By Eden Amirav
C.E.O. and Co-Founder of Become
Fifteen years ago, New York Times columnist Thomas Friedman proclaimed in a bestselling book that in the age of globalization, The World Is Flat. Among the biggest causes of the world’s flattening? The ability to easily transport people and goods across borders—now under serious threat not only due to the COVID-19 pandemic, but also amid predictions of long-term deglobalization and shrinking supply chains.
While the global logistics market is projected to reach $3.215 trillion in 2021, up from $2.734 trillion in 2020, next year’s forecast is 10 to 15 percent lower than pre-pandemic projections. This underscores that while demand for services like e-commerce delivery and online grocery shopping may be flourishing during social distancing, the transportation and shipping industry will face significant challenges even after the pandemic subsides, particularly in the absence of a rapid, “V-shaped” economic recovery.
The challenges facing SMBs in the industry are especially formidable—but by following these four tips, businesses can better navigate the difficulties to come and even emerge from the crisis stronger.
1. Boost revenue by going digital.
Freight is one of the world’s oldest industries, but over the past decade, it has found its footing in the digital world. Cloud technology, artificial intelligence, and the Internet of Things (IoT) are fueling rapid growth in the freight transport management market, which is slated to reach $41.52 billion by 2025, compared to $23.7 billion in 2019.
Embracing transportation and warehouse optimization software can help SMBs in the industry streamline delivery routes, reduce fuel-related costs, optimize operational efficiency, and boost revenue. Introducing shift work and encouraging employees who can do so to work remotely can also help curb office expenses and improve productivity.
2. Think outside of the box with new vendors and partnerships.
As businesses assess weak spots in their supply chains and work toward remedies, many will find that finding suppliers closer to home will make the most sense. Given that many trade shows and other networking opportunities have been postponed until 2021, finding new vendors and partners is more challenging than usual. But, tapping into local contacts and networks can help ease the burden.
3. Get lean.
Now is the time to focus on results-driven models and boosting ROI. Accordingly, businesses should keep overhead low and identify new opportunities for cost savings—something that personal accounting software can make easier and more precise. Keeping meticulous records of spending in the event will prove a major help to businesses in the event they need to file for compensation or forgiveness on loans down the line, as many current assistance programs require accurate, up-to-date data.
To further streamline operations, prioritize efficiency over speed—and yes, there is a difference. Carefully planning out the most efficient methods of delivery—consolidating routes so fewer trucks need to be on the road at once, for example—will do far more to shore up the bottom line than a frenzied quest for expediency, which is bound to make a business less efficient, not more so.
4. Look into alternative financing.
SMB owners know all too well the difficulties of securing financing, and while there’s still capital available, lenders are bound to be more selective and risk-averse than they were before the pandemic and ensuing economic downturn.
Among the criteria lenders will consider is how a business has performed since the doldrums of March and April. Businesses that can demonstrate revenue growth since then will be in much better positions to secure approval for financing, which makes it all the more important to take steps like those outlined above.
For freight SMBs, there are unique factors to consider when it comes to accessing capital. It could be a good idea to look specifically into vehicle financing, in which the vehicle itself serves as collateral to the loan, thereby increasing the chances of approval. And while taking out a small business loan to purchase a large fleet may sound especially risky in this economic climate, businesses that are able to expand their fleets and train new drivers will not only be helping to strengthen the economy, but they can also bolster their credit scores by ensuring loans are consolidated and paid in a timely manner.
Planning for the long haul
COVID-19’s impact on the freight industry won’t disappear along with the virus. Businesses operating across international borders will continue to be cautious of returning to the flat world of globalization and dispersed supply chains, while companies whose operations are more local will find themselves navigating a weaker economy.
While the duration of the pandemic and the severity of the economic downturn are factors beyond the control of individual freight businesses, they can strengthen their positions by adapting their business strategies, finding innovative new revenue streams to stay solvent, and most importantly, keep on trucking.
Eden Amirav is the CEO and co-founder of Become (https://www.become.co/). As a young, non-stop serial entrepreneur, Eden started his first company at the age of 16 and hasn’t stopped moving since. As Become’s CEO and co-founder, Eden brings 13 years of experience in a variety of online businesses, marketing technologies, methodologies and platforms.