Refrigerated cargoes are becoming hot commodities in trucking, as truckload carriers launch expedited services to speed refrigerated freight from coast to coast.
New services launched by U.S. Xpress Enterprises and CRST International rely on team drivers to haul produce shipments and other temperature-controlled freight cross-country two to three days faster than a single driver could legally travel.
U.S. Xpress said in November it would expand the team service the Tennessee-based carrier launched last spring to 100 trucks by the end of this year and 250 trucks by the end of 2012. CRST deployed 25 teams Dec. 1 and plans to shift dry van teams to reefer as needed.
Team drivers can make the trip from the West Coast to the East Coast in about 60 hours, the carriers said, as opposed to five days or more for a single driver, cutting at least two days from travel times to eastern metropolitan distribution sites.
CRST initially is concentrating on lanes connecting California with New York, Philadelphia, Baltimore, Rochester and Pittsburgh. U.S. Xpress is serving East Coast markets from Maine to Miami and a few metropolitan areas in the Midwest.
These expedited services redirect capacity — Class 8 tractors and drivers — toward higher-paying, more profitable freight. They also support changes in the food supply chain triggered by massive retailers led by Wal-Mart and Target.
Those retailers are pushing beyond their basic department store models by blurring the lines between their usual offerings and those of grocery stores in hopes of drawing more consumers into their “one-stop shop” sites.
“Big-box retailers like Wal-Mart and Target are continuing to grow in the grocery space, and they’re doing all they can to differentiate themselves” from other stores, said John White, president of U.S. Xpress. “They do that through the quality and freshness of their product. They’re trying to improve that whole supply chain.”
CRST “isn’t just throwing trucks into a new market, they’re adapting to the supply chain,” said Tom Finkbiner, a principal with Surface Intermodal Solutions who along with fellow consultant Ted Prince is helping the carrier launch its expedited service.
Wal-Mart is starting to reshape the refrigerated produce supply chain, Finkbiner said, just as the retail giant reshaped packaging and sourcing. “They’re the biggest purchaser of perishables in the country. And they go straight to the farmer.”
Traditionally, produce is picked and shipped from the fields to final destinations, often hauled by owner-operators. That model is changing, the truckload carriers say. “Wal-Mart runs a large cross-dock operation in Southern California for produce,” U.S. Xpress’s White said. “They bring it in, run quality tests and load it outbound to their cold-chain grocery distribution centers.”
That gives large truckload carriers deploying team drivers advantages over independent truckers, Finkbiner, Prince and White said in separate interviews.
First, the large retailers are looking for suppliers that can scale capacity up or down. They also want consistent pricing and service. “The refrigerated market, like the truckload market, is tremendously fragmented,” White said. “There’s a need for someone to come in and play a more significant role with the customer. Size and scope certainly help. Shippers are looking for financially stable, technology-driven carriers who can meet stringent CSA standards and are positioned for growth.”
Owner-operators have an advantage, too — their numbers. U.S. Xpress and CRST are large (the fourth- and 11th-largest U.S. truckload carriers, respectively, ranked by revenue), but the universe of produce shipping is much larger. The sourcing business is partly what has built C.H. Robinson into a $9 billion freight brokerage giant.
Owner-operators, especially those who specialize in refrigerated freight, still will find plenty of loads to haul. But increasingly they could be regional loads, as more truckload operators are likely to take aim at the same expedited, long-haul freight.
Owner-operators are enjoying increased spot market demand for refrigerated equipment. A 12 percent surge in refrigerated food shipments sent spot market reefer rates up almost 2 percent during Thanksgiving week, according to TransCore Freight Solutions. The load board operator expected refrigerated food demand to remain high through mid-December as consumers stock up for holiday meals.
The team-based long-haul reefer service is a distinct business model that can’t be matched by traditional trucking or intermodal rail, Finkbiner said. “Intermodal is not going to work for perishables, and I’m a career intermodalist,” he said. Intermodal service is much more consistent than it once was, he said, but it lacks the speed to compete with team-driven trucks in a transcontinental service.
Scale is important to pricing, too. CRST says it can price its expedited team-driven service competitively with single-driver truck rates because it has 2,200 teams already hauling dry van and flatbed freight that can be switched to reefer. “They really have the critical mass to drive the cost down,” Finkbiner said.
Team drivers can log as many as 6,000 miles a week, said Finkbiner and Prince, more than twice what a single trucker could legally drive. “As you increase utilization, you drive the per mile cost of operating that truck down to where you can compete on rates with the company using that single driver,” said Prince, an intermodal transportation consultant and columnist for The Journal of Commerce.
In addition, CRST will offer fixed prices in return for a fixed number of loads, and guarantee shippers capacity. “Capacity is a big thing for the buyer,” Prince said. “The problem isn’t immediate availability of capacity, it’s assurance that capacity will be available when you need it. The value proposition for the shipper is that you’re going to have 52-week capacity and assurance you’ll have capacity in a surge.”