The frequency and intensity of challenges faced by those in the commercial vehicle industry have been increasing dramatically over the last three years. Surprises introduced by the Covid pandemic, supply chain disruptions, hikes in the cost of fuel, and the passage of a massive infrastructure bill contribute to an unpredictable environment that has made forecasting future business more difficult and extremely critical.
“The Infrastructure Investment and Jobs Act (IIJA) has been in effect for a little over a year now and the most significant investment is in the rebuilding of roads and bridges. Our clients in these industries are doing well.” Debora Ekross, VP, Sales-Commercial Vehicle Division, Ascentium Capital
In 2023, many interrelated issues and challenges will continue to create uncertainty in the industry. Given this uncertainty, how should commercial vehicle companies prioritize and position themselves for success? Let’s explore some anticipated issues and trends.
It's no secret that many expect a continued economic downturn to result in a recession. The U.S. has weathered 12 such periods since WWII, and some see this as a necessary outcome of the heightened level of inflation and global economic stresses. However, this doesn’t have to mean doomsday. While a slowdown will affect overall shipping, there is little concern that total freight traffic will be significantly impacted due to the lingering shortages needing to be fulfilled.
ACT Research President and Senior Analyst Kenny Vieth discussed the market forces, business conditions and supply chain issues that will impact carrier operations during 2023. Vieth said it could be "the best recession ever," adding that a strong U.S. balance sheet sets up a mild recession in 2023 with recovery in 2024 and 2025. “It's going to be even more difficult to find drivers as we move into the recovery period (2024 and 2025). If there's a silver lining here, it's that the U.S. economy doesn't work without trucking."
Bankruptcies and acquisitions/mergers are both a cause and effect of the numerous challenges the industry has experienced. Retail firms are shipping fewer goods, and logistic supply chain issues are compounding this issue. Pressures have led to larger and smaller trucking firms exiting the industry and the loss of truck driver jobs. Additional consolidations are expected and will be based on market conditions.
Truckers are increasingly integrating new technologies across the industry. Route planning and safety compliance is improving productivity, introducing new constraints and providing new ways of getting the job done. Data analytics utilization is a corollary aspect of technology integration. Use of massive volumes of data is behind decisions made affecting drivers, including load planning, routes, and scheduling.
While there was some relief in mid-2022, the issue of fuel costs will continue to dominate the daily cost of operations for all aspects of the trucking industry.
“The segment that has been hit the hardest are the small fleets and owner/operators in the over the road (OTR) category. Their struggle is due to the softening of freight rates coupled with diesel fuel and insurance costs.” - Carol Dmytriw, SVP, Sales-Commercial Vehicle Division, Ascentium Capital
Whether you are an owner-operator, an independent contractor, fleet owner or any sort of trucking entrepreneur, 2022 was a challenging year. With ongoing industry challenges, business owners and operators must look in the rear-view mirror at the past year and look ahead in 2023 and beyond. At the heart of a well-run business is an understanding of the past, current position, and a plan or roadmap for driving ahead. The variable nature of the trucking industry, especially in the fast-paced world of expedited shipping demand, can create hurdles making it difficult to plan. Consider the grand scheme and understand the value of establishing plans and processes. Evaluating your business while also moving it ahead requires attention to the detail, industry projections, and learning from the past.
Forecasting is tough in volatile market conditions. You’ll need a reliable system to recognize and address current needs and potential operational challenges down the road. Establish and put plans in motion to be organized for the upcoming year(s).
Having detailed records ensures you understand the financial position of your business and reduces time and pain when tax filings are due. A transparent view of your business will also help you avoid unexpected bumps in the road ahead.
The nation’s transportation framework has been reshaped in many ways. The good news is the industry has survived much bigger challenges, including operating through two world wars and developing the driving infrastructure needed to maintain the commercial vehicle industry. Looking back at the industry's past accomplishments, it seems today's commercial vehicle leaders can benefit from historical management lessons while charting their futures.
For trucking businesses, success may be measured by miles a day, week, or month, but running a trucking business is more than just counting miles. Sustained success is dependent on how your business is positioned for what’s next and preparing for the long haul. Evaluating your business and developing a plan that can address today’s challenges and the opportunities that await you down the road is vital to drive success.
Ascentium Capital’s commercial vehicle financing solutions can help you overcome bumps in the road and keep your business running on a full tank. Hedge against inflation with predictable monthly payments on new or used vehicles, technology enhancements and more.
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