Prior to the e-commerce boom, small trucking companies could survive by sticking to small regional routes and maintaining minimal fleets. With the e-commerce boom, many small shipping companies are quickly falling by the wayside due to ability and pricing. Simply put, they are struggling to compete with larger competitors. To combat folding, many small companies are beginning to merge with larger ones, such as the recent FedEx and TNT Express merger, and to stay ahead of the game, larger companies are acquiring smaller fleets to offer a variety of services.
A few of the key ways mergers and acquisitions are affecting the shipping industry include:
Although the American Trucking Association has made strides to keep truckers employed, lighter loads and dropping gas prices have reduced the need for freight services over the last two-quarters. Overall, the freight industry has seen frequent disruptions in their distribution routes whether it be from extreme weather, lulling oil prices, or companies who overstocked. To ride out the constant ebb and flow of an industry that is being governed by unpredictable e-commerce needs, companies are going to have to build low-cost business models to remain afloat.
Better technology means that deliveries arrive complete, on-time, and to the right location. Although there are undeniable benefits to having a top of the line logistics and management system, it’s not in the cards for every company. The cost of these systems is often prohibitive which means that only large companies are able to afford them. This extra technological advantage gives larger companies an edge over smaller guys. For many of the smaller businesses to remain profitable, there is a good chance they will have to merge with larger companies.
More Efficient Fleets
More advanced logistics and management systems aren’t the only things that put larger companies ahead of their smaller competitors. Larger delivery companies are also typically able to afford trucks equipped with better technology. These trucks typically have fewer break-downs and are overall more efficient, which means that deliveries are more likely to arrive on-time and intact.
For smaller firms with aging fleets, merging with a larger competitor may save on having to update entire fleets, and could also keep employees on the payroll.
Last Mile Companies will Rise
Before the e-commerce boom, UPS, DHL, and FedEx were enough when it came to last mile delivery needs. However, that’s not the case anymore. Many e-commerce shops, such as Amazon, offer next day delivery with very few exceptions. This means that the need for last mile delivery services is spiking. While many FTL and LTL freight companies may have avoided the last mile deliveries in the past, there is a good chance that they will either have to add services or acquire companies that do in order to remain in business.
Overall, the freight industry and need for truck drivers are expected to grow over the next 5 years. However, the expected growth doesn’t mean that everyone who is currently in the game will remain so. In order for companies to remain profitable, they are going to have to become more efficient and most will have to merge or acquire companies offering differing shipping services.
Find out more information on eCommerce and Freight Shipping in 2016 here: