Earning Shippers'' Trust

Earning Shippers'' Trust

Copyright 2004, Traffic World, Inc.

The annual contract bidding ritual is ongoing at virtually every trucking company and its customers. You know the drill. Put out bids, describe your indescribable freight, exchange opening offers, tweak those bids, change your freight''s characteristics beyond description and - voila! - enter into a 12-month deal replete with reopeners, protection clauses, add-ons and other safety valves.

Charles Hammel, president of Pitt Ohio Express, says he has a better idea.

Now celebrating his company''s 25th anniversary as an Eastern LTL carrier, Hammel would like to relegate the one-year contract to the pile of green eyeshades in the regulatory relic attic. Pitt Ohio soon will roll out a program with several large customers of longer-term cooperative agreements based on trust, exchange of information and systems with the aim of improving business for both sides.

Can this work?

"It depends who you ask," Hammel says frankly. "If you ask the field sales rep, absolutely not. But if you go to senior management, they might be ready."

But absolutely, positively, Hammel said, the trucking industry needs a better pricing mousetrap.

"You have to start somewhere and we''re looking for ones who want to try this," he said. "Frankly, we''re not sure this is going to work. Our pilot program will be with as many shippers as we can find. But one thing we know is what the industry has done in the past isn''t working. Something has to be done differently. This is a good direction."

The purpose of doing this is to gain business over a longer period of time. Shippers who reward Pitt Ohio with cost-saving behavior each year will get a decrease in rates.

"We have to invest in each other, not pay the same thing and do less," Hammel said.

Through electronic bill of lading interchange, helping long-term planning with exchange of information, shippers can aid carriers through advance planning of loads.

"Our biggest issue is with shippers who call with freight late in the day and won''t tell you how much it weighs," Hammel said. "It''s tough to plan late in the day."

Still, Hammel said he''s not overly optimistic. "My guess is it largely will not be accepted at first. Shippers view transportation as a cost. Anything you save falls to the bottom line. A lot of shippers treat transportation as a commodity. But it''s more than a commodity now."

Pitt Ohio is seeking accounts to make a commitment "to be with us over time" in what Hammel promises is a two-way street.

"We will be held accountable, just as they will be held accountable," he said. "The (bidding) system now takes a lot of energy. Combing through contracts and what''s in them, where the liabilities are, is an issue of itself."

A third-generation trucker, Chuck Hammel is the sole family member in the business founded by his grandfather as Hammel''s Express in 1919. Brother Bob was bought out last year at privately held Pitt Ohio, which is forecasting $220 million revenue this year. Profit figures are not disclosed but officials say Pitt Ohio has an operating ratio in the low-90s.

Its financial strength, consistency over many years, high percentage of on-time deliveries, very low claims, probably the best safety record in the industry, ability to stretch next-day farther than anybody else are the results of operations and sales working together with a high-quality nonunion driver work force among its 2,400 employees.

"No one thing makes us head and shoulders above the rest," Hammel said. "Incrementally, we''re a lot better than anybody else."

Pitt Ohio is tearing a page out of the Con-Way Transportation Services'' playbook and not trying to battle solely on cost.

"We don''t want to differentiate ourselves with cost,'''' he said. "We want to enter the market and be a value-added player to the market. We have a service that''s better than what''s available, rather than a price lower than what''s available."

Pitt Ohio recently built a new headquarters on the banks of the Allegheny River. It was obviously constructed with one factor in mind: profitable growth.

"We will try to leverage in-house expertise to drive new offshoot businesses," Hammel says. "We have mechanics fixing our trucks. Why not take on more business? We have an IT staff that''s the best in the business. Why not open a personal computer express service for employees to get them fixed? Rather than lay people off, we''re looking to drive people toward us."

Pitt Ohio is shifting from a sales-driven organization, which most trucking companies are, to a marketing-driven organization. Ideally, it wants to identify industry segments and align with company leaders for freight on lanes that can be profitable.

As part of its differentiation effort, Pitt Ohio eschewed general rate increases this year in favor of customer-specific, lane-specific adjustments.

The shift toward accurate costing is allowing for such changes. Still, Hammel wonders if the market place is ready for such longer-term partnerships.

He''s about to find out.