By now, everyone in the United States has likely felt the effect of COVID-19 in some way. For the transportation industry, the pandemic has caused reduced jobs, fluctuating demand, and operational changes. Shifting regulations and a pandemic that cannot be pinned down has made things difficult for individuals and businesses.
How have transportation companies handled the pandemic?
Some companies have started saving money and reducing costs to protect their businesses and staff. Others have created safer working environments and even reduced staffing to survive the economic crisis. Some have been able to provide humanitarian aid. All have had to alter their processes and operations.
There was actually a drop in both demand and pricing within the transportation industry in 2019, before COVID-19 hit the United States. This means that regular market fluctuations and shifting needs can be a threat to companies in various sectors without a pandemic.
What comes next?
The current state of things has many companies questioning what to do and look out for in the future. Fortunately, studies have been conducted, like those from McKinsey and Company, for decades to determine how the industry recovers from recessions and economic crises.
No economic “rule of thumb” has been discovered to link economic health and freight activity, but there are some things to remember. There are three major forces that have occurred alongside recovery from a recession that can be applied to today’s circumstances.
Transitioning from a product-driven economy to a service-driven one
The consumption habits of Americans have changed over the past three decades. More people are buying services and experiences than ever before. The shift is likely attributed to the age demographic of product purchases. Throughout the last three economic recovery periods, the amount of services consumed has grown. This suggests that even more could be sold after COVID-19, which would further reduce the need for freight transportation.
Globalization of products and the chain of supply
Since the recession in 2009, the shape of global trade has fluctuated. This is because the government was exploring new terms with many trading partners. Just during the COVID-19 crisis, there have been shortages in medical equipment and supplies being imported into the country. This, of course, is due to exporting countries placing holds on needed items.
Looking into the past, especially between 1990 and 2008, you would see massive growth in the GDP. But, this was due to the presence of many one-time factors like the development of the North American Free Trade Agreement and advanced communication technology. So, it is difficult to decide how the freight transportation industry will recover from the pandemic.
The advent and growth of e-commerce
Since e-commerce was invented, it has grown in popularity. Just in the past two decades, it has been a cause of change in the transportation industry. People have grown to enjoy ordering everything from food to clothing to furniture online and getting their items shipped directly to their homes.
Not only do people buy items online to ship, they also return them. This has caused the need for more warehouses. Also, the number of packages being sent through regular mail has increased. This actually reduces the need for traditional freight transportation.
COVID-19 has resulted in an even larger percentage of deliveries. This includes a large majority of non-grocery purchases (and even some groceries too). Although many purchases are likely to go back to being in-person once it is safe, it is also likely that many will remain online. This could cause the transportation industry to shift even more.
High-quality fuels and services
If your fleet is still going strong during this pandemic, you will need the best fuels and services from a professional fuel supplier. At Kendrick Oil, we provide a variety of Products and Services in Texas, New Mexico, Oklahoma, Kansas, Colorado, and Louisiana. Give us a call at (800) 299-3991 for more information.