The economic impacts of the coronavirus pandemic have been felt by industries of every size and type. Fear of infection, coupled with strict social distancing and stay-at-home orders have caused consumer spending to plummet, affecting large swaths of the economy outside of a few essential services. As a result, the trucking industry has been negatively impacted. While semi truck fleet insurance serves as a foundational element of transportation risk management, fleet owners know that addressing economic hardships is the key to surviving in uncertain times. In this guide, we will explore some of the cost-saving measures trucking fleets are implementing to overcome COVID-19 challenges.
COVID-Related Fluctuations in the Transportation Sector
Consumer demand for goods has influenced the commercial trucking fleet in the wake of the COVID-19 pandemic. According to McKinsey & Company, a leading transportation industry resource, severe swings in demand were felt by the transportation sector. As the U.S. Gross Domestic Product (GDP) declined by as much as 13% and unemployment rose to unprecedented levels, the trucking industry responded with several cost-cutting strategies.
Demand continues to be volatile. In the early part of the pandemic, consumer demand for essential goods such as foodstuffs, medical supplies, and comfort items drove a spike in trucking volume – a spike averaging around 30% above normal volumes. After that initial panic-buying period, volumes decreased dramatically, although the trucking sector has begun to recover. Rail and shipping, unfortunately, have not experienced much recovery, and volumes remain 20-25% below pre-pandemic levels.
It is important to note that the pandemic’s effects on trucking only aggravated existing declines in volume. 2019 was a difficult year for the sector; despite strong economic activity, demand for trucking dropped and thousands of fleet carriers filed for bankruptcy. Semi truck fleet insurance is an integral part of the liability protections fleet owners enjoy, regardless of economic stability or transportation activity. Still, saving money on overhead expenses is a prudent move in an uncertain situation like the pandemic.
Leveraging Technology to Reduce Overhead Expenses
The economic slowdown and declining demand for trucking has given fleet owners the opportunity to explore a range of options for surviving. Many of these options are centered on operational changes within fleets, especially investments in technology to improve efficiency. These investments are expected to help save operating expenses long after the pandemic has eased its grip on world economies. Operational changes explored by trucking fleets include:
- Top-down reviews of workflows and processes to identify areas where efficiency improvements can be made.
- Investment in touchless technologies such as electronic bills of lading, toll management systems, and weigh-station bypass services.
- Focus on cloud-based transportation management systems that allow fleet owners to meet changes in demand with available freight capacities.
Many of these technologies have already proven themselves in improving efficiency, allowing drivers to respond more quickly to demands while protecting their health and safety.
On the Road: Innovative Cost-Savings Solutions
Back-end efficiency improvements are not the only way trucking fleets have adapted to the pandemic. On the road, numerous novel approaches have served to reduce operating expenses, thereby protecting a vital sector of the U.S. economy.
Several large carriers have overhauled their fuel purchasing programs, only buying fuel when the best pricing is available. Prior to the pandemic, fleets often ignored day-to-day pricing fluctuations and purchased fuel when it was needed, not when it cost less to do so. These fuel program changes are expected to continue well into the future as more fleet owners discover cost-saving benefits.
Carriers have also turned their attention to routes and freight booking. In particular, many carriers have eliminated some of their far-flung transportation routes in favor of high-volume cargo corridors that serve larger metropolitan areas. So-called “last mile” transportation has filled the gaps inherent in this routing model, and in fact has enjoyed significant growth even during the height of the COVID-19 pandemic.
Driver Safety: A Critical Component of Cost-Savings
Drivers are the lifeblood of the transportation industry. In the wake of the pandemic, protecting drivers from infection is critical in preserving trucking services. To better protect drivers, many fleets implemented strategies to reduce person-to-person contact, including touchless transportation and billing management technologies. Fleets also engaged in extensive safety training for drivers. Semi truck fleet insurance covers the vehicles and cargo, but it is not as adept at providing coverage for workers who contract illnesses during work hours. Preventing worker illnesses helps to reduce the strains on other insurance coverages, including workers’ compensation and healthcare benefits policies. By doing so, fleet owners have experienced a stabilization in injury/illness claims, thereby managing expenses.
The trucking industry is often at the mercy of economic patterns. By taking a focused look at improving efficiency and by adopting new strategies, truck fleets can continue to perform their vital role and will benefit from improved processes and solutions well into the future.
About Gain Insurance Agency
Gain Insurance Agency protects trucking businesses against liabilities and claims in the industry. We combine products provided by respected insurance providers with our expertise and custom packages to meet customers’ individual needs. Our goal is to give you the coverage that you need at the lowest possible price. To learn more about our products and services, contact us today at (877) 424-3344.