Logistics Lane: COVID-19's Backorder Effect on Trucking

On 3/11/2020, WHO declared COVID-19 to be a pandemic, followed by Trump issuing a national emergency just two days later.

News about the novel coronavirus caused a widespread panic as quarantines went into effect and businesses shut down.

Most industries were hit hard, including transportation. Many shippers cut back on their orders while some manufacturers completely stopped production.

It's common knowledge that beginnings tend to be the most difficult, and such was the case with this pandemic. While freight rates were brutally low in 2019 attributing to about 800 carriers going out of business, the first half of 2020 turned out to be even more grueling.

The exact number of how many transportation companies went out of business is still unknown, but on May 2nd of 2020, angry truckers gathered in DC to protest the low rates, which in some cases were not enough to cover their operating expenses.

In a passing conversation, an over-the-road reefer driver said something impactful:

I went to the store this morning to buy groceries. The cost of milk was the same and yet I hauled dairy products at only $1/mile earlier this week. How does that make sense?

In truth, supply and demand are the forces which dictate the rise and fall of industries and economies alike. Because fewer shippers were placing orders than there were drivers looking for work, the freight rates were at an all-time low in proportion to expenses and the standard of living.

However, this all changed in the latter part of 2020. As panic subsided and the US government passed out trillions of dollars to assist both people and businesses, everything quickly shifted in the other direction.

With funds secured and employees back to the job, manufacturers and shippers were ready to get back on the grind and start catching up on the orders which were piling up. But all of a sudden, there didn't seem to be enough truckers to fulfill those orders.

The result of that: a dramatic increase in freight rates.

To put things into perspective, the same owner-operators who hauled goods for $1/mile in early 2020 are now frowning at loads being offered to them for $4/mile.

While it may seem like carriers are living the high life now, they are still feeling the repercussions of COVID-19 and face new issues which impact their earning potential in others ways.

A major problem which truckers face currently is the shortage of equipment and truck parts. Much like shippers, manufacturers such as Daimler-Chrysler stopped production for several months during the peak of the pandemic.

Currently, it takes longer to order new equipment, there is a shortage of trailers (especially 53' dry vans which are in high demand), and there are many truck parts on backorder.

As a result of this, truckers are experiencing much higher downtimes during a breakdown because parts needed to fix their units are oftentimes missing from their dealer's inventory. In many cases, truckers are forced to wait several days longer than normal simply because the parts needed to get them up and running are nowhere to be found. In more serious cases such as extensive damage due to an accident, the downtime may be indefinite.

In conclusion, COVID-19 has resulted in backorders which still greatly impact the trucking industry by leading to fluctuating freight rates and a massive shortages of parts. Moving forward, shippers must revaluate their budgets and seek more connections with new brokers and carriers to reduce their spending. On the other hand, carriers must take extra precautions to minimize downtime by doing more preventative maintenance on their equipment and doing their very best to avoid physical damage to their trucks and trailers.

Masterfully move forward and stay safe out there!