Pitt-Ohio launches small-parcel service

Regional less-than-truckload (LTL) and truckload carrier Pitt-Ohio Express has launched a small-package service within its 14-state territory, an unusual expansion for a company specializing in LTL and truckload services.

The product, called Pitt-Ohio Ground, is mostly being marketed to Pitt-Ohio's existing customer base or to shippers who've done business with Pitt-Ohio before, according to Kent Szalla, general manager of the company's ground division. Begun in January, the service currently has about 60 customers, most of whom need to ship 30 or more packages a day to obtain rates similar to those offered by the major parcel carriers, Szalla said.

Szalla said the product is an adjunct to Pitt-Ohio's core LTL offerings and gives customers the flexibility to tap into the parcel service as needed. One main advantage, he said, is the very low claims ratio because the Pitt-Ohio packages aren't moving through mechanized conveyors and thus, are less subject to damage. Szalla said that Pitt-Ohio Ground has reported one claim out of about 4,000 packages handled.

Pitt-Ohio is building the parcel product "piece by piece," Szalla said, adding that it represents a "drop in the bucket" relative to the revenue generated by its core business. Based in Pittsburgh, privately held Pitt-Ohio does not disclose its financial results.

Perhaps the most successful example of an LTL trucker's forming a small-package operation occurred in 1985, when Roadway Express created a company called Roadway Package System to break UPS Inc.'s then stranglehold on the U.S. small-package market. RPS proved to be a viable competitor and in 1998 was acquired by FedEx Corp., which incorporated the operations into what became the highly profitable FedEx Ground division.

Today, there are a handful of regional parcel carriers that mostly serve the business-to-consumer segment. Thomas R. Wadewitz, analyst at JPMorgan Chase, estimated in a research note there are six such regional parcel carriers with combined annual revenue of about $500 million.