In a business built on rapid, time-definite delivery of critical pharmaceuticals and high-value electronics parts, one might ask: Why would a slot machine represent an increasing growth opportunity for the expedited trucking industry?
The answer not only is indicative of a surging gaming industry across the U.S., but also of the increasingly specialized services expedited carriers offer that, combined with an improving economy and tight trucking capacity, are driving growth. Those slot machines, so critical to the profitability of the Caesars Palaces, Sands Casinos and any number of horse tracks nationwide, require exclusive-use trucks, pads, straps and lift gates. Only members of gaming commissions can break trailer seals, and shipments with broken seals must be returned.
To meet demand for such enhanced security, visibility and monitoring capabilities, expedited carriers are rolling out new technologies and premium services for shippers of high-value, mission critical and temperature-sensitive goods.
Expedited services are about much more than last-minute, time-definite shipments. With lean inventories and integrated supply chains, shippers are turning to expedited carriers for capacity management, better security and a host of other premium solutions, said Jason Frederick, managing director of operations for FedEx Custom Critical.
The FedEx unit, the nation’s largest expedited carrier, notched $375 million in 2011 revenue, up 14 percent year-over-year. Driven by tight capacity and lean inventories, growth is running in the high single-digits this year.
Security is a top priority for many users of expedited transportation services. For shippers moving pharmaceuticals, high-value electronics, key parts and even special releases and rollouts of books, video games and other media products with a high black-market value, security is a priority. Stolen property can result in huge losses, especially if those products can be copied.
For customers in the life sciences, perishable goods, aerospace, arts and finance industries, time-definite shipments almost always include other premium services. To maximize their scale and volume, some are turning to single providers for all of their expedited freight needs.
“We are finding success where customers are looking to single-source premium services as well as expedite,” said Andy Clarke, president and CEO of Seville, Ohio-based Panther Expedited Services. Five clients have consigned all of their expedited shipping needs to Panther this year, he said.
The expedited trucking sector is in the midst of a sustained period of growth. Each of the five biggest U.S. expedited carriers recorded healthy revenue increases in 2011. Combined revenue for the top five carriers — including the expedited divisions of UPS and FedEx, the nation’s largest transportation providers — totaled $938 million in 2011, a 9.3 percent increase over 2010.
That’s a far cry from the 22.2 percent year-over-year increase between 2009 and 2010 as companies turned to expedited services as they dug their way out of the recession. Current growth rates, although not as high, are healthy and appear to be more sustainable and lasting. “2009 was a very bad year, so people were still catching up to what they used to have,” said Satish Jindel, president of SJ Consulting Services.
Panther is benefiting from improving light-vehicle sales and a minor renaissance in automotive and general manufacturing in the U.S. and Mexico. “That is driving cross-border and domestic expedited shipments,” Clarke said.
or a special sale. UPS’s regular LTL customers usually call three or four times a year in need of expedited services. “We want to provide that service without them having to find another provider,” said Cornell Howard, UPS Freight’s vice president of expedited freight services.
Expedited volumes are climbing steadily even among highly price-sensitive customers. To keep them happy, the expedited group offers a variety of delivery times and pricing options. “Even with that, we have seen steady growth in expedited division volume,” Howard said.
Expedited carriers, along with the entire U.S. trucking industry, struggle to find enough drivers. Industry observers say hundreds of thousands of drivers will be needed to meet projected freight demand. Demographic trends such as an aging work force shrink the driver pool, while the Federal Motor Carrier Safety Administration’s CSA safety initiative and hours-of-service rules are driving some from the profession, as are high fuel, tire and equipment costs.
To attract and retain drivers, Panther last year rolled out a tiered rewards program that Clarke said is similar to airlines’ frequent flyer programs. The more loads and miles drivers accept, the more they generate rewards such as higher pay rates and vouchers for hotel stays. “Drivers want to feel part of a good organization that values their services,” Clarke said.
FedEx Custom Critical views its contract drivers as professionals and pays them fairly and on time. “We don’t have issues about not paying them on time,” Frederick said. “We do what we say we will do.”
The company caps the amount drivers pay for diesel fuel at $1.25 a gallon and pays the balance. It also has implemented a quarterly recognition program that rewards drivers with paid vacations and other bonuses, and provides its approximately 2,500 drivers with discounts for a variety of services throughout North America.
“Even though they’re independent, we want our contractors to feel like they’re part of the organization,” Frederick said. “We are seeing positive gains on the retention side.”
Bolt Express’s driver recruitment and retention program includes expanded back-office support for drivers and improved tools for better communication and smoother, more efficient operations.
Bolt continues to invest in technology. Its Web-based Transportation Management System is a major contributor to the company’s growth. Bolt was recently recognized by INC. Magazine as one of the 5,000 fastest-growing privately owned companies in America. Since 2010, the company has recorded growth of approximately 50 percent and is on track to exceed that this year, Bauman said.
The company’s Border Advantage system simplifies U.S.-Mexico border crossings with online confirmation of each customs-clearance process. Bolt takes ownership of shipments across the border and through customs, proactively managing the movement of freight and information between customers, carriers and brokers.
UPS in April rolled out CrossBorder Connect, a ground freight service between the U.S. and Mexico designed to help companies navigate complex brokerage processes and reduce customs delays associated with border regulations, inspections and paperwork. The network incorporates Mexican carrier partners at eight border points: Otay Mesa and Calexico, Calif.; Nogales, Ariz.; and El Paso, Laredo, McAllen, Harlingen and Brownsville, Texas.
Although not strictly an expedited service because it isn’t guaranteed, CrossBorder Connect does expedite cross-border freight. The service was spurred in part by customer surveys that revealed a trend to near-sourcing among high-tech and automotive companies, said Steve Flowers, president of UPS Global Freight Forwarding.
Prior to the rollout, cross-border shipping options for heavy freight were limited to air or conventional LTL movements. CrossBorder Connect offers three- to four-day shipping options between most major U.S. cities and Mexico and bonded movements for faster transit times. “Our research clearly revealed the gaps in service options that exist for today’s customers,” Flowers said.
UPS is targeting the growing North American automotive industry for the service, which also is expected to have a large component of high tech, industrial manufacturing and health care companies. “As production ramps up, people need resupply of parts or products,” Flowers said. “CBC is designed as an alternative to air freight.”
Contact David Biederman at email@example.com.