2025 Logistics Outlook: Cautious optimism tempered by tough realities

The year 2024 was by all accounts one of struggle and perseverance for supply chain practitioners. No one was immune, from shippers and their third-party service providers, to the truckers providing freight capacity, brokers managing transportation, and technology providers seeking to deliver the next big tech innovation.

At this time last year, many in the industry thought the back half of 2024 would provide at least a ray of hope for a rebound. However, 2024 came to a close with many of the same pressures and challenges that marked its beginning.

Nevertheless, in a series of interviews with shippers, third-party logistics companies (3PLs), brokers, truck lines, industry associations, and analysts, there was a sense of cautious optimism about this upcoming year. That optimism is, however, tempered by a tough market as well as macroeconomic and political realities. Challenges remain—among them persistent excess trucking capacity, particularly on the truckload side; businesses delaying decisions on investment and expansion; an industrial economy that’s stuck in neutral; shifting supply chain nodes and flows; and shippers focused intensely on cost and looking to winnow down their stable of service providers.

Surviving a flat freight market

Jeff Jackson, president of the 3PL Penske Logistics, has seen many boom-and-bust cycles in his 30-plus years in the supply chain business. But he’s never seen a market like today’s. “Some call it a freight recession,” he says, “but [it’s] not really. Freight [volumes] have not retreated. It’s a capacity issue. There are still too many trucks out there chasing freight.”

He points out as well that persistent excess capacity has kept pricing depressed to the point that costs still exceed rates in the spot and contract markets. “That can only last for so long,” he says. “I’m not sure how much more [truckers] can take.”

One segment that remains solid, Jackson says, is the dedicated market, where a shipper contracts with a 3PL for a full-service dedicated trucking solution, including trucks, drivers, technology, and management and operating personnel.

Dedicated solutions, along with private fleets, are an attempt by shippers “to get more control over their supply chain” at a predicable cost and with consistently reliable service and capacity, Jackson notes. He is seeing a migration to dedicated, versus for-hire, that he believes will accelerate as a result of “nuclear verdicts” in trucking accident liability cases and the insurance crisis it has fueled.

“These nuclear verdicts are unsustainable,” he says. “You can’t listen to a big trucking company’s quarterly earnings call without hearing a reference to insurance premiums or claims being an issue. It’s a pretty steady conversation.”

Gary Petty, chief executive officer of the National Private Truck Council (NPTC), has a similar viewpoint on the rampant escalation of truck liability claims and awards. “There is no magic bullet to prevent getting sued at a nuclear-verdict level or beyond because the public views a truck accident as a driver-at-fault incident,” he says. The reality, according to Petty, is often the opposite. “The four-wheeled vehicles on the road are the ones causing the majority of accidents,” he says.

One area the NPTC and its members have focused on to protect themselves has been truck safety technology, particularly in-cab two-way cameras. “Those have been transformative; we have almost 80% penetration on the private fleet side,” Petty says. The cameras provide evidence of both fault and innocence in an accident, he says. Even more importantly, they provide a critical training and education tool to help drivers eliminate bad habits, improve skills, and increase safety.

Like dedicated services, private fleets have seen significant growth, and Petty expects it to continue. Private fleets today are a $300 billion business. (By definition, a private fleet is a trucking operation owned by a company that primarily focuses on manufacturing or distributing its own products, not on the trucking service itself.)

According to NPTC’s most recent annual market survey, the percentage of outbound shipments that moved with private fleets hit 75% in 2023, the highest level in the survey’s history. Overall, private fleets manage about 40% of the freight moving in the U.S. Some 942,000 companies now operate private fleets (which account for 47% of all truck fleets). Growth, as measured by the number of private fleet shipments, has averaged a little over 8% annually for the past five years.

Tough customers

As for the less-than-truckload (LTL) segment, the rise in nearshoring and reshoring is providing a welcome bump. “I definitely think we will continue to see growth [along the U.S.–Mexico border] in 2025,” says Chris Kelley, senior vice president of operations for trucker Old Dominion Freight Line (ODFL). “During COVID, shippers found out that having products on the water for weeks or months at a time puts their business at risk. So shortening the supply chain became an imperative.”

Kelley additionally expects to see shippers become increasingly demanding—particularly about timely, accurate information and precision service—in 2025. “The rigors of delivery to retailers have become far more stringent,” he notes. “They want freight delivered within specific windows and times. Specific purchase orders delivered on a specific day. Certain freight arriving in certain trailers.”

For these customers, delivering early is just as bad as delivering late, sometimes worse, he says. And delivering late is just not an option. “They can’t afford to have their product languishing somewhere, missing a sales window. It has to be at the warehouse or on the shelf on time,” he notes.

Where’s the warehouse?

Over on the warehousing side, Melinda McLaughlin, global head of research at Prologis, one of the world’s largest operators of commercial warehousing space, believes the base case for recovery hinges on the prospect of an economic soft landing.

