April Trends: How Coronavirus Continues to Impact Supply Chains

LDL Voice

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COVID-19 concerns continue to reshape supply chains throughout the U.S. As people adjust to wearing masks, social distancing, spending more time at home, and preparing for economic uncertainty, shippers are analyzing the trends to understand what supply chains might look like when conditions settle into a new normal.  

Coronavirus Trends and Impacts

Here are six key shipping trends affecting supply chains in April:

  1. Contract freight market bottoms out. Following a massive surge in shipments in March, freight volumes declined sharply this month, softening the market and pressuring carriers to reduce rates. High operating costs and thin margins had already led to carrier cash flow problems throughout 2019. Today’s low rates are approaching breakeven levels, putting some carriers at risk of going out of business. Fortunately, FreightWaves data shows that the downturn may be leveling out. While the spot market will not rebound as quickly, the contract freight market should normalize over the next few weeks.
  2. Drivers need face masks. More shippers are requiring drivers to wear face masks and cloth coverings while on their premises and particularly when it’s not possible to maintain 6 feet of physical distance between people. Medical-grade personal protective equipment, or PPE, is widely unavailable, but fleets continue to look for ways to procure face masks for drivers, many of whom have been providing their own. In the meantime, some carriers are providing hand-sewn cloth masks, bandanas, and other alternatives. 
  3. Meat processing plants close. Following Coronavirus outbreaks, Smithfield Foods, Tyson Foods, Cargill, and JBS have closed some meat processing plants to ensure worker safety. Many such facilities are located in rural locations where the plant is a major employer to locals. When too many employees fall ill, the plants can’t easily replace them because the pool of available workers is too small. While the long-term effects are uncertain, the closures will likely impact local economies, livestock farmers, available choices for consumers, and meat prices (USA TODAY). 
  4. Comfort foods increase in demand. Certain food industry verticals are in far greater demand than usual. Nestle reported a 50 percent surge in demand for frozen foods and especially frozen pizza. Stay-at-home orders have also increased demand for baking supplies as families spend time together baking and cooking from scratch more. Kraft Heinz also reported a rise in demand for traditional “comfort foods” like macaroni and cheese, bacon, and hot dogs. Such familiar foods may offer families comfort as they grapple with the stress of Coronavirus health threats, social distancing, and overall uncertainty.  
  5. eGrocery growth accelerates. Online grocery services saw a spike in demand last month. In 2019, eGrocery represented 2.3 percent of all grocery sales but experts expect that number to be 6 percent in 2020. According to a March survey about 40 million people used online grocery services over the last 7 months, 26 percent of whom were first-timers. The surge is fueling a shift in food supply fulfillment. Instead of leveraging large distribution centers, grocers are using stores to fulfill orders. These micro-fulfillment centers leverage available store space, such as stock rooms, paired with automated technology to help pick and pack orders for delivery. 
  6. U.S. economy plummets. Second-quarter activity is likely to have dropped 34 percent and economists warn the unemployment rate could hit 15 percent. Even with a 25.6 percent increase in the food and beverage sector, overall retail sales fell 8.7 percent in March. Although retail sales for building supplies increased 1.3 percent in March, builder confidence for single-family homes dropped by 42 points, its lowest level since 2012. The future remains uncertain, as the Coronavirus pandemic presents highly unusual circumstances dictated by health policy rather than economic rules. For that reason, economists believe the second half of the year could bring a double-digit growth and the strongest recovery the country has ever experienced.  

Fairness and Trust Delivered

As supply chains adjust with the crisis and eventually find a new normal, a trusted partner can help bring the stability and structure you need to succeed. LoadDelivered is a carrier-friendly broker with a strong network of reputable shippers. In addition to flexible contracts, personalized service, and 1-day payments, we are committed to honoring fair pricing and building lasting relationships. Contact us to learn more. 

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