How the Pandemic Accelerated Change for Motor Carriers

By Jerry Hirsch, Transport Topics

Few industries came under as much pressure and made as many adjustments during the COVID-19 pandemic as trucking.

Looking back over the more than two years since the pandemic first hit, executives in the trucking, freight and logistics space see permanent changes resulting from how this historic event altered the economy, consumer behavior and business interactions.

While the lockdowns, factory closures, sky-high spot shipping rates and many other effects turned out to be transient, other changes appear to be longer lasting.

The pandemic launched or accelerated trends that included higher driver wages, a shortening of some routes to match shopping patterns and increased digitization and automation across the supply chain.

Like most things in trucking, the changes started with drivers.

“Our industry has been battling the driver shortage challenge long before the pandemic. Unfortunately, COVID exacerbated the issue,” said Brad Carmony, vice president of brand communications at U.S. Xpress.

Retirements in an aging workforce increased as older drivers didn’t want to be exposed to the ­virus or didn’t like the restrictions the pandemic forced on the industry.

Meanwhile, job seekers could choose from many employment options outside of trucking as many industries across the economy faced their own labor shortages.

Along the way, driver pay rose significantly as motor carriers and private fleets increased wages to retain drivers and attract new workers to deal with the increased freight demand resulting from the economic recovery from the pandemic.

Walmart, for example, now pays drivers as much as $110,000 in their first year with the company. Some will earn more based on how long they have worked for the company and their location.

The retail giant, which markets itself as a “destination job” for drivers, is a bellwether for the industry as both for-hire motor carriers and other private fleets must raise wages to keep pace. The company employs 12,000 drivers.

Rising Interest in Automation

The scarcity of drivers and other transportation workers created a greater focus on applying technology to solve those shortfalls.

“The pandemic has made a lot of people take another look at autonomous trucking,” said Tim Denoyer, vice president and senior analyst at ACT Research. “It will take some time to gain acceptance, but once it does, it will happen quickly because of the competitive advantage.”

The idea of shipping freight without the labor cost of a driver always looked tempting, but motor carriers have moved cautiously while testing how autonomous trucking might work.

Fleets that have dipped their toes into autonomous trucking have been careful to assure drivers that they will not be displaced by the technology.

“We look forward to building a hybrid world where drivers continue to haul freight while autonomous trucks supplement rising demand,” Werner Enterprises CEO Derek Leathers said when he announced a deal to partner with self-driving vehicle developer Aurora Innovation to test automated freight hauling.

Werner, which also has partnered with other self-driving truck companies, is one of a growing number of for-hire carriers and private fleets that have reached deals with autonomous technology companies to test self-driving trucks and explore which routes are ripe for introduction.

Werner, based in Omaha, Neb., ranks No. 17 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Automating Warehouses and Digitizing the Back Office

Similarly, automation increased inside warehouses and distribution centers as companies worked to fulfill a growing volume of orders from consumers and took steps to streamline labor-intensive tasks such as picking and packing.

Nearly all new GXO Logistics contracts for warehouse and logistics clients include some element of automation, said Mark Man­duca, GXO’s chief investment officer.

He said that technology includes robotic arms, vision technology and “cobots” — mobile carts that carry goods within a warehouse.

The increasing comfort with remote work and less face-to-face contact also is pushing the digitization of back-office operations, said Shawn Vo, co-founder and chief technology officer at Axle, a startup that manages carrier payments and provides a factoring platform for freight brokers.

“You are moving to a virtual workplace,” Vo said. “Digital workflows are being built to replace paperwork like sending invoices and signing proofs of delivery.”

Elsewhere, companies are using technology to better plan routes and execute transportation that acceler­ated with the increase in ­e-commerce due to the pandemic, said Avi Geller, CEO of fleet management tech­nology firm Maven Machines.

E-commerce surged as consumers avoided physical interaction and became accustomed to ordering a wide range of goods online, including oversized items such as furniture and appliances.

“The genie is out of the bottle when it comes to e-commerce. The ease and convenience of ordering goods with a click on the phone is here to stay,” said Kevin Sterling, senior market strategist at XPO Logistics.

