The transportation-and-logistics (T&L) sector has benefitted from many of the most important business trends of the past half century. Globalization, the evolution of sophisticated just-in-time supply chains, and the rise of e-commerce have all helped the sector grow at a rate broadly similar to the overall economy.
But it hasn’t all been smooth sailing. Economic downturns tend to hit the sector particularly hard. Our analysis of the past five US recessions shows that T&L companies suffer more on average than the economy as a whole (Exhibit 1). And in recent cycles, the problem may have worsened. Truck transportation, for example, experienced little contraction in the recessions of 1980, 1982 and 1991. In 2001, by contrast, the industry shrank by 6 percent, and the 2008 recession triggered an 18 percent contraction.
As in all industries, sector averages don’t tell the whole story. Some companies ride out downturns much more successfully than others. When McKinsey analyzed the performance of around 1000 large, publicly traded companies through the 2007-2008 global recession, we identified a subgroup of “resilient” organizations that outperformed their peers by a significant margin over the cycle. The performance of these companies dipped less overall during the recession and improved faster during the ensuing economic recovery. By 2017, resilient companies had delivered a cumulative total return to shareholders (TRS) that was more than 150 percent higher than their non-resilient counterparts. Among the logistics and transportation players in the study, the gap was even starker, at 267 percent (Exhibit 2).
A playbook for resilience
What made the difference? Part of the formula is fast decision making, enabled by a well-prepared organization. Our analysis also identified a playbook of specific interventions applied by resilient companies (Exhibit 3). In the lead-up to the recession, these companies took steps to achieve extra financial flexibility. They reduced balance-sheet debt while competitors were piling it on. And when the downturn hit, resilient companies moved faster and further than others, selling off businesses and cutting costs through improvements to operational effectiveness.
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SOURCE: McKinsey & Company
