There will be many that can expand on this article as many connections have been in the industry longer than myself.
I want to talk about building resiliency and how most businesses are already resilient because I believe this resiliency is a positive to discuss in this current market. Many people in transportation who are old enough remember the challenging times our world and industry have faced. Each time, transportation comes through the other side and is wiser, stronger, and much better as an industry.
I would like to tell you a short story;
In 1980 I started my working career as a Property Manager for my family company. We had purchased the landmark hotel from the Shriners, called the King Edward Hotel. We had been successful with hotels in the 3 previous years, built 3 hotels for Holiday Inn, and all the hotels for Venture Inns in Ontario in the late 70s and early 80s. This seemed an exciting next step as my family had plans to make the first 5-star hotel in Canada out of the ‘Eddy’, as we called it.
The banks, suppliers, and contractors were all in place in 1978-1979. The most important partner was the bank, as the renovation budget was $30- $40 million and would require a loan. The bank had confirmed the financing of $30-$40 million at an interest rate of 3.5%, and the renovation was underway.
For those old enough, you already know that in 1980 interest rates went from 3% overnight to 17%. For the $30 million (today this would be roughly $123 million) borrowed in 1979, the banks wanted every penny paid back or we would pay the rate of 17% and climbing.
The good news, the hotel did open in 1980. Bad news, in 1979 before the renovation the hotel occupancy had been strong at 98%, and after the rate hikes put pressure on consumers our hotel occupancy dwindled to only 52%. Here, my family faced a significant challenge in paying back the loan. For many months it was not clear if our company would survive.
I tell this story because resiliency is what we are discussing. Though our development company was never the same, we did fight our way back. Our business survival is a story of resiliency. I think there are many businesses in transportation who should remember stories of resiliency, and find ways to make their business today resilient.
The transportation industry is resilient, if we look at the challenges the industry has overcome.
- The 1980 interest rate effect was felt by all, many transportation companies over-leveraged and did not make it through 1980 -1982.
- 2008 -2010 – recession across North America - highest bankruptcies in our industry in one year.
- SARS, H1N1 Flu = all pandemics that affected the transportation industry - a reminder in all cases the drivers worked through these times - Front Line Heroes.
- ELD being implemented resulted in a loss of capacity in 2018. Many carriers, O/O, stopped running cross-border, and the Eastern seaboard saw rates increase by 30% or more.
- In 2019 asset carriers, drivers, and markets were adjusting to ELDs, and then they were given new hours of service (HOS) regulations on top. They were AGAIN hit with a lack of volume, and rates started dropping again.
- In 2020 we are served with the worst pandemic in recent history, COVID. Countries shut down, and demand for products increased (stimulus effect, I will leave to the economists).
- Demand and supply chain challenges drove costs for products higher, rates for ocean, drayage, rail, and trucking all increased substantially.
- In 2022 (last quarter) and 2023, demand dropped and the market could no longer support the new carriers that entered the market during COVID, let alone support the legacy and long-standing carriers. Brokers both traditional and electronic are also affected and leaving the market.
- Ongoing combatting of driver shortages.
My favorite saying, “If you bought it, a truck brought it”, has always been true. Resiliency, determination, and competitive nature are what the transportation industry has been built on. The transportation industry has seen more changes than most other industries over the years, safety regulation changes, technology changes, equipment regulations, and technology additions like ELD, GPS, TMS, WMS, EDI, API, Break Bulk, and now AI. Transportation providers have dealt with markets providing lower rates more often than escalated rate markets, at least since 2008 when I joined.
The one constant in our industry is the people and companies have resiliency, tenacity, and strength, and this will continue to drive our industry. This may go down as the worst year for losses in our industry, and still, there are opportunities for growth hidden amongst the stress. Build a culture of resiliency, stay positive, and continue to work for the best outcomes for your teams as the pressure mounts in this tough market.