Adjusting Supply Chains for E-Commerce Growth

According to a report by Digital Commerce 360, consumers spent more than $870 billion online with U.S. merchants in 2021, up 14.2% from the previous year.

Absent the pandemic, e-commerce sales would not have reached that level until 2023, according to the retail information company’s estimates. The pandemic generated more than $218 billion in extra U.S. ­e-commerce revenue during the past two years, according to the report.

The e-commerce acceleration made retailers, shippers and carriers alike look at how the supply chain operates and make changes to better meet consumer expectations.

Companies such as online retailer Amazon are locating more warehouses and fulfillment centers in metropolitan areas to speed up delivery. That has pushed less-than-truckload carriers to move to deliveries in residential areas more quickly, changing the type of equipment they used, as well as some routing. Many carriers saw their routes shrink as they moved goods between a denser network of warehouses and distribution centers.

“We are seeing shorter length of haul as shippers position goods closer to the population centers,” XPO’s Sterling said.

XPO is changing the configuration of its warehouses by adding terminal doors to its existing facilities to improve service and efficiency.

The LTL carrier plans to grow by about 900 doors to more than 17,000 by the end of 2023.

“We are targeting the largest cities where the growth and cus­tomer demand is. It is a strategic approach,” Sterling said.

At the same time, the company is changing its pricing structure. Sterling said a decade ago shippers only looked at the best price. The pandemic and accompanying supply chain and capacity disruptions accelerated a move to higher ­pricing based on reliability and quality.

“That is a sea change in the industry. People aren’t beating each ­other up over price anymore,” Sterling said.

XPO, based in Greenwich, Conn., ranks No. 3 on the for-hire TT100.

Supply Chain Disruptions and Pricing Trends

In a stressed supply chain, companies want to ensure they can move their goods without damage and with accurate delivery times.

While the broader effects of inflation in the economy might reduce consumption and impact freight volumes, “there are still a few kinks in global supply chains that will take time to straighten out,” said Charles Simpson, vice president of strategic intelligence at U.S. Xpress.

“Think of the backlogged orders that still must be filled, for example,” he said. “Also, the prospect of further lockdowns and port closures in China have the potential to create a good bit of chaos this summer and beyond once those ports and factories come back online.”

U.S. Xpress, based in Chat­tanooga, Tenn., ranks No. 23 on the for-hire TT100.

Motor carriers have pushed through contract rate increases across the industry as freight demand soared. That raised pricing to a new level and fueled record revenue and profits for many carriers.

Although always cyclical, the wave in the rate cycle has changed, ACT Research’s Denoyer said.

“When rates go down, the trough will be higher than what we would have expected,” he said.

Meanwhile, the growth of e-­commerce has increased certain types of freight that require different pricing. Objects such as furniture and kayaks take up more space and are harder to pack in a trailer.

“You won’t be able to fill up the truck as much. You have to price appropriately to move the awkward freight,” XPO’s Sterling said.

Another industry change is the growing level of remote work that grew out of the office shutdowns in the early days of the pandemic.

The Resilience of Remote Work

While there will always be positions that must be on-site simply because of the nature of the job, such as drivers and shop technicians, there are other positions in accounting, customer experience and project management that can be performed well from a remote location, U.S. Xpress’ Carmony said.

“Moving forward, we will shift into an environment where people work in the space that is most conducive to their performing their individual jobs,” he said.

The motor carrier is changing its workflow to account for that.

“For remote team members, there will be times when coming on-site will be required,” Carmony said. “But we’re making the commitment that any time we require on-site attendance, there will be a specific purpose such as a training, new-hire orientation or a meeting that is likely to generate better outcomes in person.”

Remote work also provides motor carriers with the opportunity to recruit from a wider field of candidates, depending on how much on-site work the position requires.

“We won’t let geography keep us from attracting the best people for the company,” Carmony said.

All told, the pandemic reinforced how the trucking industry can apply technology to solve some of its largest problems.

“The demands of shippers will get more aggressive in terms of speed, visibility and reliability. That challenge for trucking will increase,” Maven Machines’ Geller said. “The companies that leverage technology will thrive. The pandemic acceler­ated that.”