What are the possible causes of a freight recession? Commonly, logistics experts attribute it to economic challenges. Some say it’s due to customers’ decision to reduce their expenses. Others suggest that the freight industry is already overcrowded.
If we truly look at it, a freight recession is a product of significant challenges concerning all the stakeholders in the logistics industry, especially customers and service providers. Due to the worsening economic impact, customers suddenly decide they no longer have the financial capacity to spend more. On the other hand, more and more businesses are entering the industry, leading to an increased number of trucks compared to the freight being moved.
The question is: how can freight businesses ensure that their income streams will be sustainable? Is there a need to use technology or specific tools to survive a freight recession?
Before exploring ways to protect your profits, we'll explain a freight recession. Then, we'll talk about how it affects profits and what to expect in the freight industry for 2024. Lastly, we’ll discuss how to use a tool to help protect your profits during a freight recession.
A freight recession is a phase in the logistics industry with a significant decline in the demand for freight services. This means fewer shipping quantities, lower freight charges, and an excess of available freight brokers and forwarders.
One of the main drivers of this phenomenon is an economic downturn. Consumers are more careful about their expenses. Hence, the flow of commodities and services slows down as well.
According to FreightWaves, freight recession could also be an issue of overcapacity. In 2021, the United States had 168.1 million trucks, marking a 93.5% increase from the 87.11 million registered trucks in 2000, as reported by Statista. The freight industry has experienced significant expansion; thus, there are too many trucks compared to the freight needed to be moved.
Due to the trucking recession, increasing profitability is a challenge. Reduced shipping demand leads to decreased freight volumes, resulting in lower revenue. Lowering rates often becomes a default strategy in such circumstances. It is an attempt to secure more shipments and sustain the business through increased transaction volumes. However, deciding to lower prices in a competitive market can have consequences. While it might secure more business, it can substantially shrink profit margins due to reduced income per transaction.
In navigating a recession, maintaining a client base is crucial. Yet, there's a fine balance between offering competitive rates to attract and retain clients and ensuring that these rates allow for healthy profit margins. It's essential to assess this trade-off carefully to avoid compromising profitability to maintain or increase market share.
As per the CNBC Supply Chain Survey, projections forecast a lack of growth during the initial six months of 2024.
Seventeen percent (17%) of the logistics executives projected that LTL trucking rates would remain the same in the first quarter. Meanwhile, fifty percent (50%) anticipate lower rates by 5% or 15%. These projected rates show the vulnerability of the freight industry due to the recession.
Furthermore, 33% of logistics executives believe freight volumes will bump up only by 5% during the year's first half. However, they projected that the second half of the year would be better. Fifty percent (50%) of participants foresee a 5% rise, 33% anticipate a 10% surge, and for the most optimistic, 17% expect an increase of 15%.
With the lack of certainty for the freight industry, how can freight businesses maintain a solid stance to survive the freight recession in 2024?
In the next section, we will tackle three CRM strategies you can implement to safeguard your profits and maintain your position in the logistics industry.
Competition intensifies when there are fewer available loads. Businesses aim to secure shipments, leading to a trend where they lower their rates to attract more customers. Consequently, some businesses are compelled to reduce their rates as well, potentially resulting in lower profits. In situations like this, keeping customers satisfied becomes important.
To guide you, here are three essential CRM strategies to protect your profits and strengthen your business during a freight slowdown.
Understand your customer’s behavior using the interactions recorded in the customer relationship management tool. Using those insights, identify which of those businesses generate more revenue. This allows you to reallocate attention, energy, and resources to these critical clients to grow that revenue stream.
This is why a CRM for logistics is a valuable tool for customer retention. With the key features of a logistics CRM, you can consistently engage with your customers and provide excellent customer service.
Ultimately, a logistics CRM lets you stay on top of your customers, helping you nurture your relationship with them and ensure customer retention despite economic turndowns.
Think of a logistics CRM as your strategic tool for simplifying the processes within your business.
A logistics CRM acts as a control center that stores all the important data - shipment counts, customer profiles, sales activities, and such. It consolidates all this information in one platform and does not require you to use multiple applications.
Another major feature of a logistics CRM is a quoting tool. Instead of contacting other stakeholders to track market rates, a specialized logistics CRM provides market rates, allowing you to create quotes in one minute or less. These quotes reflect the real-time market conditions and your historical lane rates for each customer, ensuring competitive yet profitable pricing.
Beyond data centralization, it efficiently tracks sales activities, allowing you to monitor leads, conversions, and customer interactions.
A logistics CRM can significantly optimize your business by ensuring your processes run smoothly.
CRM analytics is a powerful tool for staying strong amidst the trucking recession. Reports from your CRM can offer insights into customer behavior, market trends, and historical patterns.
By understanding market trends and customer behavior through CRM insights, you can anticipate shifts in demand. This anticipation helps realign pricing strategies, service offerings, and resource allocation to match market dynamics.
The CRM strategies mentioned above are most effective with a tool to manage your customer base. Since the Supply Chain Survey indicates that the trucking sector will continue to suffer financial stress, the freight industry must improve its approach for the following months.
The freight recession is an uncertain period for businesses. But with a remarkable logistics CRM, you can respond proactively and build long-term resilience against industry changes. At the same time, you also get the benefits of a specialized CRM, such as customer visibility, more shipments, streamlined logistics operations, and data-driven decisions.
In confronting the challenges of a freight recession, a CRM is a strategic tool for logistics businesses. A logistics CRM can help you retain valuable clients, streamline your processes to avoid additional operational costs, and push decisions based on your data analyses. This strategic use of a CRM fortifies you against market fluctuations, ensuring adaptability, efficiency, and resilience amid a freight recession.
Ready to safeguard your profit during the freight recession? Book a demo now and discover how our logistics CRM can help you protect your profits.