Experts talk about how truckers can survive the drop in cargo

Many freight experts have noted a slowdown this year as a sluggish economy has forced home builders, retailers and other businesses to curb shipments during what is traditionally the peak holiday season for carriers.

After two years of rising freight markets spurred by COVID-related disruptions, spot rates have fallen in recent quarters. Past freight recessions — like 2008 and 2019, when haulier after haulier of all sizes shut down — stick in the memory of many industry insiders.

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

“The shipping industry, particularly small shippers, is about six months ahead of market forecasts,” Owen told FreightWaves. “So freight traffic has probably been depressed for most of this year.”

NASTC was founded in 1989 and is headquartered in Gallatin, Tennessee. The association represents around 15,000 freight forwarders and helps them to control costs through purchasing management, advice and sales promotion.

“Almost all of our more than 15,000 members are small businesses in the long-haul market,” said Owen. “As small players in the market, they usually have to deal with spot market trading and contract trading, which has to do with much greater sensitivity in the market. A small, solid trucking company can go from a great deal to bankruptcy in about three weeks or a month if a perfect storm hits, which we seem to be going through right now.”

Most of those who have been in the trucking business for some time have experienced the ups and downs of the industry. As small and midsize shippers and owners scramble to weather another downturn, Owen and other industry experts share some stories and tips on how to weather another downturn.

Take care of your drivers and other assets

Randy LaValley started Lavalle Transportation (LTI) in 1995 with a single 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 transport companies, LTI was affected by the economic crisis of 2008-2009. There was still cargo to be moved, but often at much lower bids than before.

In 2008, LTI was an owner-managed airline, and LaValley said it made the decision to pay “almost everything we were paid for freight” 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 going under 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, not that they got out or left the industry altogether.”

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

“We only kept so much that the company could barely stay afloat 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 stuff, won more contracts and bought more trucks and trailers. We emerged from the last quarter or six months of this recession and hit it full force.”

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

“… [Uno que] is not served [bien] and then get in and do a great job and stay in your lane,” he said.

Texas Truckers Association (TXTA) President and CEO John Esparza said he’s seen multiple recessions and slowdowns in the trucking space and agrees with LaValley that taking care of its employees and saving money are among the most important things it does a company can do in difficult times.

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

Esparza said the companies that often survive transportation difficulties are the ones that continue to employ people even as they take on huge risks and debt.

“I know companies that have taken out loans to continue payrolls because they know this is temporary and whoever has employees on board when the recession is over will be the quickest to pick up,” Esparza said.

Esparza also said most trucking industry veterans know how to avoid panicking when the load gets too thin.

“If the members of TXTA have taught me anything during these times – I can easily point to the most successful and say they all have that common thread – it’s that they don’t get too excited when things are going really bad, but you do We’re not too excited when things go wrong either, things are going really well,” he said.

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

“I recommend you flip the trailers as well, because it’s time to fix and brace the safety side,” he said. “A lot of people have some trailers that they don’t really use or special transporters that they don’t use when things slow down a bit. Then they have their technicians check the roadworthiness of the trailers.”

Control fuel and other operating costs

Owen said most 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 must attack the fuel… [y] control it in a way that 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 signed up for a program that allows them to buy fuel on the street at a discounted rate. [o] equal or close to what the major airlines pay.”

Ed Stockman, Founder of Newtrul, mentioned other things that small and medium-sized trucking companies should consider in slow times is adopting new technology, like using new platforms or adding software to automate contracting, fees, pricing, billing, etc. others heavily manual workflows.

Chicago-based Newtrul is a digital load finding platform that integrates with carriers to digitally share available loads with shippers in real time.

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

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

“Shippers will face many difficulties over the next 12 to 18 months. We’ve already seen our average number of searches per month increase by more than 40 times in the last 7 months. This is very indicative of the market. Agility, open-mindedness, and a willingness to test multiple different technologies will be key to long-term success,” Stockman said.

Ultimately, to survive, small and medium-sized trucking companies will have to figure out how to get 3,000 miles a week, Owen said.

“The only asset they have is the drivers. To keep their drivers and keep their trucks running, they need to drive 3,000 miles per week in our long-distance haul scenario. That’s the magic number,” Owen said. “You have to be able to do it every week, 48 weeks a year, while your driver rests 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, control fuel costs and move as much freight as possible.

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

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