New services keep regionals on core carrier rosters
By Tim Minahan -- Purchasing, 5/21/1998 2:00:00 AM
With shippers limiting the number of transportation providers they use to a few core carriers, some might think regional truckers would be losing business. They'd be wrong.
Thanks to a dramatic shift in shipping patterns, regional less-than-truckload carriers today are handling a majority of the nation's freight that moves by truck. In addition, many regional LTLs are expanding their service reach to compete with national carriers in multi-regional and coast-to-coast lanes.
Expanded delivery areas and new services may solidify a spot for regional LTLs on many shippers' core carrier rosters, but regionals say their true appeal lies in the service they provide that their national rivals can't.
"When you talk about a core carrier, you can have a single carrier who can deliver all your longhaul business, but he can't do that and deliver overnight to every different region in the market," says Douglas G. Duncan, vice president of sales and marketing for Viking Freight System Inc., a regional LTL carrier serving the Western United States, Canada, and parts of Mexico. "Our expertise is in delivering overnight freight in the West. We are providing 99% on-time service in these lanes. That's what our customers are demanding."
A shorthaul nation
More and more companies are adopting inventory-lean, just-in-time manufacturing strategies that rely on smaller shipments, shorter transit times, and time-specific deliveries.
In fact, according to the American Trucking Associations, virtually all the single-mode truck tonnage carried in the United States now moves less than 500 miles. (See chart.) Regional carriers, which handle 55% of the nation's truck-based freight, have made delivering these shorthaul shipments overnight their forte.
"Ninety percent of what we deliver is overnight freight that travels 500 miles or less," says Frank E. Myers, president of WestEx Inc., a regional LTL and truckload subsidiary of Yellow Corp., serving the Western United States. "This service will continue to be our core competency."
Regional carriers also are a big draw for shippers because they're predominantly non-union, making them less vulnerable to driver turmoil and more cost-effective than the national union trucking firms.
Earlier this year, speculation that union workers would walk out on national LTL carriers prompted many shippers to shift their freight to regionals. And, even though national carriers were able to negotiate a five-year labor deal with the Teamsters, many regionals have been able to maintain the freight that had been transferred to them.
Branching out
While the strength of regional truckers will continue to be their ability to provide overnight service in short-haul lanes, many of these carriers are beginning to offer longer lengths of haul and additional services.
"As more and more shippers are developing a core base of carriers to do business with, regional [trucking] firms will need to maintain their core strength, but they also will have to have affiliated products they can bring to the table," says Joe Librizzi, senior vice president of marketing and sales for Jevic Transportation Inc., a multi-regional LTL carrier based in Delanco, N.J. "Today, shippers are not just looking for a carrier to handle a specific area. They're looking for a carrier to have the ability to provide an array of services."
For example, Librizzi says facilities in New Jersey, Boston, Chicago, Atlanta, Charlotte, and Houston allow Jevic to provide regional and multi-regional "breakbulk-free" service.
Most regional LTL carriers now offer service between 500 and 1,200 miles. WestEx, for instance, has overnight and second-day service in these length-of-haul lanes.
Some carriers are tapping inter-regional traffic through strategic alliances. One example: G.I. Trucking Co., a La Mirada, Calif.-based regional carrier offering service in 13 Western states, Alaska, and Hawaii, has teamed up with three other regional LTL carriers--Lakeville Motor Express, TNT Overland, and Estes Express--to provide service to the Midwest, Eastern U.S., and Canada.
Other carriers, such as Con-Way Transportation Services, have the girth to offer coast-to-coast service on their own.
Con-Way has been carefully linking the networks of its three regional trucking arms to offer shippers nationwide service options. The company paired Con-Way Southern Express (CSE) and Con-Way Central Ex-press (CCX) to offer multi-regional service in 1995. Earlier this year, Con-Way Western Express (CWX) and CSE linked their networks to provide coast-to-coast service. Con-Way now plans to link the operations of CCX and CWX, to provide shippers with nationwide coverage as well as service to Canada, Mexico, and Puerto Rico.
Regionals won't abandon their core overnight and direct shipment services to compete head on with the nationals. Instead, they are simply responding to shipper demands for expanded service options.
"Our decision to move into these markets comes from a request for the service from our customers," says Gerald L. Detter, president and CEO of Con-Way. "However, we don't have any delusions of becoming a major tonnage player in the longer-haul markets. We plan on providing a premium [longhaul] service for a small percentage of shippers."
Getting it over there
Regional truckers also are testing the waters of international shipping. The ATA predicts that some of the largest growth in truck and rail traffic will come from international trade.
National LTL carriers have been tapped into this market for quite some time, acting as non-vessel operating common carriers (nvoccs) that consolidate shipments into containerloads for overseas deliveries. However, regional trucking firms have for the most part limited their international services to moving shipments to Canada and, more recently, Mexico. That is rapidly changing.
One example: New England Motor Freight, a regional LTL hauler in the East, now offers ocean consolidation services to South America and the Caribbean. Company officials say 20% of its freight goes overseas.
Similarly, American Freightways Inc., an intrastate, regional, and inter-regional LTL carrier based in Harrison, Ark., recently built alliances with Honolulu Freight Service Inc. and Pacific Alaska Forwarders Inc. to offer shippers service to Hawaii, Guam, and Alaska.
New shipper demands aren't the only things driving regional truckers to expand into new service areas. Thanks to a healthy economy, regionals are finding they have the fuel to fund new investments. They also have the confidence to boost freight rates.
Most regional LTL carriers announced January 1 rate increases between 5% and 6%. And, unlike in years past, this year's hikes have a good chance of sticking throughout the year. The reason? Despite an uptick in the amount of freight available, LTL carriers have been careful not too add too much capacity over the past few years. Some carriers even report a slight tightening of capacity. This is keeping rates up and allowing most regionals to cull low-margin and non-margin accounts.
Upshot: Regional LTL carriers will offer well-rounded service menus, but shippers will need to pay appropriately for the services they use.
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