Refrigerated trucking isn’t what it used to be, and that’s a good thing for Choptank Transport, a third-party specialist in temperature-controlled transportation.
“Most 3PLs won’t admit it, but we love a chaotic market,” said Steve Covey, vice president of sales and marketing. Managing chaos, he said, “That’s why we’re here.”
Heightened concern over food safety and a fragile economic recovery are transforming refrigerated transportation, introducing a level of uncertainty that challenges shippers and carriers and creates opportunities for 3PLs.
Industry practices have changed dramatically in the past few years, Covey said, facilitated by advances in refrigeration and logistics technology. That’s putting more pressure on the 3PL. Carriers’ rates are up about 10 percent year-over-year. Shippers are demanding greater visibility into their supply chains, asking not only for a trailer’s location but also for the temperature inside that trailer and the condition of the freight. Choptank updates customers three times a day.
“Today, shippers are making decisions about how to go to market each day,” Covey said. “As a 3PL, you have to make sure you can grow with these shippers,” he said. “You have to move with the flow of business, and right now it’s pretty quick.”
For now, Choptank Transport is ahead of that flow, growing 35 percent a year, with plans to reach $150 million in revenue in five years. That’s an ambitious goal for a company that only had 13 employees when Covey joined it in 2004.
“We’re not a small company anymore,” he said. “We’ve got more than 100 people on our team,” including employees, drivers and agents.
But Choptank Transport hasn’t outgrown its roots on Maryland’s Eastern Shore, not far from the Choptank River and Chesapeake Bay. The company’s headquarters — on the southern edge of the town of Preston, population, 566 — is next to fields and farms that produce the crops and poultry it helps shippers transport.
Choptank is the 21st century heir to a 19th century business, and its story tracks the growth of agricultural shipping in the 20th century, as well as the expansion of non-asset-based logistics. It’s a subsidiary of A.W. Sisk & Son, which was founded in 1891.
“The Eastern Shore of Maryland is known for produce, and at one time it was a hotbed for tomatoes,” Covey said in an interview at Choptank’s headquarters. “A.W. Sisk was a brokerage arm for all the farmers here.” Tomatoes were hauled from farms by wagon to a warehouse in Preston and shipped to market by rail. In 1932, A.W. Sisk set up a subsidiary — Preston Trucking — to haul small lots of tomatoes.
Preston Trucking grew, was sold and later shut down in 1999. All that’s left of the railroad is its track, but the A.W. Sisk & Son warehouse is still there, now used by Choptank.
Originally set up as a logistics division of A.W. Sisk with one truck in 1984, the company was relaunched as Choptank in 1999. It currently has more than 100,000 square feet of warehouse space in Preston.
“Poultry is probably the biggest thing we haul,” Covey said. Maryland farmers produced 1.4 billion pounds of broiler chickens in 2009, according to the Delmarva Poultry Industry trade association. “We haul for every major poultry company, and I don’t envision that changing,” he said.
Not all of its freight is sourced on the farm, however. “We also haul a lot of pizza and french fries, because they’re two of the biggest items in the food service world.”
For a transportation outfit on the Chesapeake Bay, Choptank handles little seafood. “There are a ton of crab guys here, but I’ve never seen anyone with more than a pallet to haul, and that’s because that pallet is worth $100,000,” Covey said.
Choptank hauls very little itself. Although it has a fleet of about 25 trucks, it’s mainly a non-asset operator, contracting with thousands of refrigerated truckers, particularly smaller carriers operating a handful of trucks and owner-operators.
“The fleet gives us the ability to keep our ear close to the road, to know what the drivers are going through on a daily basis,” Covey said. “As a 3PL, we’re the liaison between the shipper and the carrier, and you have to understand both sides.”
That role became more important — and difficult — as the recession chilled even the refrigerated food transportation business. “We noticed probably in late 2008 a big-time shift in the buying behavior of our customers,” Covey said. “We used to get our orders two weeks ahead of time, and then we began to get a lot of last-minute orders, a lot of consolidated loads.”
That’s made securing capacity and keeping costs to the shipper as low as possible much more of a challenge. “In April, we hired a guy who just does carrier capacity; he’s in charge of carrier development. We have someone else handling carrier compliance” with the company’s standards, Covey said, “but this guy is just harvesting trucks.”
Not any rig with a reefer unit will do. Shippers are increasingly picky about equipment, Covey said, and with good reason. More than 500 million eggs from two Iowa farms, Hillandale Farms and Wright County Egg, were recalled after they were linked to 1,600 cases of salmonella poisoning this summer, drawing the attention of Congress, the Food and Drug Administration and trial attorneys.
The salmonella outbreak hasn’t been linked to transport operators, but the case emphasizes the need for 3PLs and shippers to ensure trailers and warehouses are clear of any possible contaminants, the right temperatures are constantly maintained, and correct loading and unloading procedures followed.
“You have to have a process and a checklist, and you have to educate the driver,” Covey said. “We have to be accountable for what we’re supposed to do, and that starts with making sure the people we contract with are accountable as well,” he said. And when there’s a problem — such as a product recall — a 3PL has to have the information systems in place to handle it. “You have to be an information specialist. You need to be set up so that when the customer comes to you asking for information on recalled shipments, you can provide it right away.”
Shippers are ratcheting up their reefer equipment requirements, Covey said. “It used to be, ‘How old is your equipment?’ and now it’s, ‘We’re not going to accept you unless your trailer is under 3 years old and your reefer is under 2.’ Almost every shipper wants a continuous chill unit, not a start-and-stop one. They also want you to pre-cool your trailer an hour or more before picking up the load.”
Drivers used to wait until they reached the shipper’s dock to start cooling their trailers. “Those days are gone,” Covey said. It’s easy to see how failure to pre-cool to the right temperature could cause spoilage. “If your trailer is at 30 degrees when you pick up a load of pizza or fish with batter on it, and it’s got to get to zero degrees, that load will probably ride at 10 degrees and start to flake,” Covey said.
Choosing the right equipment means choosing the right carriers, and Choptank has about 2,000 carrier partners it uses on a regular basis, plus another 8,000 accredited partners it can call on when it needs to move a shipment fast.
Unlike many of its non-asset counterparts, the 3PL relies primarily on a network of owner-operators and small fleets. “Some logistics companies will not use owner-operators at all,” Covey said. “They worry that if they have a bad load they’re going to be out of business, or if they have a claim, they’re going to leave. That’s when you better know who you’re using. It’s all about your relationship with them.”
On many levels, it’s easier to negotiate with smaller trucking operators than the larger national carriers, Covey said. And the big players all have sales departments as large as Choptank — which means they often compete for the same customers and same lanes. Smaller fleets use Choptank to extend their sales reach, and working with owner-operators, “You get a feeling you’re helping your local community,” Covey said. “A lot of them are based right around here.”
Contact William B. Cassidy at email@example.com.