As businesses look to make their supply chains more nimble to meet rising consumer demands, freight companies are restructuring their business to accommodate more trips over shorter distances. As a result of the surge in online purchases, companies are expanding their shipping presence and capabilities by opening compact warehouses in cities and suburbs, replacing large, remote distribution centers.
It’s a triumph for the carriers who are facing demands for more frequent shipments, which is boosting revenues and pricing leverage.
“A couple reasons for that: Consumer spending is up, people are buying more online and they’re still trying to replenish shelves that were bare because of the pandemic,” FOX Business’ Grady Trimble told "Varney & Co."
Old Dominion, one of the country’s largest shipping companies, saw revenue increase by more than 6% year-over-year. The acceleration of online shopping is the biggest pandemic-induced change to the trucking business, Adam Satterfield, the company's chief financial officer, told The Wall Street Journal.
With companies adding smaller facilities closer to consumers, “what could have been a truckload of goods now needs to be a few pallets of product brought in more frequently,” he said.
C&K Trucking in suburban Chicago has seen a similar increase, following a slow start at the beginning of the coronavirus outbreak amid global lockdowns.
“We were really slow for April and May, and then volumes really picked up right after COVID, and they haven’t really declined since,” Mike Burton, president of C&K Holdings, told FOX Business. “A lot of it was replenishment, the inventory shelves got low. But then buying just continued to be strong with consumer spending.”
While truckers keep up with demand, last month’s deep freeze is still causing delays in shipments across the country. The winter storm forced the U.S. Postal Service to close offices and other facilities in Texas as well as Alabama and Mississippi. Similarly, FedEx reported that the winter weather had caused “substantial disruptions” and delays across the country.
“It was about a week and a half that we lost a lot of productivity,” Burton added. “And what happens then is the volume doesn’t move, but it keeps coming into Chicago. So then you got a backlog of freight, and so we’ve been trying to catch up since, and it will take a couple of weeks to get caught back up.”
Fox Business' Grady Trimble contributed to this story.