June 25, 2020
COVID-19: The Impact on Shippers, Carriers, and Third-Party Transportation Management Brokers
As the world faces unparalleled times with the Coronavirus (COVID-19), one thing holding steady is the U.S. supply chain. Our supply chain has proven to be critical in these times and remains the backbone keeping the U.S. economy operating.
While there has been a large surge in shipping volumes for the medical and food industries, the supply chain is seeing declines in non-essential commodity shipping volumes. To characterize the impact COVID-19 has had on supply chain management as solely positive or negative is too broad a stroke to be accurate. To combat this, below are a few examples of different players in our supply chain who are likely being affected in both realms.
Transportation Rates: Businesses deemed non-essential by the government were forced to close, which created a capacity surplus of available equipment to transport materials. Shippers paying for freight in the spot market have been able to capitalize on the increased capacity by seeing a drop in their rates.
Large-Scale Changes Stalled: Shippers stuck in a less-than-ideal supply chain model looking to restructure their network have been forced to apply the brakes. Some fine-tuning and rate adjustments have been met with open arms throughout this pandemic, but asset relocation and the big-picture projects are taking a back seat to shelter-in-place orders.
Dedicated Business: Asset-based carriers with essential dedicated business are coming out on top during these times with the excess in truck capacity. Contract rates and guaranteed business are keeping their trucks moving during COVID-19.
Asset Relocation: A counterpoint to the positive of having dedicated business can quickly turn negative if the carrier loses its headhaul or backhaul. Positioning assets in the correct location and eliminating deadhead is critical to keeping cash flowing during this pandemic.
Third-Party Transportation Management
Agile: Third-party logistics (3PL) providers are in a unique position to still be able to provide supply chain management solutions to their customers and carriers. They are doing this by leveraging their technology, the vast relationships held industry-wide, and the current spot market to their advantage.
New Business Growth: 3PLs are experiencing a slowdown in signing new contracted business. Rate shopping is always a risk for spot business, but getting a foot in the door with a new client and pitching a supply chain management solution is challenging during these times.
The entire economy is currently going through unprecedented times, and the logistics industry is doing its best to navigate the waters. One thing is certain—logistics professionals will continue to adapt and react to minimize the impact across all business sectors for the end consumer.