Kerry Byrne has a good yardstick for the pace of economic recovery -- his company’s rate of revenue growth. Truck freight broker Total Quality Logistics took in $2.1 billion in total revenue last year, only three years after TQL first passed the $1 billion revenue mark in 2011.
In 2011, TQL had 1,643 employees; today it has 3,100 employees and 27 offices in 16 states, including several offices that opened or expanded during 2014 in Alabama, Arkansas, Georgia, Kentucky, Michigan, Missouri, Ohio, Pennsylvania and Tennessee.
“We are very aggressive,” said Byrne, executive vice president of the Cincinnati-based brokerage. “We aggressively invest in people and technology. We continue to add quality employees and train them intensely.” In addition, trucking “is a really big market.”
TQL is one of the largest truckload freight brokers, and like competitors Coyote Logistics and Echo Global Logistics, the company has enjoyed enormous growth in the past decade. Over the ten years since 2004, TQL’s total revenue has climbed by nearly 2,000 percent.
In 2015, “we expect to open a number of new offices,” Byrne said. “Much like the asset side of the business, we’re looking to hire the right type of folks. Recruiting is a big deal here.”
Logistics companies say they are tapping previously unmined veins of transportation spending as shippers outsource larger portions and multiple strands of their supply chains. That means plenty of new business for third-party logistics providers to tap.
Coyote also expected to top $2 billion in revenue in 2014, after acquiring Access America Transport, which added about $500 million to its revenue. Coyote has a 680 percent five-year growth rate and $1 billion in revenue in 2013, according to Crain’s Chicago Business.
Echo GLobal Logistics, which completed three acquisitions in the third quarter, expects 2014 revenue to range between $1.16 billion and $1.18 billion -- up from $888.2 million in 2013. The Chicago-based logistics company is aiming for $2 billion in revenue in 2017.
XPO Logistics, which has grown rapidly through acquisition since 2011, had a $3 billion revenue run rate target for 2014, after hitting $702.3 million in revenue and a $1 billion run rate in 2013. XPO had a 33 percent average quarterly growth rate over 10 quarters.
All these third-party logistics operators have identified trends or factors driving growth in third-party business and tapped them successfully. Unlike almost all its competitors, TQL has grown without the benefit of an acquisition -- its long-term growth has been totally organic.
TQL’s growth has been interrupted only once since 1997, when former shipper Ken Oaks founded the logistics operator. TQL’s revenue reached $573 million in 2008, but dropped 8.9 percent to $522 million in 2009 after the recession and global financial crisis.
Once the recovery began, TLQ’s growth resumed, as revenue expanded 46 percent in 2010, 36.5 percent in 2011, and 32.7 percent in 2012, according to the company’s website. That expansion slowed to 15.9 percent in 2013, as the U.S. economic recovery sputtered.
Last year, the company’s growth rate sprang back up to 31.3 percent, as U.S. gross domestic product grew 4.6 and 5 percent in the second and third quarters of 2014, generating more freight demand and tightening over-the-road truck and intermodal capacity.
“Capacity has not been able to catch up,” Byrne said. “We continue to see and feel the tightness in various markets across the country. It ebbs and flows a bit, but it’s still a tight market out there, and we’re in January,” typically a slower month for truck demand.
Byrne doesn’t see the situation changing dramatically in 2015. “The primary driver, no pun intended, is the driver shortage,” he said. “Everybody is trying to find a solution. Asset-based carriers are investing millions of dollars (in drivers), and we haven’t found the solution yet.”
For shippers, the solution will likely involve increased use of brokers and 3PLs that can provide the technology that connects them to much needed capacity. “The good news is everybody is investing in that technology to help the shipper and carrier,” said Byrne.
“You continue to see productivity improvements,” he said. “We’re really interested in the mobile applications. How can we alert drivers and carriers about potential loads? How can we make it easier for customers to check on the location of loads on their cell phones?”
Tightening capacity on highways and rails, port congestion and rapid truckload rate increases made 2014 a transformational year for shippers in the U.S. “The conversation has changed,” Byrne said. “We’re having strategic conversations about long-term relationships.
In 2015, Byrne believes shippers will compete more for carriers. “They’re examining their turnaround times and asking how they compare to other shippers and receivers. These conversations are really important, and they need to continue to happen,” Byrne said.
“At the end of the day, you need to move product, and you need a truck and a driver,” he said. If the U.S. economy continues to steadily expand at rates above 3 percent, as it has in four of the past five quarters, “it’s going to be very complex trying to find capacity.”