In the last two weeks, several prominent freight carriers have declared bankruptcy. Two companies provide different templates for their effect on their customers.

The trucking giant, Yellow Freight, has closed all operations, and any shipments they still hold will be subject to litigation. The other example is Western Global Airlines, which over-expanded during Covid and has now gone to court for bankruptcy protection while they attempt to restructure their debt. Western Global is trying to create a repayment plan and still providing services to its largest customers. Anytime a freight carrier goes bankrupt, it will significantly affect the shippers who rely on their services. Here are some ways a freight carrier’s bankruptcy can impact shippers. In our role as supply chain professionals, we are often asked to provide an estimate of the impact to executive management. Here are some high-level talking points to use to brief your team.

• Service Disruption: One of the most immediate and noticeable effects is the disruption of shipping services. Shipments in transit or scheduled for pickup may be delayed or held in the carrier’s terminal. Your company may need to quickly find alternative carriers to move their goods. This can lead to disruptions in the supply chain, missed deadlines, and difficulties in meeting customer service level agreements.
• Higher Costs: You may face higher shipping costs as they scramble to secure alternative transportation options. These costs could include expedited shipping fees, finding carriers that charge higher rates due to increased demand, and using carriers that don’t understand the customer’s SLA’s resulting in chargebacks.
• Supply Chain Delays: Shippers reliant on the bankrupt carrier will suffer delays in receiving raw materials, components, or finished products that can affect production schedules and inventory levels. This is known as the bullwhip effect, and it can take months to restore your supply chain to maximum efficiency.
• Operational Challenges: Your team will need to invest time and resources into finding and vetting alternative carriers, negotiating new contracts, and educating your new carriers to the SLAs and Routing Instructions from your customers.
• Uncertainty and Risk Mitigation: A carrier’s bankruptcy will create uncertainty in the shipping market. You may need to reevaluate the financial stability of your carriers or potential carriers to ensure they are not at risk of encountering similar disruptions in the future.
• Customer Relations: Delays in shipping and supply chain disruptions resulting from a carrier’s bankruptcy will impact your ability to deliver customer orders on time. This can lead to dissatisfied customers, damage to your company’s reputation, potentially huge chargebacks, and potential loss of business.

Anytime a freight carrier goes bankrupt, this will create complex challenges for shippers. How quickly you can adapt and implement contingency plans to mitigate the impact of the carrier’s bankruptcy on their business will determine the impact on your business.