What do you think will be in store for the drayage industry in 2021?
I fully expect that the huge increases in volume that we’ve seen so far through the third and fourth quarter will continue in the next year and more than likely, once we hit Chinese new year, it will start to normalize after that. Once we see the impact of COVID start to subside and people get back to a more normal work life, I would expect some of the share of spend that had been shifted to goods from services to shift back.
The only other real unknown, in my point of view, is whether the huge increase in e-commerce shipping continues or if there’s a return back to brick and mortar. That will impact the level of inventory that shippers determine to keep on hand. If e-commerce shipping and demand remain high, then shippers are going to start holding greater levels of inventory at more distribution center locations, which is going to require more import volume to support. If e-commerce demand flips back to pre-COVID levels, I would expect a more muted second through fourth quarter next year compared to 2020.
What does capacity look like in 2021 and throughout the holiday season?
For next year’s holiday season, I would expect it to start earlier than we typically have seen and finish later. I don’t think shippers have the risk tolerance to run a just-in-time inventory system that they may have had previously. I think they want to make sure inventory is on hand, that it makes its way to the port complex with enough time to get transloaded through the distribution center network, and that it gets into stores and on the shelves as quickly as possible. And so, because of a lot of the constraints that we have this year with congestion in the ports, I would expect a more risk-averse shipping strategy next year. Peak season probably starts a little bit earlier, doesn’t have quite as sharp of a peak, plateaus a little bit, and stays busier longer than we typically have seen in years past.
Are there any expectations or changes that could occur with the new administration that will impact the drayage community?
One of the big debates within the drayage community that was put on hold in 2020 due to the pandemic, but will be brought back to the forefront in 2021, is the issue around misclassification and whether the driver-base supporting the drayage community should be classified as Owner Operators or employees. At NFI, we feel very strongly that we want to support any operating model that the driver chooses. We operate an Owner Operator model, a licensed motor carrier model, and an employee model all within our drayage operation. We feel very strongly that drivers should have the right to choose what kind of driver they want to be: whether they want to be their own boss and operate as an Owner Operator, as a licensed motor carrier, or if they choose to be employed and drive an NFI blue truck. We provide each of those options to drayage drivers and fully intend to support the right for drivers to choose. That conversation is expected to continue in 2021, and we feel very well-positioned to support shippers regardless of how the driver classification debate shakes out through the court system. Because of the flexibility that we offer, NFI is in a good condition to support any operating model, regardless of driver choice.
The second item that could get impacted with the new administration would be equipment types that support the industry. Many Owner Operators own their own diesel trucks and in certain states, there have been pushes towards encouraging, or in some cases requiring, either alternative fuel or lower emissions diesel engines. I could see the new administration implementing incentives or requirements on a national scale to start accelerating the transition away from diesel to electric or natural gas equipment within the drayage community.
Whether it’s diesel, electric, or natural gas, a number of alternatives are becoming prevalent and available on a pilot basis as fleets are beginning to test out new technologies. NFI has been a leader in that space operating natural gas trucks and electric trucks within our drayage fleets, and we want to make sure that we’re on the forefront of proving how these technologies work and how they support our business. Our team feels like drayage is the best application to begin, particularly for electric, because of the short length-of-haul and round-trip nature of the business. We’ve invested not just in trucks, but in the charging infrastructure as well. Positioning NFI as a leader in trucking electrification is a leading focus for the organization, and drayage is one of the best opportunities to do that.
What are some things that shippers should take into consideration in 2021?
Shippers need to take a really hard look at the marine terminals in which they bring freight. In many cases, they’re focused on transit time from overseas and lead time expectations for the freight to work its way across the ocean, through the import supply chain, through the distribution network, and into stores. But in many cases, because of unexpected congestion at certain terminals, that throws lead time way out of whack.
I think that looking at the efficiency of the marine terminals could change the strategy for many shippers. By accepting a little longer transit through the East coast, but more predictable availability of containers and transport off-port into the warehouse network, they might be able to get better lead-time visibility on the inventory that they’re bringing into their system, rather than being so focused on a perfect transit time from Asia. Taking into account how quickly or slowly the real-world process takes will be really important to understand as shippers look at their import strategy going into 2021 and beyond.
How can NFI help shippers in 2021?
Because of the scale that we have in operating at over 15 marine terminals and inland ports across the country, we have a really good boots-on-the-ground feel for the varying levels of efficiency of different port complexes. In many cases, we welcome the opportunity to work with shippers to help develop a strategy to efficiently bring freight into the terminals by working with steamship lines that we have the best relationships with, communicating what expected transit times may look like, directing where there is transload capacity, and reporting what the drayage capacity looks like in different markets. We help shippers understand and think through some of those real-world decisions so that they can go in with an eyes-wide-open view and make cost-effective decisions on where they want to ship their freight.
What’s on the horizon for the NFI drayage team in the new year?
There’s two primary focus areas for next year. One is remaining a value-added provider through continued investment into our technological ecosystem. The transportation industry in general tends to be somewhat of a late adopter of technology, and within transportation, drayage tends to be the last adopter of technology. We see that as an opportunity to separate ourselves. NFI is making big investments into transportation management systems, our GPS systems within the trucks and chassis, and our business intelligence tools to ensure that we’re providing as much real-time supply chain visibility to our customers as possible. The supply chain typically tends to be a bit of a black hole from a data standpoint because of different stakeholders, whether it be the steamship line, the marine terminal, the chassis provider, or the drayage company. NFI is trying to cut through the noise where data points are fragmented and build a technological ecosystem that consolidates all that information into a single view. Giving our customers improved access to information will help them make better, faster decisions when it comes to their import and export freight.
The other area we’re focused on is building up our capacity, not just in our employee trucks, but our Owner Operator trucks and our partner carriers as well. Our goal is to build a fleet to the point where we are always able to source a truck and find the capacity to meet our customer’s needs. The one thing that we’ve learned this year is that demand requirements can be very unexpected. Whether it’s finding a truck or finding a chassis, we want to be in a position to service all of our customers, regardless of what’s going on in the environment. And so, building up our capacity in order to do that is a big focus for NFI going into 2021.
What are you most excited about for 2021?
What I’m most excited about for 2021 is continuing to integrate Cal Cartage and its divisions into NFI. I think that 2021 will be a big step forward and we’ll be in a much better position to operate as a one company and one team. Complete integration will set us up to be much better positioned, not just to work internally together, but also to provide a higher level of service to our customers.
Aaron brings his expertise to the NFI Cal Cartage drayage team, where he works to seamlessly provide end-to-end solutions for NFI customers. As one of the largest drayage providers in North America, NFI Cal Cartage operates at all major ports, rail terminals, and logistics hubs, leveraging the services of nearly 1,500 Owner Operators. To stay up to date on port drayage and other industry news, subscribe to NFI Cal Cartage’s monthly newsletter.