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Emerge and RecoverPredicting the Response of the US Trucking Market
to the COVID-19 Pandemic
Center for Supply Cha in ResearchÒ , Penn State Univers i ty
2020ã Center for Supply Chain ResearchÒ. All Rights Reserved.
Agenda
2
¾ Introduction
¾ Guest experts
¾ Q&A / Open forum
The State of UncertaintyCommon Path, Yet Various Shapes of Recovery
3Image adapted from McKinsey (2020)
Disease progression path: Key influence on three common phases of public health responses¾ Containment. Strict
physical distancing, bans on gatherings, non-essential business closure
¾ Partial recovery. Reducing some restrictions to restore a moderate level of economic activity
¾ Full recovery. Vaccine discovered, approved and widely administered—economic activity fully restored
The State of UncertaintyCommon Path, Yet Various Shapes of Recovery (continued)
4Source: BCG (2020)
The United States, most of Europe, and an
increasing number of
locations around the world are
currently in the “Containment”
Phase.
The State of UncertaintyCommon Path, Yet Various Shapes of Recovery (continued)
5
Containment Partial Recovery Full Recovery
Shapes of recovery depends on five key questions:
1. What will be the length of containment?
2. To what depth does the economy drop during containment?
3. What will be the length of partial recovery?
4. What level of recovery does the economy achieve under more relaxed restrictions?
5. Where does the economy return relative to the pre-COVID crisis?
Source: Adapted from BCG (2020)
The State of Uncertainty Common Path, Yet Various Shapes of Recovery (continued)
6
Examples of various shapes of recovery
Perc
ent
Cha
nge
from
Pea
k
0 %
Time to Recovery
“V” Shaped
Perc
ent
Cha
nge
from
Pea
k
0 %
Time to Recovery
“Square-Root” Shaped
Perc
ent
Cha
nge
from
Pea
k0 %
Time to Recovery
“U” Shaped
Perc
ent
Cha
nge
from
Pea
k
0 %
Time to Recovery
“W” Shaped
7 7
Our Guest Experts C. John Langley Jr.
Clinical Professor of Supply Chain Management
Penn State University
Dale McClung
Sr. Director of Integrated Logistics Design Analytics
CLX Logistics
CLX Logistics Fast FactsEstablished in 1997Steve Hamilton – Founder/Chairman, PSU Grad David Vieira – CEO NA Headquarters: Blue Bell, PA EMEA Headquarters: Eindhoven, NLComplete Logistics Service OfferingsACC Affiliate MembershipSpecialization in Chemical VerticalBoard of Advisors:
Dr. John Coyle – PSU Professor Emeritus Joe Nicosia – PSU Grad
One of the Founding Corporate Sponsors
Truck Freight Market as Economic Barometer
9Source: ATA (2020)
Trucks hauled 11.49 billion tons of freight in 2018
Represents 71.4 percent of tonnage carried by all modes of freight transportation, including manufactured and retail goods
Industry revenues were $796.7 billion, or 80% of total revenue earned by all transport modes
928,000 truck drivers employed in the United States
Truck Freight Market as Economic BarometerWhat’s Happening? — Spot Load Availability
10Source: FTR (2020), as of the week ended April 17 (week 15)
Truck Freight Market as Economic Barometer (continued)
11
n Revenuesn Loadsn Tonnagen Capacityn Utilizationn Jobsn Jobless claimsn Route milesn Load turndowns
FREIGHT ACTIVITY: EXAMPLE METRICS
n COVID-19 outbreak experiencen Manufacturingn Aggregate economic activityn Unemployment ratesn Seasonalityn “Virtual” alternativesn New approaches to strategic sourcingn Future changes to consumer and business buying behaviorn Restructuring of industries, businesses, and supply chains
FACTORS IMPACTING FREIGHT RECOVERY
Emerge and RecoverBullwhip and Reverse Bullwhip Effects
12Image adapted from KnowledgeBrief
¾ Small changes in demand cause significant supply chain volatility.
¾ Demand variability increases as we move upstream.
¾ Large changes in demand are NOT met with significant changes in supply.
¾ Demand variability increases as one moves downstream.
Bullwhip Effect (Traditional) Reverse Bullwhip Effect
Emerge and RecoverBalancing Supply and Demand
13
Problem of Supply-Demand Misalignment
Emerge and RecoverLearning from Hurricane Harvey Disruption: V-Shaped Recovery
14
0100200300400500600700800900
1,0001,1001,200
26 27 28 29 30 31 35 36 37 38 39 40 41 42 43
Ship
men
t C
ount
In/O
ut
of H
oust
on A
rea
2017 Week Number
Truckload Demand Recovery
Original ForecastSquare Root Shaped
Revised Forecast“V” Shaped
0
100
200
300
26 27 28 29 30 31 35 36 37 38 39 40 41 42 43
Ship
men
t C
ount
In/O
ut o
f H
oust
on A
rea
2017 Week Number
Rail Demand Recovery
Original ForecastSquare Root Shaped
Revised Forecast“V” Shaped
Quick business recovery in the Houston area
created a surge in truck demand which sparked a disruption
in US truck rates across the country.
Source: CLX outbound bulk tank truck shipments in the Houston and Louisiana areas
Emerge and RecoverHurricane Harvey Disruption: US Truckload Dry Van Tender Performance
Source: CLX Logistics domestic US truckload dry van tender performance data. Sequential tendering only from January 2017 to April 2020. Customer pickup shipments excluded.
Hurricane Harvey
Shippers who didn’t have volume in areas where truck demand surged lost their preferred carrier capacity …and paid higher rates!
Emerge and RecoverMinimizing Unexpected Transportation Spend
16
Today’s excess truck capacity is temporary. Demand for truck capacity will surge in areas where the economy begins to recover causing
volatility in rates. It could last longer than you think.
Action Guide1. Review business continuity plans
to prepare for tightening truck capacity in the coming months.
2. Benchmark your current truck spend.
3. Partner with critical carriers to secure truck capacity on critical lanes. Revised rates or volume commitments may be necessary.
Emerge and RecoverDeveloping Capabilities to Facilitate Recovery
17
Examples of shipper and provider capabilities that if available will facilitate recovery in the freight markets
¾ Accommodating COVID-19 precautions
¾ Improvements in advance shipment planning
¾ Use of digital technologies
¾ Use of automation
¾ Ability to innovate and transform supply chains
18
Q&A / Open forum
1919
STEVE TRACEY
Professor of Practice, SC&ISExecutive Director
§ Center for Supply Chain Research® , Penn State University, and
§ Penn State Executive Programs, Penn State University
Your Executive Director
) 814.867.5860
To access the CSCR® COVID-19 Weekly Virtual Town Hall Archive and additional COVID-19 supply chain management resources, please visit
https://www.smeal.psu.edu/cscr/covid-19-supply-chain-management-resources/cscr-covid-19-supply-chain-management-resources