01 Oct AiroAV Malware Declared: Forging Ahead: The Evolution of Transportation in the COVID
The world has changed dramatically in just a year. From the way people work and go to school to the way they shop, travel and spend leisure time, COVID-19 has reshaped how many industries do business and challenged many to redefine their day-to-day operations.
In the business world, transportation– whether by road, rail, marine or air – and supply chain management have been among the most significantly affected sectors of the economy as businesses have had to reinvent, reshape and reimagine how to overcome many challenges, while seizing new opportunities in the space.
From an equipment finance perspective, the transportation industry is seeing a marked resurgence. In fact, a recent State of the Industry report by ACT Research revealed that the U.S. trailer industry booked nearly 30,000 net orders for August, which is a 46% increase from the month prior and a 150% increase than the same month last year.
These new figures confirm a revival in the industry, despite the perception within the overall lending community that COVID-19 has had a negative impact on the transportation industry. With these latest numbers dispelling that myth, there have been some big winners in the space with specific segments within transportation thriving, including grocery and retail, especially with companies that have active online marketplaces.
Changing Tides Drive Significant Changes
The growth in net orders underscores how a shift in perspective both within the industry and among lenders is vital to helping the industry maintain its momentum.
To begin with, the emergence of COVID-19 has highlighted the need for forward-thinking asset management. When the novel coronavirus first emerged and as it continued to thrust nearly every aspect of daily life into chaos, every industry froze and began to look at their portfolios. Transportation was no different, albeit there was perhaps more anxiety given that it is a high-risk industry and asset management was a significant issue.
Transportation, particularly fleet management, was in a downturn trend years before the coronavirus and desperately needed to evolve. In 2019, long-haul trucking experienced decreased shipping volume across the board, which drove down freight rates impacting the revenue stream of many carriers deterring new investments in assets. Before COVID-19, rail freight had also been steadily decreasing since mid-2018 and maritime trade volumes were declining, as well. Research firms and economists were predicting even more dire consequences as the virus spread.
On the contrary, the virus has facilitated – or better said forced – an evolution of thinking among leaders in the industry. No longer was a trailer a trailer. Analyzing trends and seeing growth markers within other key sectors created dynamism among industry trailblazers who saw an opportunity to capitalize on these developments and helped stimulate momentum in the overall redirection and reshaping of the industry.
Perhaps there is no better example than examining the shift within the trucking industry over the first half of 2020. As public demand for goods shifted from discretionary items, such as apparel and furnishings, to in-demand necessities such as groceries, transportation pivoted, too. Carriers that once had large fleets of dry trailers that would normally transport department store and big-box retail goods converted to more specialized refrigerated trucks to meet the rising demand for grocery delivery.
Whereas previously the transportation industry was staid and unlikely to invest in newer fleets, forward-thinking asset management has helped some companies capitalize on thriving segments of the economy such as grocery.
In the same vein, in order to implement forward-thinking asset management, companies have had to take stock of lending opportunities, making it increasingly important to have access to capital that could translate into taking advantage of opportunities as they arise.
This initially came with challenges as lenders – from independent equipment finance companies to large-scale banks – pulled back access to capital to more closely assess the economic situation. Truly astute and nimble equipment finance groups have been able to identify the same trends that transportation industry leaders have seen, and both provided capital and devised creative financing options to help carriers seize opportunities.
Charting a New Course for the Industry
Moving forward, taking a three-pronged approach will be vital to ensuring future success.
First, if anything has been learned from the impact of COVID-19, diversification will be key. More than ever, companies will need to ensure they are connected with clients who are positioned well for the future and ready for the long haul.
With manufacturing set to make a comeback in the U.S. as many commercial goods and pharmaceutical companies have announced their intentions to restart domestic production, along with the existing surge in perishable products that shows no signs of abating, carriers will need to take a sober look at their existing fleets and determine how best to enhance or modify their inventory to pursue growth opportunities.
With that in mind, as manufacturing makes the shift, all transportation channels will be in higher demand. There has been a marked increase in marine travel, especially using inland or brown water transport. A report from IBISWorld about ocean and coastal transportation in the U.S. cited expectation for total trade value to increase at an annualized rate of 3.3% over the five years through to 2025. As a result, industry revenue is expected to rebound, growing at an annualized rate of 2.8% to nearly $4.0 billion over the next five years.
Next, the ability to be nimble as market conditions change will be just as important to the industry as a whole. Unlike the past where companies could stay the course with resources they have, fleet status will need…