Five Key Takeaways From the 2020 Trucking Owners and Leaders Roundtable

With so many unknowns facing the trucking industry in the coming year, “wait and see” was the overarching theme of most of the presentations delivered by speakers and panelists at the 2020 Trucking Owners and Leaders Roundtable hosted by Katz, Sapper & Miller’s Transportation Services Group, the law offices of Scopelitis, Garvin, Light, Hanson & Feary, and KSM Transport Advisors on Feb. 4 in Indianapolis.

An uncertain election year, the unexpected global impact of Coronavirus (COVID-19), and tempered optimism for a trucking rebound from the lows of 2019 weighed heavily on the minds of speakers, panelists, and attendees. Despite this sense of apprehension, some key messages were at the forefront of the day-long event, including implementation of new regulations and proactive restructuring to address legal concerns. Below are five key takeaways from the event:

1. We Have Already Hit the Bottom – The pricing cycle hit its lowest point in the second half of 2019 and data indicates the industry has turned the corner. “We’re fragmented, so there’s not a lot of pricing power in the trucking industry,” said Jack Atkins, managing director, research analyst at Stephens Inc. “We’re done processing through excess inventory, so conditions should return to normal.” But how long it takes for the rebound to formally occur is still to be determined.
2. Existing Problems Are Evergreen – The same concerns that have been at the forefront of the industry for years continue to exist. At the top of the list are demographic challenges, specifically the continued age increase of existing drivers while pay rates stagnate. Finding employees and limiting turnover is an ongoing concern. Factor in new regulations, including the requirement that all drivers must be registered in the Drug & Alcohol Clearinghouse, and the barrier to entry stiffens further. One proposed solution was delivered by Steve Baker, vice president, The Great Game of Business. In his presentation, he focused on the importance of creating shared ownership with all members of a company. “The company is the product,” said Baker. “Why not tie education, accountability, and incentives to building a great organization? That’s how you build something sustainable.”
3. The Current Bank Lending Environment – The banking environment continues to be competitive for borrowers as we head into 2020, but banks have little room for error. Banks will continue to work with companies with strong balance sheets and focus on making good loans. Many carriers could have covenant issues as they report their 2019 financial results. A panel comprised of bankers at the roundtable reiterated that communication is key in these circumstances.
4. A Continued Focus on Metrics – Trucking companies must continue to focus on optimizing data to maximize their opportunities for profit improvement. Metrics like yield, dwell time, deadhead per truck, fuel and driver costs, and revenue per truck per day were all highlighted as indicators of ways trucking companies could improve margins. Perhaps the most impactful metric was raised by Chris Henry of the TCA Profitability Program. His suggestion was for carriers to focus on maintenance expense per mile. “The goal should be 20 cents per mile or less,” said Henry. “Any way to reduce that number is pure profit for the carrier.”
5. The Industry Must Change – Perhaps the most difficult information for attendees to hear was the declaration by Atkins in his presentation that consolidation was necessary for the industry to prosper. “E-commerce is continuing to change supply chains,” he said. “Rate increases do not even cover inflationary costs over the past decade.” For the industry to thrive, companies are going to have to merge or risk becoming obsolete.

The overall U.S. economy is good but risks do exist for the trucking industry. Demand is still to be determined, capacity attrition is taking place, and spot and contract rates have stabilized. How will regulatory changes impact capacity? What is expected in global trade activity? The answers are unknown. Until there are more defined results, the trucking industry is applying a simple dictum: Wait and see.

Interested in Learning More?

Read about other topics discussed at the 2020 Trucking Owners and Leaders Roundtable: Indianapolis, including an economic outlook for 2020 and how carriers can implement The Great Game of Business to ensure long-term success.