Where Is Expedited Trucking Headed?
By Jeff Jensen, Editor
Sep 14, 2006 - 7:57:00 PM
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Where is expedited trucking headed?
Expedited Trucking - a definition:
Emergency or time-sensitive freight picked up and safely delivered as soon as possible, typically by an owner-operator leased to an expedited carrier. Truck sizes range from cargo van to tractor-trailer.
Since the "birth" of expedited trucking in the early 1980's, there have been many predictions of this niche market's demise or at least, its decline. Those predictions usually have usually accompanied an economic slowdown, and for expedited trucking, it was most recently experienced in 2000-2001.
Since that time however, the segment seems to have rebounded with new, albeit smaller, carriers appearing on the scene and acquisitions by major players taking place. Other changes are occurring in the market as well.
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Changes and acquisitions
This past spring, FedEx Custom Critical of Green, Ohio introduced its Surface Expedite Network, a time-definite LTL service. The company explained this strategic move as one that would expand its customer service offerings in addition to its ability to utilize a larger FedEx sales force.
Another major change in the expedited trucking landscape occurred in the summer of '06 with the acquisition of Con-way Expedite of Ann Arbor, Michigan (founded in 1996, this was the expedite division of trucking giant Con-way) by Panther Expedited Services of Seville, Ohio.
The former "Panther II Transportation" then became, at least in terms of owner-operator fleet size, the largest carrier in the "traditional" surface expedited market. With Panther's Initial Public Offering coming sometime in the near future, only one of the older, established large expedited carriers will remain privately owned - Tri-State Expedited Services, Inc. of Perrysburg, Ohio.
Outside competition
The entrance of truckload and less-than-truckload carriers into the expedited niche has long been a matter of concern to those already established within the industry.
Spencer A. Squier, the President of All-State Express, Inc. in Kernersville, NC addresses this issue:
"Over the last 5 years, the JIT (Just In Time) delivery service has increased tremendously and to this day it continues to increase. This is due to leaner manufacturing from industries looking to eliminate stock build up and eliminate unwanted costs. With this demand rising and the shortage of drivers, this presents a challenge within our market to expand fleet counts."
"Many companies have gone through changes from acquisitions to mergers and some have gone as far as closing doors. The rise in fuel costs and insurance premiums, have taken their toll as well. The competition has grown from the historical expedite trucking company to 3PL'S and large LTL and truckload companies offering expedite services."
"Still the demand continues to rise for JIT freight and we as expedite companies must prepare and counter such growth."
From the carriers
VP/General Manager David Spence of Epes Express in Greensboro, NC is optimistic about expedited trucking's outlook, while at the same time, acknowledges the problem areas:
"We feel the future is bright in the expedited trucking industry. There will be challenges as we move forward but with proper planning and execution of that plan we are looking forward to what lies ahead."
"The driver shortage the industry faces will continue to be a problem and will certainly worsen as time goes on. Driver retention will continue to be a big focus at our company. Qualified drivers are hard to find now and they will be harder to find as we move ahead. Retaining the drivers you have is more important now than ever. Wages for OTR drivers need to increase to help attract drivers into this industry."
He continues, "Fuel prices will continue to impact the expedited industry. Adequate collection of fuel surcharges from customers will be important to help offset a portion of the excess cost. In an industry using a large percentage of owner operator equipment, proper disbursement to the owner operators will be necessary to help them control their costs."
"Capacity shortages across all segments will continue to spill over into the expedited industry. Customers unable to move their freight regular mode are relying on expedited carriers to meet the deadlines that they face with their end users. The "Just in Time"manufacturing processes coupled with reduced inventory levels will continue to produce expedited shipments."
Ben Bauman is the General Manager of Bolt Express in Toledo, Ohio. He says, "Our view of where this industry is going is either one of two ways. Seeing that the industry is so strongly tied to automotive industry, I see the industry, over the next two years, facing one of the following two directions:"
"1) Automotive cutbacks will lead to a reduction in over all expedite freight. They will get much smarter in their supply chain management and reduce expedite shipments by creating a better balance of inventory and the need for our services."
"2) After the cutbacks they will reduce inventories even further and with the reduction of personnel, the need for our services will increase."
Panther Expedited Service's CEO Dan Sokolowski says, "Expedite is a growing sector and it will continue to grow as supply chain management becomes more and more complex."
"Whereas, 5 or 10 years ago, expedite was a necessary evil that a lot of transportation professionals were trying to find a way to do without, it's now an accepted mode of transportation. As the supply chain does become more difficult, it's actually a necessary mode in order to make sure that the end user is supplied with the service or product that they need."
"From all indications, it will continue to be a growing sector for many years to come."
“I think Expedited Trucking will continue to be a growing segment of the trucking industry,” says Jeff Young, Recruiting Director of Nations Express in Charlotte, NC.
“Due to weakness in the auto industry, automotive freight levels should be lower but should be offset by increases in freight from other non traditional expedite shippers. Third Party Logistics providers like NLM should continue to grow in importance in the expedite field as they control more high-volume freight.”
“We will continue to see the increase in tractor-trailer loads in the expedited trucking market and somewhat of a reduced market for cargo vans. The ease of moving Tractor-trailers with load boards will make them a bigger part of the expedited business in the coming years. Less sitting will mean happier contractors and less turn over.”
“Consolidation of expedite companies will likely continue in the near future as more business and equipment is controlled by fewer dominant players.”
"With a customer base of nearly 1,000 companies that range from Fortune 500 corporations to smaller job shops, Express-1’s customers represent several key U.S. industries: automotive supply, appliance manufacturing, pharmaceuticals, commercial and financial printing and high technology," says Jeff Curry, Chief Operating Officerof Express-1 of Buchanan, Michigan.
"Some of the trends we see in expedited hauling include:
"More companies will expedite freight as they adopt just-in-time manufacturing techniques pioneered by the automakers, sometimes applying the techniques outside of heavy industry. Examples of this can be found in appliance and office furniture manufacturing, as well as printing and pharmaceuticals. These manufacturers will expedite freight in situations where they have reduced their inventories too much to respond to swings in demand from their customers."
"There may be a shakeout soon among smaller expedited freight companies and companies that carry a lot of debt to operate. The cost of insurance has become increasingly significant, and the cost of fuel while offset by surcharge,has made it very difficult for the smaller carrier as his loaded mile percentages and margins on "return freight" can be smaller than the larger companies."
"Expediters will also need to upgrade to the latest technologies to move freight efficiently, which will put further pressure on their wallets initially. The technologies will include everything from the latest software that plans routes efficiently to accounting packages for quick payments to owner-operators to satellite tracking of trucks for immediate updates to customers on ETAs."
"While it seems to work against just-in-time techniques, we may see a strong rise in the number of customers using warehousing as a way to cut the length of freight runs. This means we will have to become even more efficient at handling smaller order sizes, more order sizes and consolidating shipments to more cities. U.S. companies spent nearly $29 billion last year on warehousing – an increase of 10 percent over the prior year – and the warehousing industry expects to see another banner year this year."
From a truck dealer’s perspective:
"I keep hearing from everyone that they are not heavily dependent on the automotive industry for their freight and I hear that they are branching out into other segments and I tend to believe them," says Bobby Snyder, an Expedited Truck Specialist with Fyda Freightliner of Columbus.
"However, if the auto industry closes plants as scheduled, then whoever has been hauling that freight will have a drop in revenue. I think that the future of expediting is held in the hands of the expedited freight companies and their commitment to finding new opportunities for time sensitive freight."
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