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Think Globally Truck Regionally
Monday, 15 March 2010 00:00
Truckload carriers shorten their hauls; broaden their business to secure freight

The open road doesn’t have the allure it once did for some truckload carriers, or for their shippers.

Companies with business models once grounded in long-haul trucking are shortening trips and shifting resources to intermodal and other services as shippers re-engineer supply chains to bring distribution points closer to suppliers and customers.

The carriers are following the freight, and in 2010 that freight is flowing fastest in regional lanes, they say. For many, the shift means more than shorter trips as they seek to broaden their business, increase intermodal capacity and expand into more specialized services.

These trends have been under way for some time, but they gained speed in 2009 and are moving faster in 2010 as the nascent recovery puts more freight in motion.

“Manufacturers, vendors and retailers are all relocating closer to reduce transportation spend,” said Herb Schmidt, president of Con-way Truckload in Joplin, Mo. “That’s created far more regional opportunities than there were 15 or 20 years ago.”

Now those opportunities abound, he said. “A typical bid package from a Fortune 500 company is 70 percent regional in nature, only 30 percent long-haul.”

That increasingly regional focus among shippers was reflected in many carrier length-of-haul figures reported in the fourth quarter. USA Truck, Van Buren, Ark., cut its average length of haul 14.2 percent from a year earlier, to 594 miles, noting it is transitioning to shorter lanes “where freight is more abundant” and it is able to load its trucks more times per week.

Omaha, Neb.-based Werner Enterprises reduced its average length of haul 12.6 percent to 463 miles. Long-haul, one-way trips now represent about one-sixth of Werner’s total truckload business, down from about one-third a few years ago, said Robert E. Synowicki Jr., executive vice president and chief information officer. “We’ve seen a lot of shifting between long-haul, one-way freight and different regional markets.”

The question is whether the shift is a short-term response to economic conditions or a fundamental change in distribution patterns. Moves at several carriers suggest they believe there is a deep underlying change in shipping patterns, but there also is an impetus in the trucking industry because the shorter hauls are more attractive to a larger pool of drivers, making recruiting and retaining drivers easier.

Green Bay, Wis.-based Schneider National is aggressively expanding its regional operations in a bid to radically change its freight mix. In 2008, only 5 percent of Schneider’s freight was regional. Today, that figure is 25 percent, and Schneider’s goal is to make regional freight account for half of its truckload business.

Strong demand is building a denser freight base in all of Schneider’s regions, propelling expansion at a faster pace, Vice President Mike Hinz said. The company plans to hire 2,100 regional drivers this year, bringing its total regional fleet to 2,500 units.

“The customer demand for our regional service has exceeded our expectations and created enough freight density to get drivers home weekly,” he said.

Con-way Truckload now has about 350 trucks in regional service, and that number is rising every month, Schmidt said. “There’s growing opportunity to redeploy assets” from long-haul to regional service. The company has about 2,700 tractors altogether.

“I love the regional business,” Schmidt said. “We’ll be just as comfortable in that space as in the long-haul business.” And while more long-haul truckload traffic is shifting to intermodal rail, it will never vanish, he said, “because there will never be enough rail coverage to fill that void.”

Journal of Commerce, 3/15/2010