State of Freight – 2023
Welcome to the “State of Freight – 2023” a comprehensive guide for decision-makers to expertly navigate the next twelve months in Logistics. In this report, we’ll reveal the truth behind recent layoffs, share the rate fluctuation we see, uncover Air, Ocean, and Warehousing’s potential, and decide whether our industry can survive a recession and whether things will improve going into 2024.
What’s Behind the Freight Brokerage Layoffs?
Uber Freight. C.H. Robinson. Coyote. Yellow. Just a few of the companies that experienced significant layoffs in 2023. What most people don’t realize is that the “massive” layoffs aren’t happening like you think they are.
Historically speaking, we haven’t seen this kind of unemployment rate (in a good way), since 2000. Most people have a job right now, 96% in fact (source: statista).
What is important to know is that over the last five years, Logistics has had a higher rate of unemployment than the national average (3.9% as of September 2023). This has continued to be the case for 2023 as the unemployment rate rose slightly to 4.9% (source: statista).
This must mean that things are getting worse in Logistics right? Not exactly!
When you look at the Bureau of Labor Statistics you see a different story. Before COVID-19, it wasn’t uncommon to add 50,000 executives to our industry. After a historically high unemployment rate in 2019 and 2020 where so many lost their jobs, we had a massive “correction” of 1 Million people entering Logistics from 2021 to 2022. So when you see that we only added 70,000 people to Logistics from August of 2022 to August of 2023, that number becomes a lot more of an “expected” of a year so far.
I think context is everything. Yellow declaring bankruptcy may have been a historic collapse but their layoffs only comprised, at most, 30,000 executives. On top of that, there’s a good chance that a significant portion of those people were able to find new jobs within 60 days due to the unique circumstances and desirability of skills of those affected.
My hope for Transportation is that our industry’s unemployment rate would be more in line with the national average (3.9% as of today), and if that happens coupled with our continued growth and innovation, we could see 30 Million+ Logistics executives in our industry within our lifetime (source: Bureau of Labor Statistics).
What was “normal” before COVID, What’s “normal” now, and What can we expect with Rates in 2024?
COVID-19 messed up our idea of what “normal” was for a lot of freight brokerages, especially with rates for each mode of freight. Let’s take a look at Truckload as it fluctuated from 2019 to 2023.
Truckload:
Q4 2019:
965,000 shipments, Invoice Amount/Load ($1,641), Margin ($256 or 15.6%).
Three years later in Q4 of 2022:
1.3 Million Shipments, Invoice Amount/Load ($2,172), Margin ($383, or 17.7%)
After Q1 of 2023:
1.2 Million Shipments, Invoice Amount/Load ($2,017), Margin ($318, or 15.7%)
To me, it looks like we are headed for a settling of the “Invoice Amount Per Shipment” at around $2,000-$2,200 with inflation while the “Gross Margin” looks to settle around 14-15%.
Less-than-Truckload (LTL):
LTL had a similar outcome with Total Shipments and Invoice Amounts returning to a “middle-ground” between 2019 and peak COVID. However, the difference between Truckload and LTL is that the margins and margin percentage decreased and it seems poised to settle under 20%.
Yellow’s Impact on Rates:
Even though Yellow has closed up shop, their customers still have freight to be moved over the next few months. The fight between freight brokerages over the next 30-60-90 days for Yellow’s customers will be an interesting thing to watch.
As freight brokerages dynamically change their pricing and acquisition strategy of Yellow’s former customers, this will have an impact on what the industry’s new “average” LTL and Truckload rates will be in 2024. If companies go cost-effective and play for the long term, the rates will either dip further down or stay the same. If freight brokerages go with the scarcity model and maintain or increase their pricing, that will drive the margin back up closer to 20%.
Either way, I think Yellow’s bankruptcy will impact the market beyond just displacing its thousands of employees.
What is the Outlook for Air freight, Ocean freight, and Warehousing?
What people don’t realize is that while specific areas within Logistics may be returning to “normal” other areas continue to experience noticeable growth outside of the pandemic. Since 2022, Air is up 7.1%, Ocean is up 4.9%, and Warehousing has added 1.5 Million people to that specific sector (source: Bureau of Transportation Statistics).
Can Trucking Survive a Recession?
If a recession is on the way, the question that many will ask is, “Can Trucking, 3PL, and Logistics Survive?”
The good news for many of you in those industries is, “Yes!”
Logistics is like a pendulum that follows the economy.
The only thing that changes in Logistics is the “kind” of talent that is needed depending on what side the pendulum is on: the Shipper or the Carrier.
When the market is “soft”, talks of a recession are looming, and your finances are rocky, things are in favor of the Shipper. This is when Shippers move away from non-asset-based logistics and move to asset-based companies, wanting to use this leverage to deal with the carriers directly.
You’ll often see a lot of layoffs for non-revenue producing roles (in Operations) as freight brokerages look to add more Sales Executives with a quick ROI.
If things are good, people want Operations. The balance tilts in favor of the Carrier. Shippers are more inclined to embrace non-asset-based logistics solutions.
So, it just depends on which side of the ball you play on. Operations or Sales?
Either way, it’s important to remember that no matter if we are in a recession or in the greatest time of prosperity, “Top Talent” is always desirable and placeable, no matter the position!
Will the State of Freight Get Better in 2024?
Many wonder if Trucking or Logistics will get better in 2024. Here are my predictions based on a scale of 0-100 showing who will be in power over the next twelve months:
Client Driven Market
It’s clear to me that we are slowly shifting back to a “client-driven” market. Clients are spending more time in interviews, taking fewer risks, and have more job openings than they have had in a long time. Coming in and making a name for yourself as soon as possible is paramount.
Entering Q4 of 2023, I’d say we are at a “45” in favor of the client. By the time we get to 2024, this is going to shift even further in favor of companies to a score of “40.”
Sales is King
If you are on the Sales side of Logistics and Supply Chain you are sitting pretty right now.
Between any other position in Logistics at “0” and Sales at “100”, the 3PL companies I talk to are at a “75.” 3PLs are looking to inject immediate cash flow through National Sales Executives. I don’t see that changing at least until 2024.
If there is a change in the other direction, it will be a minor one. I could see it going as low as “65” to account for the operational positions needed to handle the holiday freight.
Tough Road for Operations
For those on the Operations side, the Holiday season will be your friend. Business is abundant and freight brokerages must have the right operations in place. There can’t be any late holiday presents!
For those on the Carrier Sales side, I’d put them at a “40.” During the holiday season, I could see it reaching as high as “45.” Being under “50”, means that those in Sales will continue to be preferred over those in Operations for the time being.
Outro
Ultimately, these are just my predictions and not guarantees of where Logistics is headed over the next 12 months and into 2024.
If you would like a more in-depth look into the topics covered in this report, download our e-book here. Stay informed, stay ahead, and make strategic decisions in the ever-evolving world of logistics and supply chain.
Best of luck to you and your team as you navigate into the new year!
– Top Talent