Globalization is a fact of life as businesses increasingly extend their operations and source products offshore to drive down production costs. And with offshore sourcing has come a convergence of global and domestic transportation, meaning that LTLs are now part of the global supply chain.

Shipments are coming into North America from every area of the globe, leading to unprecedented congestion at air and seaports, and causing a huge demand for ground transportation. "Basically, the imports are coming into the U.S. faster than we can handle transporting them to the customer," says Joe Perez, Director of Ground Transportation, Pilot Air Freight.

The line where global shipping ends and domestic transportation begins is blurring. Extended global supply chains can stretch from a plant offshore all the way into the consumer's home, involving multiple modes of transportation. Today, ground transportation is playing a critical role in both air and ocean imports. Getting the goods to North America is only part of the equation; getting them out of the ports and to their ultimate destination has become a significant challenge.

Moving from regional carrier to global provider

Ironically, carriers report that globalization has resulted in a shift to more regional shipping. When the majority of manufacturing was done domestically, most goods shipped by truck were long haul. Today, with the tremendous amount of goods coming from offshore, the pattern has changed. Many of the containers coming out of the ports are shipped by truckload to a regional distribution center. They are then shipped out through LTLs for shorter trips. "Regional transportation, say 800 miles or less, has grown at two times the pace of long haul," says Chris Baltz, Vice President, Marketing & Pricing, ABF Freight System.

It is a new world, for both carriers and their customers. "It used to be that manufacturing happened at home and time-to-market was three days. Then the manufacturing moved to Central America, and it took nine days to bring the product to market. Now, manufacturing has moved to China, and it takes thirty days to market," says Chuck Odom, Vice President, Sales & Marketing, Averitt Express. That means that businesses are looking to minimize their transit times, and to drive costs out of their supply chain. As the last link in that chain, domestic transportation providers have had to adapt along with their clients.

For Averitt Express, long known as a regional LTL carrier, the changes have been dramatic. The company has expanded its service offerings in order to meet the demands of its clients, and has reached beyond the regions it has traditionally served. "We are one of the few providers with an LTL infrastructure as well as a truck fleet. That combination has been a key part of our long term vision," says Odom.

What Averitt Express aims to do is to control more of the truckload part of the chain, bringing full loads into the areas it has traditionally served as an LTL. Part of this strategy includes establishing a presence on the U.S. West Coast in order to have access to the shipments as soon as they enter North America. Averitt Express is getting involved right at the port. The company's Port Side service provides delivery direct-to-store, or to the distribution center. Instead of moving full containers across the country, Averitt Express offers customers the ability to sort and offload their products directly into trailers, consolidating freight while still portside and cutting expenses.

Many other LTL carriers have become involved in nationwide, long haul delivery. By extending their own coverage on certain lanes, or by partnering with other carriers, LTLs are responding to customer demands that they offer seamless coverage to most points in North America.

But moving the goods is only one aspect of the business; LTL is no longer just a matter of shipping the products down the highway. "We can sort, bag, tag, or coordinate matching sets," says Odom. "The customer has asked us to move further up the supply chain." Perez concurs. He says that while the majority of goods coming into the ports are still shipped in their containers, some do require break bulk and distribution directly at the port. "LTL is the most cost effective way to move the goods," comments Perez.

Perez identified the capacity crunch as the biggest issue facing carriers and shippers today. Globalization has highlighted the lack of equipment and drivers-a situation that is not likely to be rectified any time soon. According to Perez, this has increased demand for Pilot's services outside of the LTL arena. "Customers are being turned away by truckload carriers who cannot provide the necessary equipment, and being told that rail or LTL won't get it there fast enough. We are seeing an increase in our second day or economy service to help get products moving."

Capacity crunch is another reason for the growth of regional transportation over long haul, according to Perez. An example is the shortage of available equipment at the ports. "Importers can't secure enough carriers to move the goods so they are contracting more of it to move LTL in order to fill their customers' needs."

Both Baltz and Odom say they are also expanding their service offerings to cover other elements of logistics, such as brokerage and warehousing. Customers who have established long-term relationships with their LTLs are asking them to get more involved and to reach further back into the supply chain. "Our customers are asking us to become more involved. We don't traditionally start out with that level of service, but it grows," says Odom. It is no longer good enough to provide a single service, customers see global transportation services as interdependent and interchangeable, and expect their partners to manage their supply chain using the most cost effective and efficient modes available.

Forming unique partnerships

In order to provide end-to-end solutions, most LTLs are looking to other logistics service providers to help round out their service menus, and in many cases, this means LTLs are partnering with their competitors. "Averitt is built on partnerships. We try to do the right thing for the customer and if we need to, we will find the right partner," says Odom. For many LTLs, the outcome is a business model similar to that of a 3PL-managing supply chain solutions with multiple partners with out making immediate capital investments in their non-core areas.

