Long Haul

Long Haul

Everything you thought you knew about the less-than-truckload industry is wrong. That certainly was one message from the FedEx purchase last month of Watkins Motor Lines, a trucker seemingly at the other end of the LTL spectrum from FedEx Freight and its "fast-cycle logistics" service.

Not that Watkins doesn't move fast, but it's at the long-haul end of a business the experts will tell you is going short-haul. And it's at the heavier, lower-yield end of a trucking business that's supposed to be losing ground to truckload and intermodal and where major players have become more valuable for their real estate holdings than their freight business.

But it turns out the long-haul LTL business is not nearly as troubled as some have suggested and is likely growing, although perhaps in patterns and routes that are different from what many in the transportation industry grew up with.

For one sign of why FedEx Freight, which has been rolling up big numbers since FedEx rolled up two acquisitions in the two-region regional provider, bought Watkins, just look at Averitt Express.

A Southeast regional LTL specialist with a sterling track record, Averitt in the past year opened facilities in California and the Pacific Northwest to pull in the shipments from gateways in an American economy increasingly driven by imports. And look at the huge warehouses going up in California's Inland Empire, Houston, Tacoma, Wash., and South Carolina.

"Shippers are changing their distribution patterns, consolidating their warehousing and shipping from these points to points closer to final destination," says Satish Jindel, a principal of SJ Consulting, which works in the parcel and LTL field. "You look at where people are putting warehouses and it's not inland, it's at the ports."

The long-predicted demise of long-haul LTL, he says, "is a false presumption. We have data showing the long-haul percentage of LTL traffic actually starting to increase."

The trouble is, as FedEx Freight presumably decided in putting its own network up against projected shipping patterns, short-haul LTL and long-haul LTL don't easily co-exist. FedEx could have gone the non-asset-based path, but FedEx as a whole rejected that strategy long ago and sticks closely to a guiding business model built on getting the most efficient use out of its transportation assets. FedEx sees trucks and planes not as costs but as revenue generators.

Now, with its national service, FedEx will go after shippers on most sides of the trucking equation, from package to long-haul LTL, and even offer a smattering of truckload through Watkins. That raises the possibility FedEx will buy a truckload carrier, of course, but that would put the company up against and working with a slew of transportation brokers. 

And UPS, long content to skim the cream from the LTL business, now finds its newly minted UPS Freight operation up against growing, multi-faceted operators (YRC, FedEx Freight, ABF) and several high-quality regional players (Con-way, Dayton Freight Lines, Estes Express, Averitt, Old Dominion, Saia and so on). 

So the next step likely will come from the competition, as long as these carriers believe that shippers are in it for the long haul.