The U.S. freight recession has arrived; autonomous innovation expanding

The trucking industry, long a barometer for the overall U.S. economy, is showing signs of a freight recession. Excess capacity, waning demand and declines in spot rates are at play in the trucking and logistics industry, according to industry watchers.

A recent Bank of America survey found that truckload demand has fallen 58% to near-freight-recession level. Consumer spending habits are contributing to the decline, too. As pandemic restrictions eased, buyers scaled back their online shopping habits and spent more money on services rather than goods, according to the U.S. Bureau of Economic Analysis.

Supply chain executives from around the country gathered in Rogers for the two-day FreightWaves Conference which concluded Tuesday (May 10).

Joe Rajkovacz, director of governmental affairs and communications for the Western States Trucking Association, is warning that low trucking demand could indicate an oncoming recession. Craig Fuller, FreightWaves CEO, recently said falling demand seen in recent weeks will be trouble for the trucking industry that ramped up during the pandemic. He said when demand falls to pre-pandemic levels and shipping rates will collapse.

Bill Driegert, co-founder and head of operations at Uber Freight, said spot shipping rates have plunged 30% since January and this is putting pressure on contract rates as overall demand remains flat. He warned that the 9,000 new drivers who have registered since February will likely have a hard time remaining employed as freight demand falls. He said many have a higher fixed cost and are relegated to buy fuel at retail prices and get only spot load shipments. Driegert expects many new owner/operator drivers will end up working for larger carriers if the slowdown worsens.

None of the conference speakers see shipping rates improving soon.

AUTONOMOUS INNOVATION
Gautam Narang, Gatik CEO and co-founder, spoke about autonomous trucks like those used in Bentonville in a middle-mile logistics pilot with Walmart. Narang said Gatik chose to focus on the middle-mile logistical leg with its driverless truck innovation.

He said the larger long haul driverless trucks do not work well for moving goods off the highways because they must disengage when entering populated areas. Gatik is designed to take goods from micro fulfillment centers to stores and can navigate through heavily traveled areas along fixed routes.

The pilot with Walmart takes items from the dark store located at 3701 S.E. Dodson Road in Bentonville, 7.1 miles down Walton Boulevard turning left at Southwest Regional Airport Boulevard and making another left turn on I Street at the Neighborhood Market located at 906 S.W. Regional Airport Boulevard. The driverless truck runs day and night and is equipped with technology that allows it to stop at crosswalks for pedestrians and follow traffic signals.

Narang said the pilot has been so successful that Galik plans to expand the operation and add more U.S. customers later this year.

NWA INNOVATION CRADLE
Northwest Arkansas has emerged as an incubator for transportation and logistics technology and innovation. Steuart Walton, co-founder of Bentonville holding company Runway Group, and Cyrus Sigari, co-founder and managing partner of UP.Partners also spoke about the region’s potential growth during the conference on Tuesday.

“There is so much going on in the United States. And there’s so much going on – that’s not on the coasts – in this heartland. And we want to be a beacon … for other towns, other regions in this part of the world to say, ‘Hey, if they did it, so can we,’” Walton said.

Walton said innovation and the transportation of goods is another area for which the state can promote itself on the national stage. He also said Arkansas’ rural nature is a bonus because many of the technologies will either be more relevant to rural parts of the country or first experimented with and tested here. For example, Walmart has two drone delivery test programs in Farmington and Pea Ridge. Each operation provides insight for the next wave of final mile deliveries, according to Walmart CEO Doug McMillon.

Sigari was recently appointed chairman of the Arkansas Council on Future Mobility by Gov. Asa Hutchinson.

“(The) governor’s mandate to myself, from our council members, is let’s make Arkansas the shining beacon on the hill, where every entrepreneur on the planet that wants to move things quicker, faster, safer, lower cost and do it with the biggest companies of the world, they have one place in mind they think of. It’s coming to Arkansas so they can expand the benefits of their technologies and their businesses,” Sigari said.