9 Ways to Protect Your Profits in a Freight Recession

What is a freight recession?

A freight recession is a specific kind of economic downturn that affects the movement of goods, rather than the general economy. While a broader economic recession impacts multiple sectors, a freight recession zeroes in on the logistics industry, leading to reduced demand for freight services. This can arise due to:

• Decreased Demand: As businesses produce less due to external factors, there’s a direct decline in the need to move products.
• Oversupply of Capacity: Too many trucks, ships, or planes and not enough cargo can lead to an oversupply, causing freight rates to drop.
• External Factors: Political tensions, new tariffs, or global events can restrict or reduce international trade.

Key Takeaways

• Optimizing operations with technology offers the potential of cutting costs to protect your bottom line.
• Pricing solutions like Magaya Rate Management can help you adjust shipping pricing strategies proactively, based on evolving market conditions.
• Periodically review financial commitments like rent, subscriptions, and memberships. Consider reviewing your insurance policies with a licensed advisor like the experts at Magaya Insurance Services to determine if your coverage is adequate and if there are any cost savings you could benefit from.

Are we in a freight recession?

All signs point to yes, as of the time this article was published in late 2023, we are currently experiencing a freight recession. Trucking is particularly heavily affected, but import volumes are also down, impacting other modes of transportation, notably ocean shipping. Freightwaves even goes so far as to declare, it’s a “freight recession unlike any other in history.” 

How to Protect Your Profits in a Freight Recession

While the term ‘freight recession’ may evoke images of idle trucks, vacant shipping lanes, and plummeting profits, it’s crucial to approach such downturns from a broader perspective. Just as nature has its way of filling voids, economic downturns can present surprising and exciting avenues for growth for those willing to look beyond the immediate challenges. Here are nine ways you can remain profitable despite an economic downturn or lower demand.

1. Diversify Your Customer Base

Relying heavily on a handful of significant clients is a high-risk strategy. During economic challenges, this can become more evident. Instead, you may want to consider casting a wider net to attract various types of customers, delve into diverse niche markets, and broaden your geographic reach.

2. Optimize Operations with Technology

Whereas diversifying your customer base can help secure sales during a freight recession, optimizing operations with technology offers the potential of cutting costs to protect your bottom line. In this digital era, tools like Dimensioner by Magaya enable automated cargo dimensioning, saving significant time compared to manual measurement and enabling more accurate billing, often recouping costs compared to manual rounding down. Leveraging such technology aids in efficient planning, tracking, and streamlining operations. 

In the back office, freight forwarding software can be leveraged to save time with automation and integration, reducing manual keystrokes and duplicate data entry, so that staff can get more done in less time, and avoiding the errors that often accompany such manual work. Embrace automation and lean methodologies to stay ahead regardless of how the market is performing.

3. Monitor and Adjust Pricing

While competitive pricing attracts customers, it’s essential to strike a balance to protect profit margins. Tools like Magaya Rate Management can help you adjust shipping pricing strategies proactively, based on evolving market conditions.

4. Strengthen Customer Relationships

Economic downturns underscore the importance of customer loyalty. After all, it’s far more costly to attract new customers than it is to retain loyal ones. Enhance your communication channels, provide reliable services, and utilize platforms like the Magaya Digital Freight Portal. This solution not only gives customers real-time access to essential features like tracking, quotes, schedules, reports, and more but also optimizes your team’s productivity by reducing call volumes and freeing customer-facing teams to work on other tasks. 

5. Reduce Fixed Costs

Periodically review financial commitments like rent, subscriptions, and memberships. Consider reviewing your insurance policies with a licensed advisor like the experts at Magaya Insurance Services to determine if your coverage is adequate and if there are any cost savings you could benefit from. Additionally, co-loading or sharing resources can significantly cut down costs.

6. Diversify Revenue Streams

As the adage goes, don’t put all your eggs in one basket. When shipping volumes are down, there may be opportunities to increase revenue in adjacent avenues. Explore complementary business services, such as warehousing, cross-docking, or customs brokerage.

7. Stay Informed and Be Agile

With the industry’s ever-evolving nature, staying informed is crucial. Adaptability, combined with insights from industry associations, trade publications, subject matter experts, and peers, is the key to thriving in a changing environment. Social media and online news sources are accessible ways to stay informed day-to-day. Industry events can also be excellent opportunities to network and monitor macro-trends. 

8. Invest in Staff Training and Development

Ensure your business remains competitive by equipping your team with the latest knowledge and tools. Investing in comprehensive training programs not only enhances their skill sets but also empowers them to adapt to the ever-changing dynamics of the industry. 

Fostering a resilient work culture is essential. This means creating an environment where challenges are viewed as opportunities for growth, where innovation is encouraged, and where every team member feels valued and motivated. After all, it’s a universally acknowledged truth in the business realm that a motivated team invariably translates into a productive, efficient, and successful team.

9. Evaluate and Strengthen Partnerships

Strategic alliances can be your safety net during recessions and challenging times. It may be a good time to review and renegotiate terms with carriers, vendors, and other partners. There may also be opportunities to collaborate with partners for joint ventures or resource sharing. The Magaya Network is an excellent way to find and be found by thousands of agents and logistics service providers worldwide, ensuring you’re never isolated in the market.

While a freight recession poses challenges, with proactivity and the right strategies, it’s surmountable. The logistics industry, known for its resilience, can not only weather such downturns but also emerge stronger. So, reassess your strategies, make the necessary adjustments, and gear up to seize the opportunities that lie ahead.