Experts discuss how truckers can survive the freight recession

Many freight experts have seen a slower ride this year as a sluggish economy has forced home builders, retailers and other businesses to cut back on deliveries during the traditional haulage peak holiday season.

After two years of surging freight markets caused by COVID-related disruptions, spot rates have fallen in recent quarters. Previous freight recessions — like 2008 and 2019, when carrier after carrier of all sizes shut their doors — haunt the memories of many freight professionals.

David Owen, founder and president of the National Association of Small Trucking Companies (NASTC), said small truckers are like “canaries in the coal mine,” often showing what’s in store for the U.S. economy.

“The trucking community, particularly small truckers, is about six months ahead of what the market is predicting,” Owen told FreightWaves. “So freight traffic has probably been depressed for most of this year.”

NASTC was founded in 1989 and is based in Gallatin, Tennessee. The association represents approximately 15,000 trucking companies by helping them control costs through managed purchasing, advice and advocacy.

“Almost all of our 15,000+ members are small businesses in the long-haul full truck load market,” said Owen. “As small operators in the market, they usually have to deal with spot market freight and contract freight, which means a lot more sensitivity in the market. A good solid small trucking company can go from very good to broke in about three weeks or a month given a perfect storm that we seem to be driving through a series of right now.”

Most who have been in the freight business long enough have felt the ups and downs of the industry. As small and midsize carriers and owners scramble to navigate through another downturn, Owen and other freight industry professionals share some anecdotes and tips for surviving another recession.

Take care of your drivers and other assets

Randy LaValley started his company, Lavalle Transportation (LTI), in 1995 with one truck. Today, the Potsdam, New York-based company has about 440 trucks and 422 drivers, according to the Federal Motor Carrier Safety Administration.

Like most trucking companies, LTI was challenged by the economic downturn of 2008-09. There was still cargo to be transported, but it was often offered at much lower bids than before.

In 2008, LTI was an owner-managed trucking company, and LaValley said he chose to pay “almost everything we got paid for the load” to drivers.

“We wanted to keep the owners and operators healthy because back then there were a lot of trucking companies that were dying and falling off in large numbers every quarter,” LaValley told FreightWaves. “We took care of them and made sure they made it to the other side of the recession and didn’t quit and/or exit the industry altogether.”

LaValley said they were extremely cautious about spending for most of 2008-09. He found that once the recession ended and demand returned, someone had to be ready to provide transportation.

“We kept just enough for the company to barely keep its head above the ground and move on,” LaValley said. “As soon as I saw the light at the end of the tunnel, I doubled down and did a lot of things, won more contracts and bought more trucks and trailers. We came out of the last quarter or six months of this recession and have come full steam ahead.”

Another lesson LaValley has learned from his years in the industry is to find a niche and stick to it.

“… [One that’s] not be served [well] and then get in there and do a damn good job and stay in your lane,” he said.

Texas Trucking Association (TXTA) President and CEO John Esparza said he’s seen multiple recessions and slowdowns in trucking and agrees with LaValley that caring for its employees while saving money is one of the most important things a company can do in tough times times can do.

Founded in Austin in 1932, TXTA has 1,000 companies ranging from small businesses to Fortune 500 companies and serves as an advocate for legislation for its members and the transportation industry.

Esparza said the companies that often survive freight recessions are those that continue to employ workers, even at great risk and in debt to themselves.

“I know companies that have borrowed to keep making payrolls because they know that this is temporary and that when things emerge from a recession, the person who has employees on board will bounce back the quickest.” said Esparza.

Esparza also said most trucking industry veterans know not to panic when freight slows.

“If TXTA members have taught me anything during these times — I can easily point out the most successful ones and say they all have that common thread — it’s that they don’t get too excited when things are going really bad, but They also don’t get too excited when things are going really well,” he said.

Assets like trailers that a company already owns can also be reinvested in slower freight periods, Esparza said.

“I recommend them flip trailers, also because this is the time to fix and shore up the safety side of things,” he said. “A lot of people might have some trailers that they really don’t use, or specialized transporters that they don’t use when things slow down a bit. Then they have their technicians turn the trailers over and make sure they are ready to go.”

Control fuel and other operating costs

Owen said the majority of NASTC members are companies that own 10 trucks or fewer and operate on slim profit margins. When a recession hits, these airlines must control their biggest expense: fuel.

“They need to attack fuel… [and] Control it so it doesn’t break you,” Owen said. “The first line of defense is to negotiate what is known as a fuel surcharge. Hopefully, NASTC members have already enrolled in a program that allows them to purchase fuel on the street at a discounted rate. [either] equal or close to what the larger airlines pay.”

Ed Stockman, Founder of Newtrul, mentioned other things that small and medium-sized trucking companies should consider in slow times, namely adopting new technologies, like using new platforms or adding software to automate load sourcing, pricing, billing and other highly manual ones workflows.

Chicago-based startup Newtrul is a digital freight matching platform that integrates with freight brokers to digitally share available loads with carriers in real time.

“We’ve looked at how recessions have affected other industries, and the one that really stands out is the oil industry. There have been three massive downturns over the course of the 20th century,” Stockman said. “There are very few industries as manual as the oil and transportation industries. When you have these super manual paper and pencil industries, those downturns are usually what separates those who are hanging out and those who aren’t. The common denominator of the survivors was innovation and adaptability.”

Stockman said whether it’s using technology to find more available loads or using software to digitize and automate workflows like payments, those who adapt fastest have a better chance of surviving.

“Airlines will experience many difficulties over the next 12 to 18 months. We’ve already seen that our average monthly searches have increased by 40x over the past 7 months. This is very indicative of the market. Being nimble, open-minded, and willing to test multiple different technologies will be key to long-term success,” Stockman said.

Average 3,000 miles per week

Ultimately, to survive, small and medium-sized trucking companies must find a way to clock up 3,000 miles a week, Owen said.

“The only asset they have is drivers. So to keep your drivers and keep your trucks running, you need to clock out every week, in our scenario for a full truck load long haul haul 3,000 miles per week. That’s about the magic number,” Owen said. “You have to be able to do it every week, 48 weeks a year, while your driver is rested at home every weekend.”

Owen also said there’s really no magic formula for small trucking companies to weather a recession other than look after their drivers, monitor fuel costs and move as much freight as possible.

“It’s just good business principles down here where we live,” he said. “We just have to fight the dragons every day.”

Watch: Advising owners and small fleets during a freight recession.

Click here to see more FreightWaves articles by Noi Mahoney.

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