areas of impact included the:

  • Need to invest in premium equipment to attract and retain drivers

  • Fuel price uncertainty

  • ELD implementation and Proposed Hours-of-Service rule changes

However, each paled in comparison to the wholesale transformation of the supply chain from the COVID pandemic, and its effect on transportation and logistics services providers. But, much like the truck drivers who haul vital freight across North America every day, the most important thing to do now is to look forward.

In fact, as we navigate the first quarter of the new year there is promising news. Data from American Trucking Associations in a report on truckinginfo.com, for example, noted how “most major freight indexes continue to advance.” In particular, growth in intermodal loads is rising to record levels, driven by low retail inventories. In addition, data from the Institute for Supply Management indicates an expansion in manufacturing activity.

 

2021 By Comparison

In the past, those levels have been seen as precursors of rising truck tonnage, especially for loads of consumer and essential goods. Freight carrying capacity remains tight. There are reports of increased confidence among trucking companies and that level of confidence has led to growth in truck and trailer orders.

In its 2021 Freight Market Outlook, third-party logistics company Sunset Transportation, in conjunction with Stifel Transportation & Logistics Equity Research, presented its insight into the Q4 2020 and 2021 freight market, capacity, and ongoing COVID-19 impacts.

The year 2021 looks to be more complex with a fast-paced shift occurring in how freight moves across domestic and international markets, the companies related. Shippers should anticipate somewhat of a freight recovery, they said, but “COVID-19 changed everything about freight movement, and it did so at an incredibly rapid speed.”

Among the changes that shippers and transportation operations should be aware of include that different freight is moving, with essential goods replacing non-essential items. It is also moving to different destinations on different modes with increases in ground freight activity seen among parcel, truckload and intermodal operations. A Last Mile strategy is now a must for shippers, they added.

 

What to Expect in the Transportation Industry

For 2021, the companies said to expect growth in freight volumes next year as goods production recovers and more products flood the market. But while intermodal capacity is expected to help compensate for tighter truckload capacity, freight demand will be inconsistent in 2021, they added. Finally, they advised that e-commerce and rapid consumer delivery expectations will continue to impact freight costs and capacity availability so shippers should prepare multiple scenarios.

Challenges remain, of course. Results of the American Transportation Research Institute (ATRI) Top Industry Issues survey released during the American Trucking Associations’ Management Conference and Exhibition, identified key industry concerns, including the driver shortage, truck parking, driver compensation and retention, and insurance costs. The not-for-profit research organization received responses from 3,122 truck drivers, motor carriers and other industry stakeholders – an all-time record for the 16-year-old survey.

“For a number of reasons, 2020 [was] a tremendously challenging year for our industry and our country, but as ATRI’s survey lays out, there are a number of issues we must address in addition to the ones put in front of us by this pandemic,” said ATA Chairman Randy Guillot, president and CEO of Southeastern Motor Freight and Triple G Express Inc. “From finding and keeping qualified drivers to the increased costs of insurance and burdens imposed on our industry by unwarranted lawsuits, ATRI has identified the issues our industry cares most about and outlines plans for how we can solve them.”

 

What to Lies Ahead in Transportation

Still, by many accounts it appears that 2021 holds significant promise for the trucking industry. Americas Commercial Transportation (ACT), in its latest North American Commercial Vehicle OUTLOOK, projects 2021 to be a transition year. That conclusion is based on the anticipation of global economic recovery from the negative impact of COVID-19. As a result, the demand for North American commercial vehicles will continue to increase.

While ACT's President and Senior Analyst, Kenny Vieth, acknowledged that there isn't a clearly visible forecast for 2021, he did point to several factors that could signal that a strong year is ahead. The combination of a structurally sound economy that was in place prior to the coronavirus sweeping through the country, ample government support and a great deal of pent-up demand for products and services of all types appear to be the ingredients needed for the economy to rebound.

Even though shippers are still struggling, it's imperative that they start thinking about all of 2021 now, ACT also noted. Though the recovery rate is expected to be relatively slow for the rest of 2020, once the new year arrives don't be surprised to find that 2021 starts off strong.

There remains significant uncertainty about what lies ahead. Yet across the industry there is general consensus that 2021 will be a positive and profitable year.


Is your transportation organization ready for what lies ahead in 2021 and beyond? Contact us today to discover how the right supply chain technology can help you stay productive and efficient, both in 2021 and in the years to come.