Partnerships are extending offshore as well. Currently, Averitt Express has partners in several countries; ABF acknowledges that there is the potential for offshore partners, and Pilot Air is a member of the World Freight Alliance (WFA), a network of freight companies around the globe. While China has been the focus for most of this year, predictions are that India and Africa will continue to develop as outsourcing locations. The upshot is that LTLs looking to partner offshore will need multiple partners in several nations, which is a fairly complicated undertaking.

Global outsourcing and offshore manufacturing have brought some unique challenges to businesses, which in turn have become challenges to the LTL industry. Companies operating today carry lean inventories; a delay in a shipment can close down an entire production line. "Reliability and consistency are just as important as speed," comments Baltz. It is absolutely critical for transportation companies to have the goods in the right place at the right time, all the time. Companies that fail to meet the timelines established by their clients can face charge backs, putting pressure on transportation providers to provide reliable service. Carriers must also ensure that freight is not lost or damaged.

Industry experts say that it is a carrier's world and that shippers must work proactively with their transportation providers to maximize their supply chain efficiencies. In some cases, this means paying more for premium services. "Traffic managers now see premium service offerings as a normal part of managing their supply chain," says Baltz. Services such as next day delivery, or time guaranteed services come at a price, but Baltz says customers are willing to swallow the costs to guarantee their supply chains run smoothly.

The enhanced role of IT

Like other players in the supply chain, LTLs have discovered that one of their key strategic advantages is found in information technology. "Information is just as valuable as the actual freight," says Baltz. There is increased demand for shipment visibility and control, and customers want the ability to make changes while the goods are in transit. Both ABF and Averitt Express have made significant investments in technology in an effort to streamline processes, cut out unnecessary delays and improve security.

According to Baltz, ABF has a dynamic rerouting system that lets the customer enter ABF's system, access their inventory and redirect shipments with out having to contact an ABF representative. "As the critical last leg, ABF's [technology] enables the customer to redirect inventory at the last minute," says Baltz. "There's no delay this way." He adds, "And after all, it is their freight and the information belongs to them." Customers can now make changes to the routing while the goods are still offshore, while they are being loaded, while they are in transit, and even as they are being unloaded at the port.

Customers are also asking for tools that will give them the ability to integrate shipment data from the carrier into their own systems. They want to be able to look at how much they ship to one customer as compared to another, and to use that information for their business planning. Because they are often the last carrier to touch the shipment, it is absolutely critical that today's LTLs have the systems that can communicate information to their customers in real time.

There is tremendous opportunity for LTLs as they continue to grow and adapt. Globalization has highlighted their importance as a key link in the global supply chain. With complex outsourcing arrangements, and ever lengthening supply chains, shippers will be looking to the logistics partners they trust to help them navigate the complexities of global transportation. "It is not their core business," says Odom. "Customers want a partner in their supply chain whom they trust and who is accountable and reliable." Odom says that the carriers have to become more flexible along with their customers. He sees that many businesses no longer want to invest in plants offshore, but instead plan to locate production facilities and contract manufacturing to the most cost effective locations around the globe. "We have to be prepared to provide multiple services and to do so with different modes," says Odom.

Just as businesses today have to compete globally to survive, domestic transportation companies have to think globally as well. Shipping is no longer a strictly divided process, where international ends and domestic begins. Global shipping encompasses every movement of the goods, from the time it leaves the factory in China, to the minute it arrives on the store shelf. As the critical last link in the supply chain, LTLs have a critical role to play, and they have no intention of being left behind.

Sidebar: How Con-Way Handles Global Trade

It's a conundrum-how can a regional carrier handle the global supply chain demands of a customer?

"The changes from the shipper's perspective have been phenomenal over the past decade," says David S. McClimon, President, Con-Way Transportation Services. "They used to manufacture and ship to Distribution Centers, await orders and then ship to customers with almost all the activity contained within a region. With off-shoring the supply chain got stretched, complexity increases with multiple international partners and touch points. By the time the freight hits the ports and the borders, the need for speed is even greater."

This changing context has been particularly vexing for LTLs, whose range of service has traditionally been regionally focused. Con-Way has emerged as a leader in the new LTL environment by adding to its already vast service center network (adding 950 dock doors, an increase of 6.5%, over the past three years) and emphasizing flexibility (to service the congested Chicago-land market, for example, there are nine separate facilities spread throughout the area). Con-Way has also up-graded its offerings with such services as express coast-to-coast (customers asking for three and four day coast-to-coast service is one of the company's fastest growing segments), consolidation and deconsolidation, or intermodal.

Before, when LTLs were the last link in the supply chain, their customers were not calling for much supply chain visibility. But that has also changed. Providing such visibility, however, is not easily done with customers using many different carriers around the world employing different supply chain management IT systems with few universally shared standards.

In this area, though, Con-Way has a distinct advantage when partnering with its fellow CNF company, logistics provider Menlo Worldwide. As a way of providing the much-demanded visibility, Menlo President Bob Bianco cites Menlo's Global Visibility Tool, a system into which all partners along the supply chain feed information and which enables customers to arrange a LTL shipment, track it, be notified of changes and have delivery confirmed-all on a web-based Internet site.

"We try to match Con-Way's capabilities with the needs of the global customer, "says McClimon.