It used to be that simply picking up and delivering freight was enough to keep every “motor carrier of property” in the land fat and happy. Those days vanished, however, along with the Interstate Commerce Commission, P-I-E Nationwide and 50-cent diesel.
Spurred in part by the entry of big express carriers UPS and FedEx into the trucking arena, large operators such as YRC and Con-way have diversified beyond basic freight hauling to avoid being outclassed in what has become a highly commoditized business.
A rising number of mid-tier and smaller trucking operators are falling in step, broadening service portfolios and delving into new areas of business, redefining what it means to be a motor carrier. They’re blurring the lines that traditionally distinguish different types of trucking operations and crossing into third-party logistics and brokerage as well.
“We won’t be a pure-play LTL company in the future,” said Charles L. Hammel III, president of Pitt Ohio Express, a regional LTL carrier based in Pittsburgh.
“LTL is what brought us to the party and it will always be our backbone, but the dock-to-dock movement of shipments is just becoming too commoditized,” Hammel said.
Pitt Ohio is one of several midsize companies pushing trucking’s envelope.
Rather than pulling back as freight demand dropped and the recession deepened, Pitt Ohio expanded its services and its reach, entering a partnership with several other regional carriers called the Reliance Network in 2008.
“We’ve diversified throughout the recession,” Hammel said. “We’re positioning ourselves for when the recession ends.”
Last October, Pitt Ohio rolled out a regional package service, looking to fill what it saw as a gap in U.S. package delivery.
“We discussed it with 150 customers, and 125 said they wanted to hear more,” Hammel said. “They were upset DHL exited (the domestic market), and they were looking for alternatives.”
The company also added a “heavyweight” service targeting freight that typically would go to truckload carriers.
Pitt Ohio also is competing with 3PLs — to a limited extent. “We’re doing some supply chain management for our dedicated accounts,” Hammel said.
“We’re not a 3PL, but not every shipper needs the capabilities a 3PL offers. We’re an alternative for the company that needs outside expertise but doesn’t want to switch to a third party.”
|Companies such as Pitt Ohio that are taking on the logistics mantle in their own operations may be on the best track for survival and expansion, said Satish Jindel, president of SJ Consulting Group in Pittsburgh. “They are very marketing- and technology-oriented, unlike many others in the industry,” Jindel said. “That has helped them explore services that leverage those strengths.”
Hammel and two brothers launched the business in 1979 with three trucks. Today, Pitt Ohio has almost 700 tractors and 1,800 trailers, along with straight trucks and sprinter vans. It serves shippers in a territory stretching from Chicago to Virginia.
With competition coming from 3PLs, truckload carriers and parcel companies as well as traditional LTL haulers, Pitt Ohio is entering a new phase of what Hammel calls “an evolution” in transportation, from the growth of regional LTL to the blending of trucking and logistics.
That blending is progressing as more shippers outsource transportation to 3PLs. Shippers turn to 3PLs for convenience and greater visibility into their supply chains, said Jim Butts, senior vice president at C.H. Robinson Worldwide, one of the largest U.S. third-party logistics providers with nearly $8.6 billion in 2008 revenue.
“We’ve grown in LTL because we’re able to provide visibility for shippers on one platform, through one Web site, even while using many carriers,” he said. “There’s a convenience factor and savings as well.”
That can lead to conflict, as well as collaboration, between 3PLs and carriers who sometimes are rivals, and at other times customers and suppliers.
Some third parties “are a major issue" for trucking companies, said Hammel. Not those “that add value” to supply chains by combining transportation and other logistics services, he said, but third parties that bid LTL packages against each other solely on rates, without input from the trucker, driving down price.
That turns into a proposition that is “good for the 3PL,” he said, but not the trucker.
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