A wide-ranging panel discussion at last week’s Council of Supply Chain Management Professionals (CSCMP) EDGE Conference in Nashville focused on the “State of Transportation,” touching upon myriad topics that are front and center for shippers and service providers alike.
One key topic was the ongoing freight recession, which has now persisted for more than two years, with inventories still high, over-the-road capacity leaving the market, and demand levels remaining below expectations.
Kelson Hardwick, senior director of transportation services at Walmart, explained that from an industry perspective, he views 2024 as the return of seasonality, following a drop-off in demand that began in 2022 and bottomed out at some point in the first half of 2023.
“In 2024, as expected, some seasonality has returned,” he said. “It was a busy spring and a healthy summer, with the length of the port strike impacting what the fall will look like. I expect 2025 to be a continuation of that—a return to whatever normal looks like now, as demand begins to pick up.”
The other shipper on the panel, Debbie Weir, senior director of transportation at W.W. Grainger, explained that, as an industrial supplier, Grainger’s business is not as closely tied to the economy as retailers are.
“Our demand was very strong over the last couple of years, as the MRO market was growing,” she said. “Our demand softened a bit going into this year, but we tend to stay relatively controlled. We do pay attention to what’s happening in the marketplace, because it can impact our costs. We’re certainly seeing some softening, particularly on the truckload side. We’re benefiting from lower rates and available capacity, and we’re seeing some capacity on the LTL side as well. In parcels, it’s a bit different, given that we’re a large shipper and many large shippers have multi-year contracts, which makes us think a little differently about supply and demand changes in the marketplace.”
From a less-than-truckload (LTL) perspective, Heather Dohrn, Vice President of Sales & Marketing at Dohrn Transfer Company, said her company’s numbers have remained consistent and even increased over the last couple of years.
“We’re seeing softening in that a lot of our shippers are shipping fewer products,” she said. “There’s a bit of slowdown there. It’s hard to compare year-over-year due to Yellow going out of business last year, which really disrupted capacity in the market. We’re also seeing a lot of M&A activity in the LTL space, with larger carriers acquiring smaller ones, which is affecting capacity. But one thing I’ve noticed this year is that even though rate levels are softer, LTL carriers have been very disciplined with rates, understanding that we need to continue moving forward and remain healthy. You’re not seeing as many carriers go out of business for lack of discipline, as we did before.”
Addressing the impact of the East and Gulf Coast port strike, which began just hours after this panel was conducted, Tom Nightingale, industry veteran and consultant, said it had the potential to “wreak havoc” due to the fact that supply chains are already fairly lean.
With early pre-buying and front-loading by shippers earlier this year in anticipation of the strike, leading to a surge in summer import volumes, Nightingale said it was still not enough to bring inventory-to-sales ratios to a level where there wouldn’t be a ripple effect.
“The ripple is a function of how long the strike lasts,” he said, “with a week for each day being a pretty conservative estimate of how long it would take to recover. That could bring some volume to the truckload sector and enable it to exert price pressure, which is needed right now. There are a lot of carriers on the verge of bankruptcy, hanging on and waiting for demand to return, and the strike could provide a tailwind.”
As for the still-high levels of truckload capacity and when rates might start to rise again, Nightingale observed that this largely depends on the banks and how willing they are to call in loans from what he referred to as “zombie carriers.” He added that banks are not seeing great resale value for trucking equipment—depending on the equipment market’s rebound—which makes it less enticing for them to force the issue.
Looking ahead to a potential recovery, Nightingale predicted an atypical recovery driven by demand rather than supply, particularly as interest rates come down.
Walmart’s Hardwick said lower interest rates could spur increased demand if mortgage rates relax and more people begin buying homes. This could boost the durable goods supply chain, which has been uneven since the mass purchases made in 2020 and 2021.
“That cycle needs to pick back up,” he said. “You’ve got housing, you’ve got durables. And then there are other pieces of the economy that will come along with that, but it’s a gradual 6-12-18 month build. As it happens over time, we’re all waiting for this ‘black swan’ event…everyone’s waiting for the next big thing. Maybe it doesn’t have to be a thing. Maybe it just has to be natural growth, which would be good and healthy for shippers. It’s good and healthy for carriers as we grow into those things and hopefully ease back from the kind of whiplash we’ve been experiencing over the last few years.”
