Digital Freight’s Bumpy Road As Virus Spreads, Macro Slows

Tech-enabled disruptors promise to upend the way things have always been done to help streamline industries that are paper-reliant, process-reliant and perhaps ripe for a shake-up. For some newer firms that have gone from concept to multiple funding rounds at what might seem breakneck speed, the question becomes whether the disruptors themselves can avoid being disrupted — or at least hitting speed bumps — when facing, thus far, untested macro headwinds.
The question is especially timely as the coronavirus has infected thousands of people and killed several hundred individuals since expanding from China — the epicenter. The virus has had a chilling effect on supply chains that flow in and out of the country. In tandem with the global health emergency, UPS has canceled some flights. Cathay Pacific, which handles cargo in the region, has cut flights through the end of March.
As reported in Commercial Appeal, observations from Freight Investor Services noted that the virus “is likely to have a huge impact on the economy,” with the particular impact felt in China. Manufacturing is being idled in Wuhan and beyond — which, of course, would impact the production of goods that eventually cross borders, and are destined for the U.S. and other countries.
The slowdown would not be one-sided, though. For example, White House Economic Adviser Larry Kudlow said on Tuesday (Feb. 4) that the spread of the Wuhan coronavirus in China will hurt the country’s efforts to buy U.S. goods and services through the “phase one” trade deal between the two countries.
“The export boom from that trade deal will take longer because of the Chinese virus,” Kudlow said on Fox Business.
The Ripple Effects
The uncertainty of just how much impact from the pandemic will be seen on global trade — and, thus, freight — will linger as long as the virus. However, one must keep in mind that both countries’ economies were already slowing well before the outbreak.
News over the last couple of weeks hinted at some of the issues facing freight-focused firms — specifically, digital freight economy firms, as well as their financial backers — that seek to reshape the way goods get from place to place, and eventually to end-users. This especially includes trucking, which was estimated by the Bureau of Transportation Statistics to make up as much as $12.5 billion of the $17 billion freight industry.
Beyond those trucking-specific stats, the Bureau of Transportation Statistics said in January that its Freight Transportation Services Index (TSI) saw a 10-basis-point gain in November, the most recent month for which data is available, as measured against October, and went down 80 basis points year over year.
This is coming off high levels, reported Logistics Management, as the most recent is only 2 percent below all-time highs set last summer. Drilling down a bit, the only sub-sectors that saw growth were pipeline and rail carloads — trucking, air freight and intermodal had all declined. Uber, of course, has been expanding its presence in freight over the past few years, as has a bevy of startups.
Earlier this week, Emerge — which operates a platform for more efficient truck freight management across shippers and brokers — said it had raised $20 million in funding. The funding round was led by NewRoad Capital Partners, with participation from existing investors Greycroft and 9Yards Capital.
As reported, the inefficiencies of trucking are such that as much as 20 percent of trips carry no freight at all. Through a platform approach, the company matches shippers and truckers in a way that can reduce shipping costs. The wild card, of course, is what happens if demand softens across the board.
Separately, NEXT Trucking — which also matches demand and supply within the freight industry — said late last month that it will lay off 19 percent of staff, and is cutting some (as yet to be disclosed) business lines. The company has raised about $125 million to date, as reported by The Wall Street Journal, and has been focusing its efforts on moving goods among storage areas, such as warehouses, rail yards and ports.
This latest news comes as container volumes have been hit by the trade war that has stretched over recent months. As noted, the emergence of the coronavirus will likely dampen what had once been a tailwind.
Many of these firms were founded within the last few years, into a rising tide of economic expansion — and now, perhaps, the real test begins.

Original Source: https://www.pymnts.com/news/international/2020/digital-freights-bumpy-road-as-virus-spreads-macro-slows/

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