What have you seen this past year in the dedicated transportation market?
It has truly been a year unlike any other. We saw 2020 at the start of the pandemic being a pretty scary environment as many of our retail customers were shutting down and stores were getting closed. We really weren’t sure how the rest of the year would look for customers on the dedicated fleet side. As capacity started to tighten throughout the course of the year and rates started to increase, it definitely resulted in an increased demand for customers looking to buy asset-based transportation services. We’re also optimistic about next year. I think in the past year, we realized that there is going to be continued increased demand for dedicated fleets, and we’re excited about finding those opportunities to grow.
How have the events of the past year impacted capacity?
As the omnichannel continues to evolve, customers are buying in different ways. What used to be purchased at the store can now be purchased online and picked up at the curb. So capacity has changed and we’ve seen some customers in the consumer packaged goods (CPG) environment where their shipments have skyrocketed, inventories are turning much quicker, requiring more deliveries out in the market. From our perspective, the business continues to evolve and change, and we’re going to remain flexible to provide that consistent value in their supply chain.
What do you think was most challenging for shippers in 2020?
Shippers struggled to identify or predict what consumer demand was going to look like, and how much inventory they need to store in their supply chain in order to meet customer ordering patterns. They struggled with knowing if the store was going to be open, if customers were going to order online, if they should deploy more inventory. Shippers really focused on trying to figure out how not to miss the sale. So for some customers and shippers, it was a matter of trying to survive during the pandemic. For other shippers, it was about how they could meet demand and have enough inventory where it needed to be. I think as we come out of this 2020 period of uncertainty and a vaccine comes in to play, shippers will be able to get back to a more normal ordering pattern and timing in their cycle for servicing their customers.
How has NFI helped shippers navigate the challenges of 2020?
Creating consistent capacity and being able to provide those customers service. Our customers repeatedly tell us all the time that our service is superior to the competition. We do not sell price, we sell value. In asset-based transportation, we really focus on hitting those delivery windows, providing that customer engagement model at even a store level or a plant or a distribution center. In asset-based transportation, it’s definitely about putting an environment together for the shipper where they know their goods are going to be delivered on time, every time. Asset-based transportation has really provided an environment for our customers where those goods are going to get from origin point to destination.
What did our customers in the grocery vertical experience from a transportation perspective this past year?
We handle a large majority of our dedicated fleet business in this vertical. Consumers were unable to go out to dinner for most of this year and were unable to travel, so we saw some dip in activity in the food service industry of our business, where we were delivering to hotels and restaurants. At the same point in the grocery vertical, consumers were home and cooking for themselves and purchasing groceries, so business exploded and NFI was able to rise to the challenge. We were able to make more deliveries, more frequently surge capacity to meet demand, and I think those customers truly appreciated our ability to step up and help them service their customers as well.
What challenges do you think private fleet operators faced this past year?
In 2020, private fleet operators were also reminded they, too, will struggle to recruit and source the labor and the drivers required to service the business. The risks for them have never been higher. I would also say that insurance premiums are skyrocketing. Unfortunately, some massive risk on accidents, expenses, maintenance, all of those costs are going to add to their cost. Supply chain customers will continue to evaluate the benefits of outsourcing. I believe as a third-party carrier, we provide the opportunity with our scale operating over 4,000 tractors in North America to provide equal, if not better service, but also to reduce costs. And I think that the private fleet conversion market for us is going to be a huge opportunity moving forward.
How have the types of freight moved this past year evolved?
In 2020, there was definitely a surge in the food and grocery markets, as well as in our CPG verticals. Companies that were manufacturing essential goods saw a surge in volume. I think that will continue as we come out of this pandemic, that there’ll be an opportunity for NFI to grow more in new segments.
How do you think this past year shaped the transportation market for years to come?
It’s a great question because I think that’s what we’re all trying to figure out 2020. As capacity rose so did rates. Dedicated fleets became more appealing to shippers looking to get consistent service and costs in their supply chain. I think for 2021, we’re going to anticipate capacity remaining tight, which will make dedicated fleets even more appealing. A constant discussion for us every day is where we are going to source and recruit new drivers. In that model, we just continue to be extremely focused because the driver population is getting older and the demand has never been greater. The shippers need service because they do not want to miss their sale, so 2020 is going to set up NFI for a tremendous opportunity next year and I think it will forever change. The market will continue to have opportunities to grow both asset and non-asset [transportation], but for those shippers that need consistent service and consistent drivers, with consistent equipment and consistent lanes, the future is very bright along asset-based transportation lines.
Joining the company in 2001, Bill Mahoney is the Senior Vice President of Sales and Account Management at NFI. He helps to design comprehensive supply chain solutions for existing and prospective customers.