The Covid pandemic and the pre-Covid economic era of low interest rates afforded investors the luxury of lending very, very cheaply. That era has come to an end over the past two years as interest rates increased. With interest rates higher and money more costly to borrow, logistics and trucking companies are some of the hardest hit. After all, lots of capital was pumped into logistics from investors due to supply chain issues happening in the pandemic and early post-pandemic period.
Now, another round of layoffs has arrived, impacting the logistics industry. Who is affected?
1. Uber Freight
Uber got into the logistics business during the Covid pandemic. The appeal was simple: the global supply chain was in despair and help was needed. To set up freight operations at the time was cheap yet very profitable, since container and trucking rates were hitting all-time highs. Already last year, Uber Freight cut as many as 150 jobs earlier in the year and another, smaller round of layoffs over the summer.
Now, as of this week, Uber Freight confirmed to several news outlets including Freightwaves and Yahoo! News that in order to “drive sustainable growth” it is cutting more jobs. About 40 to 50 jobs will be affected.
Flexe, not to be confused with Flexport, is a Seattle-based startup in the supply chain business. It specializes primarily in warehousing and transportation. After cutting over 130 jobs last fall, the company has now cut another 99 employees as of earlier this week.
Although Flexe was valued at $1 billion just a few years ago, higher interest rates have led to investors being less willing to dish out more cash towards these types of startups, particularly in logistics and the supply chain, where profits rapidly decreased between 2021 and 2023.
3. Trucking Companies, including UPS
As is typically the case after the holiday season, UPS implemented layoffs of many part-time warehouse workers as the new year rang in. One particular location, the Centennial Hub in Louisville, Kentucky, saw a sizable layoff, according to first-hand reporting from UPS workers on various social media platforms.
Perhaps a bigger story for trucking has been the bankruptcies and layoffs that popped up in various trucking startups in 2023. Now, the trend is poised to continue this year as interest rates remain high. There are simply too many trucking startups that received boatloads of outside capital, and that funding has dried up.
What comes next?
Combined, the shifting demand, profitability, and dynamics of the supply chain at-large means that more layoffs are likely within logistics-related startups, whether on the warehousing, trucking, or digital development side. Interest rates may go down after the next Federal Reserve meeting, but it will continue to require adjustments on the business and investor sides to account for higher borrowing costs. We will keep you posted at More Than Shipping.