Can technology, partnerships keep small LTL truckers rolling?

Can technology, partnerships keep small LTL truckers rolling?

Trucking companies like Nebraska Transport Company are taking alternative routes to commercial success in a challenging market.

In a trucking landscape that often seems tilted toward large players, smaller companies need to be innovative to survive and thrive. Increasingly, that means turning to new technology and partnerships to offer shipper customers services that make smaller carriers more competitive.

Nebraska Transport Company, a regional less-than-truckload carrier with about $25 million in annual revenue, is taking both routes. The company is implementing new billing technology from DDC FPO and handling electronic logging with onboard computers from Zonar Systems.

In addition, NTC also cemented an alliance with a larger regional LTL carrier, AAA Cooper Transportation, that expands its footprint, giving the Midwestern carrier access to customers and consignees in the Southeast. The two carriers have integrated key computer systems.

“We’ve made several strategic moves to better our business and lower our costs in the last four or five months,” Phil Holliday, executive vice president of sales for NTC. “That combined has allowed us to get much more competitive and start to place more freight in our trucks.”

Loading more freight in a stagnant economy and in a region that hasn't enjoyed the best of the recovery since energy prices began to drop, can be a tall order. Larger LTL carriers, with a few exceptions, have seen volumes drop as customer demand wallows and they prune less profitable freight from their networks.

But some regional carriers are catching the freight dropped by larger competitors, which they may be able to handle more profitably. Regional players are also expanding, adding new terminals and services. New England Motor Freight recently expanded service in West Virginia, for example, pushing its regional borders.

“Growth is available, if you have competitive advantage,” David Ross, a managing director at investment research firm Stifel, said at the SMC3 Connections 2016 conference in Chicago June 27. Unlike in previous economic cycles, “low price is not an advantage,” he said. Good service is an advantage, Ross said.

"There are three keys to LTL success," he said, "knowing your costs, pricing appropriately and improving density."

Being small can be a disadvantage, Satish Jindel, president of SJ Consulting, said. “The trouble is having the scale to reinvest in your business,” he said. The return for dimensioning equipment, for example, is different for a $25 million motor carrier than for a $250 million one.

Smaller trucking operators need to be nimble and able to rapidly change course to meet customer demands. If they can’t, Jindel said, they should consider selling while their business retains value. Several smaller, and some not-so-small, LTL carriers have folded in recent years.

Trucking bankruptcies in the United States nearly doubled in the first quarter, according to trucking analyst Donald Broughton. The number of carriers that declared bankruptcy rose from 85 in the first quarter of 2015 to 160 in the first quarter, the senior research analyst and managing director at Avondale Partners said.

“Truck tonnage will contract for the next six months,” falling 1 percent to 2 percent, he said at the Transportation Intermediaries Association conference in May, putting more pressure on smaller fleets. Those companies will need to work harder and smarter to survive.

Like many smaller companies, NTC emphasizes building close connections with its customers, many of whom run small businesses. The company isn’t competing for business with industry giants; it’s looking for business those giants typically won’t take because of scale.

“We look for niche markets and niche shippers, that’s where we can be unique,” said Kevin Figg, vice president of business development. “We want to take a customer-specific approach rather than play by hard and fast rules” applied to customers across the board, he said.

The company got its start when Richard B. Holliday, Sr., Phil Holliday’s grandfather, was fired by another carrier for “deadheading” 450 miles (traveling without a load) to fulfill a customer request. “He did that once and was warned. The second time he was fired,” Holliday said.

“He told the customer he could lose his job, but the customer said they’d lose everything.” On his own, Holliday purchased the dormant operating authority of Nebraska Transport and went into business with two terminals, a couple of borrowed trailers and “an old Hertz rental truck.”

Today the company, with headquarters in Gering, Nebraska, has nine LTL terminals serving shippers in a 10-state region stretching from Wyoming and Colorado to Indiana and Wisconsin. NTC also has a more varied service portfolio, something Holliday called critical for a smaller carrier.

“We don’t just do LTL,” Holliday told JOC.com during an interview at the SMC3 conference. “We have a truckload department with flatbeds, vans and specialized equipment. We have a brokerage division as well.” Like larger competitors, NTC tries to fulfill customers’ varied needs.

“With smaller shippers, you often know the chief executive officer,” Holliday said. “You may know everyone in the organization. It’s a more personal relationship.” Said Figg, “You get a sense of being in a fight together. A smaller shipper, or a mom-and-pop store, will identify with the small carrier.”

That makes losing customers more painful, especially if the loss is due to an avoidable billing error. “With a larger customer, usually you’d have multiple chances to make that right,” Figg said. Smaller customers, however, are more likely to break the connection and move on.

With its manual billing system, “we were starting to see an erosion in our client base, the smaller or midsize shipper that would go away,” when mistakes were made Figg said. “That was a real concern of ours” and led to the partnership with DDC FPO, a supply chain software provider.

NTC is now using DDC’s billing software, and the company says its billing accuracy has improved from 77 percent to 99.5 percent. The switch to an automated system also reduced training time for billers and helped reduce employee turnover, Holliday and Figg said.

Just as important, if not more, the company is using the system to collect billing data that can be used in high level analysis of its accounts and costs. “There’s a tremendous advantage for us as a carrier to have a fixed cost per bill, to identify what that is for period of a contract,” Figg said.

The carrier began working with DDC more than a year ago. “We have a dedicated account team and they come to us with new solutions,” said Holliday. “We’re doing a data capture project that puts old documents into a usable format. And we’re also looking at analytics and intelligence.”

NTC began installing onboard computers from Zonar Systems to prepare for the upcoming electronic logging mandate and to get its drivers “comfortable” with the technology, Holliday said. “We want to be fully ready when the mandate comes in December 2017,” he said.

Those onboard computers also create a direct connection between NTC’s truck drivers and its maintenance shops, he said. Zonar’s core products allow information on pre-trip truck inspections to be transmitted directly to shops, instantly notifying mechanics of problems.

“Our shop now has a direct line to our drivers,” said Figg. “This has helped lower our vehicle maintenance CSA scores (under the federal Compliance, Safety, Accountability program) drastically. They’ve always been good, but it’s allowed us to step our game up.”

The partnership with AAA Cooper Transportation, the 15th-largest U.S. LTL carrier, according to SJ Consulting Group, is another step up for much smaller NTC. The two carriers linked their information systems using application program interfaces, or APIs, to transfer data seamlessly.

“That gives the customer the ability to track and trace” shipments as if they were being moved by one carrier, not two, Figg said. “Our partnership has been ongoing for many years,” he said, but over the past year the trucking companies ramped up the level of cooperation.

“We’re starting to look at how we expand on it, we’re trying to pull and push freight both ways,” Figg said. AAA Cooper, with more than $500 million in revenue last year, is much larger than NTC, and that gives the Nebraska company more pull with shippers in its Midwest territory.

“That’s why our partnership with AAA Cooper has been so valuable,” Holliday said. “Our geographical location and size is a challenge for us.” AAA Cooper is a “like-minded carrier” when it comes to service standards, Figg said, which has supported the partnership.

“It becomes difficult, especially in trying economic times, to sell someone on the value that a regional LTL carrier provides,” Figg said. “There are certain advantages we can offer in a short-haul market, including next-day service and less touching of freight.”

When the economy is slow-moving or stagnant, however, “that makes it trying for us,” he said. “You see shippers consolidating the carriers they use, which means less opportunities.” Through the adoption of new technology and its partnerships, NTC hopes to keep its seat at the shipper table.

Contact William B. Cassidy at bill.cassidy@ihs.com and follow him on Twitter: @wbcassidy_joc