“Any volatility that interrupts what the Fed [Federal Reserve Board] is trying to engineer would change that,” she notes. “But given a soft landing, we see a gradual recovery in 2025.”

McLaughlin believes that a reduction in volatility and uncertainty could help “unlock” investment dollars in the warehousing market. She says that the uncertainty and volatility seen in 2023 and 2024 caused a “slowdown” in decision-making for things like expansion plans and fleet and facility investments. Volatility from geopolitics, natural disasters, and labor disruptions “points to a more disruptive future for supply chains,” she says.

Given market conditions, Prologis customers remain tightly focused on cost, especially as energy, wages, and construction costs continue to rise. Companies are also increasingly pressured to incorporate sustainability measures.

Consumers’ habits will play a large, additional role on distribution operations, as companies will need to adjust to the multiple ways they choose to shop and receive goods, McLaughlin adds. “We will have productivity enhancements, but at the same time, service levels really need to rise because that has defined the industry long term,” she says.

As a result, McLaughlin sees a trend toward staging goods—and the warehouses that handle storage and fulfillment—closer to end-consumers. This trend has also increased the importance of last-mile logistics. “It is about bringing scale as close to the end-consumer as possible,” she notes. “There are tremendous benefits and cost savings, as well as carbon emissions savings. You have fewer miles traveled.”

Overall, McLaughlin is hopeful the industry will see “clearer skies” in 2025. “Some companies are still conservative and remain pretty defensive in how they are running their supply chains,” she says. “They are waiting for more clarity and hope to see that in 2025.”

Key focus areas: cost, tech, and labor

Managing costs is also top of mind for 3PL customers. Steve Sensing, president of supply chain and dedicated transportation solutions for Ryder, says his customers are homed in on continuous improvement and are looking to Ryder to help them drive out costs.

“Their volumes are down, and they have challenges in key markets,” he says. “So it’s really about helping them manage costs in a down market. And they are equally as eager to make sure we are prepared to support them when the volume returns.”

Kenneth Clark Co., a 3PL that specializes in heavyweight, oversized, and project cargo logistics, is hearing similar demands from its customers, which are mainly makers of heavy machinery for the construction industry. President Ken Clark, whose grandfather founded the family-owned company in 1960, says his customers are facing an inventory glut at dealers.

As a result, he’s detected a shift in how shippers are planning for and managing their freight needs. “Whether it is using sophisticated technology or just good tactical execution to [boost] efficiency, shippers want to drive down costs. They are looking for how I as a broker or 3PL can make it as cost-effective as possible and still manage my freight with good service,” he notes.

Likewise, Sensing is also seeing an increasing demand from customers to be adept at the latest technology. “There is always going to be new technology, so we have to make sure we innovate and stay on top of it. Automation is becoming a bigger part of what we do, especially in the omnichannel area,” Sensing notes.

Part of this focus on technology is driven by the tight labor market. “Customers are concerned about getting people,” he says. “So they look to us for both technology and automation solutions as well as innovative hiring and retention programs.”

An eye on fraud

Another issue demanding attention in the brokerage space, says Clark, is fraud, such as double-brokering, as well as cargo theft and other nefarious practices. “We have to prevent unlicensed brokers, working from places not friendly to the U.S., from operating in the U.S.” he stresses. “We have been fighting this for years. It’s a huge problem: brokerages in Eastern Europe, Asia, and South America directing the movement of goods in the U.S. Some are commodities but others are sensitive goods we probably don’t want our adversaries to know about.”

Clark, along with Chris Burroughs, the president and CEO of the Transportation Intermediaries Association, is working with association members, government agencies, and other parties to shore up the licensing process, establish tougher requirements, and bring more transparency to who is directing freight. “It’s an existential threat to the industry, and shippers are looking to the brokerage community to come together and solve the problem,” says Burroughs.

Make it simple

Outside of solving the fraud issue, deploying more and better technology, and lowering logistics costs, shippers are looking to partner with logistics providers that are agile and efficient, offer consistent service, and can quickly solve problems, notes Dylan Rexing, president of 3PL PFL Logistics. They also want to deal with fewer suppliers. Rexing cites one shipper who last year went from a stable of 500 carriers and multiple brokers down to 250. “And they are planning to reduce that even further,” he says.

“From the customer’s perspective, they are always looking to us for ways we can make their lives easier, whether it’s integrating new tools, optimizing their freight, onboarding carriers, [providing] real-time visibility, or simply doing the blocking and tackling of the business flawlessly,” he says.

“Trucking is not all that sexy, in my opinion, but it is perhaps the most critical piece of the supply chain, and we want our customers to have confidence their goods are moving safely and efficiently, and are showing up when and where they expect them,” he concludes.

Editor's Note: This article originally appeared in the December 2024 issue of DC Velocity.