Private Equity Firms Should Monitor These October Trends

The first month of Q4 — and the last month before the long-anticipated U.S. presidential election — October revealed some trends that private equity (PE) firms should be monitoring. The U.S. logistics market is experiencing some significant upheavals, and PE firms need to ensure that their portfolio companies are navigating these disruptions successfully.

Not only is logistics an enormous cost center, but it also plays a central role in delivering on customer promises, creating positive relationships, and driving incremental revenue. PE investors should be closely monitoring the performance metrics and results of their logistics teams as we close the book on a tumultuous October — and look toward an election with far-reaching economic consequences, as well as America’s peak holiday shopping season.     

October Previews Four Big Challenges for Q4  

Here are the four big forces shaping October and beyond. How well are your portfolio companies managing these major challenges?  

While Hurricanes Helene and Milton are behind us, these two devastating storms are still causing lingering effects throughout the Southeastern U.S.. Recovery efforts have reduced trucking capacity and increased freight charges in many areas. Ports in Tampa Bay, Manatee, and Jacksonville will be closed to large container ships for up to six weeks, forcing shippers to use less efficient ports. And many highways and bridges remain closed. PE firms need to ask themselves, are our portfolio companies ready for disruptions — as well as a potential long aftermath? Logistics teams should be using an advanced transportation management system (TMS), dynamic procurement tools, and other digital solutions to keep cost and service results on track. From re-routing shipments to switching up transportation modes, agility, and flexibility — informed by artificial intelligence (AI) and data — have become a cost of doing business today. 

Low diesel fuel prices, combined with excess capacity in the trucking market, may have created a sense of complacency for many logistics teams that rely on over-the-road transportation of goods. After all, the current diesel price of $3.63 per gallon is down steeply from October 2023’s average of $4.50. But growing tensions in the Middle East should have everyone paying close attention. If U.S. oil imports are threatened and diesel prices rise, logistics teams need to be prepared to pivot, both swiftly and strategically. It’s easy to focus on the near term and on getting today’s orders out the door, but PE firms need to ensure that someone at the portfolio business is looking at the bigger picture. Control tower technologies are a great way to identify and assess these kinds of risks, without investing in a lot of extra staffing, specialized expertise, and time-consuming manual analysis. 

Last week, the National Retail Federation (NRF) predicted modest retail sales growth of 2.5-3.5% for the upcoming November-December holiday season, compared to 2023 numbers. Online sales are expected to grow more significantly, representing an 8-9% increase from last year. If realized, this e-commerce growth will place pressure on logistics teams — especially given this year’s compressed period between Thanksgiving and Christmas. However, analysts are already predicting that the results of the U.S. presidential election may have significant effects on consumers’ confidence and spending heading into the holiday season. Smart shippers will be prepared for a range of outcomes, balancing the risk of excess inventory, labor, and other assets with the potential for lost sales. Again, AI-enabled decision engines and control towers are essential in considering multiple variables in a dynamic manner. These technologies help protect PE investors from big losses in the event that long-range retail forecasts prove wrong. 

While there’s a lot of uncertainty in Q4 and beyond, one thing is certain: The cost of shipping parcels via UPS and FedEx is skyrocketing. Starting last summer, the major carriers announced peak-season holiday rate increases — then they also introduced new fuel surcharges. Next, UPS and FedEx announced a confusing array of surcharges for various zip codes, package types, and other special circumstances. Just as shippers were sorting through all these complexities, UPS announced a 5.9% general rate increase (GRI) for 2025, accompanied by an up to 29% increase in accessorial charges, which take effect on January 6. FedEx doubled down with its own 5.9% general rate increase, along with a 2% credit card surcharge, effective December 23 — the earliest date ever for a carrier to introduce an annual GRI. Redwood estimates that all these new fees will increase the typical shipper’s parcel costs by 10-12% next year. But PE firms need to be aware that their portfolio companies are not powerless in the face of these rising fees. There’s a huge opportunity to counter these rate increases via route optimization, load consolidation, zone skipping, and other data-driven strategies. There’s also the power of good old-fashioned negotiation. Logistics teams should be able to leverage advanced technology, as well as coaching and advisory services, to tilt the scales back in their favor.  

Redwood: Your Secret to Logistics Value Generation 

As this monthly report demonstrates, there are multiple complex forces impacting the U.S. logistics market every day, from demand trends and weather events to high-level economic indicators. The logistics teams at portfolio companies are typically focused on getting shipments out the door, accurately and efficiently, instead of preparing for the long-term future.  

That’s where Redwood comes in. We provide the dedicated resources, specialized expertise, and advanced digital capabilities logistics teams need to master today’s unpredictable market conditions. From strategic advisory to hands-on execution and supply chain digitalization, Redwood helps protect private equity firms’ investments, no matter what the future holds. Start increasing your portfolio companies’ intelligence, capabilities, and value by contacting Redwood today.