For a long time, regional less-than-truckload (LTL) carriage has been one area of the trucking industry where growth seemed unstoppable. Every time Corporate America rolled out a new money-saving logistics strategy, it seemed to play right into the carrier's hands. Cut costs by reducing inventories? All the more small shipments for regionals to deliver. Slash storage costs by reducing cycle times? More need for overnight or second-day service, a specialty of the regional carriers'. Cut transportation bills by consolidating shipments into truck loads? More need for regional haulers to carry out final deliveries.
None of that's changed, but in the last two years it became apparent that even the regional carriers weren't exempt from economic cycles. Shipments sagged and profits lagged. Though a few carriers report that earnings have shown signs of improvement lately, that's not saying a lot. Capacity remains plentiful and competition fierce, forcing some of the weaker players to consolidate or shut down altogether. (The latest casualty, Plymouth Rock Transportation, a regional carrier in the Northeast, was acquired by USF Red Star in April.)
In short , it's a buyer's market right now. And the competition is making it tough for regional LTLs to raise rates (and recoup rising operating costs) ,especially at a time when the nation's shippers are still entrenched in a cost-cutting mode. "The question we keep hearing in the marketplace right now is, 'How do I save money.' That's the mantra," says Edward Moritz, director of marketing for Con-Way Transportation Services.
Tight competition also means that what business is out there is getting spread among a lot of players, dashing carriers' hopes of a freight bonanza any time soon. "We've not built any economic growth into our forecasts for this year," admits Steve Ginter, vice president of marketing for New Penn Motor Express, a Roadway Corp. subsidiary with operations in the Northeast.
But if the regionals have glumly accepted the lack luster short-term outlook, they're also gearing up for a brighter future. They have reason for optimism, says Ted Scherck, president of the research firm Colography Group. Speaking at the Council of Logistics Management's annual meeting last fall, Scherck suggested that regionals would be major beneficiaries of what he called "shocks to the system" that disrupted global supply chains over the last few years—terrorist attacks and the resulting increased regulation of international shipments, and labor disruptions at West Coast ports last fall, among others. Afraid of being burned again, he predicted, companies will overhaul their distribution networks with an eye toward increasing investments in regional distribution centers, regional inventories … and regional transportation.
As they wait for the economy to restructure, carriers are adjusting their own networks and services to accommodate shippers' changing demands."We're trying to make lemonade from the lemons," says Moritz of Con-Way, which operates three regional LTL carriers across North America. Con-Way has added capabilities to its Web site that make it easier for customers to download customized reports of various types. And mindful of its customers' desire to save money, it's also "looking at bundling and delivering services more effectively," Moritz reports.
Con-Way, he add s, has also enhanced its pool distribution services, which combine a truckload line-haul with regional distribution. "[Pool distribution's] been around for 50 years,"he says, but today's analytical tools do a much better job of identifying opportunities for assembly and distribution programs.
New Penn has also focused on pool distribution. Ginter says the carrier will introduce a new electronic service, called POOLT RAC, that provides door-to-door shipment tracking capability for pool distribution shipments. Like Moritz, Ginter says he's fielded many requests lately from customers looking for ways to reduce costs without necessarily focusing on rates. "They realize they cannot continue to reduce costs by get ting bigger discounts on the backs of the carriers,"he says. "They're making genuine inquiries about how to take cost out of the process as opposed to just reducing their prices."
He admits those opportunities are not always easy to find. "For a regional carrier like us, taking cost out is largely a function of streamlining the pickup and delivery process," he says. "That's where the opportunity is." Speeding up pickup or delivery, he adds, can be as simple as working with customers to stage freight effectively before the truck arrives to shorten the loading process.
New Penn will soon add a returns management capability to its Web site that allows customers to complete a bill of lading and submit it simultaneously to both the shipper and carrier. "Where we can help," he says, "is to provide a system to help facilitate communication between the buyer and seller."
On a roll
In a superheated competitive market, Con-Way and New Penn have plenty of company among carriers rolling out service improvements. Other regional carriers are unveiling services faster than Freddie Mac's top executives are resigning. Here's a brief look at some recent announcements: