To say that supply chains have undergone a major transformation in recent years is almost an understatement. As companies have raced into emerging markets in countries such as China and India to take advantage of low-cost manufacturing and sourcing opportunities, service providers representing all modes of transportation have been right behind them, rolling out new products and services to keep pace with rapidly changing demands.

“The need that our customers have for services has evolved significantly in the past several years,” confirms Roy Slagle, SVP Sales & Marketing, ABF Freight System (www.abfs.com). “It used to be that our customers’ logistics components were compartmentalized, and therefore their suppliers’ services were also compartmentalized. Typically, you had a traffic manager who was responsible to get product from Point A to Point B, and that was all that particular person focused on. He looked at the carrier to move that freight from Point A to Point B, and that’s all that we focused on. Today, the art of logistics is such that it is causing logistics professionals to expand their horizons and look at the supply chain as a whole and how that fits in to their company’s overall strategic objectives. They’re also looking to the carriers to be more than simply a trucker.”

An example of how this has manifested is the proliferation of regional distribution centers. “Many of our customers have regionalized their shipping,” says Slagle. “They have set up distribution points in key markets so that they can reduce their reaction time—speed-to-market—and likewise, carriers have adapted. We have enhanced our regional service tremendously from a transit time perspective and from a visibility/communications/technology standpoint to support them. Furthermore, more companies are sourcing globally than in the past, so there’s a need for worldwide visibility and worldwide capabilities. At ABF, we’ve responded by combining our international department with our supply chain services department. That has allowed us to take a more integrated approach to customers who are sourcing from China, for instance. It gives them a single point of contact from the foreign door, or the foreign port, to their final customer, whether the customer is that retailer importing directly for their own use or a middleman who is moving the freight for another customer.”

In addition to improving product offerings and enhancing services, trucking firms are continuing to look externally for consolidation opportunities. Duluth, Georgia-based Saia (www.saia.com), a major LTL player, recently purchased The Connection Company, which has resulted in expanded geographic coverage.

According to Saia’s president and CEO, Rick O’Dell: “In the highly competitive LTL market environment, it is essential for successful carriers to differentiate themselves from competitors. One way Saia is working to meet customer demand is through acquisitions, like the recent purchase of The Connection Company, which gives customers a larger service area and improved transit times to key markets. In addition, we’re trying to exceed customer demand by introducing products that our customers tell us are important to them. Saia launched Xtreme Guarantee, which guarantees freight pickup through invoicing with a 100 percent money-back guarantee. The Xtreme Guarantee is based on Saia’s six Customer Service Indicators. If we fail to meet any of the indicators, the customer’s invoice is entirely written off. No other carrier comes close to this commitment,” says O’Dell.

Slagle points out that in addition to time-definite delivery, ABF’s customers are also looking to reduce their inventory. “That’s a focus for many if not all of our customers. And, they’re looking to the transportation companies to assist them. We do that through a number of our products. Our TimeKeeper product, which is an expedited, guaranteed product, is one example. Again, we’re seeing an evolution in the marketplace. Previously, customers used to view expedited offerings such as TimeKeeper as being an ‘emergency response’ service. In other words, if they required that type of service it must have been because of poor planning. But today, many customers have begun using expedited products as part of their overall supply chain strategy. The reason is largely due to vendor compliance. This is a huge issue for many companies that have to comply with a retailer’s requirements, for instance, which are very specific concerning everything from packaging to labeling to delivery windows. Everything must be extremely precise. And, while everyone’s obviously mindful of their transportation costs, more companies are stepping back and looking at the overall cost of that whole supply chain and realizing that transportation is just a single piece of that. Therefore, if they can pay a small premium for a guaranteed delivery to consistently hit that customer’s delivery window, it may end up being a more economical choice than simply going with the cheapest mode of trucking.”

As part of their OD Global suite of services, Old Dominion Freight Line (www.odfl.com) offers customers a Nationwide Container Drayage service. The service transports customers’ full container shipments from any point of origin in the continental U.S. to any one of the company’s ten domestic drayage service centers, or from these service centers to anywhere in the continental U.S. The service also covers container loading, unloading, consolidation, deconsolidation, warehousing, and boasts a 99 percent plus on-time delivery to and from the ports. Similar to the other major players, OD has expanding its coverage to markets in the Caribbean, Europe, the Far East, Central and South American, and various points in between.

Setting up shop in China

As companies have expanded operations in China and elsewhere, so too have their transportation service providers. YRC Worldwide (www.yrcw.com) made news in 2005 when it purchased a stake in JHJ International Transportation, a Shanghai-based air forwarder. Since then, other trucking firms have made similar expansions.

Greenbay, Wisconsin-based Schneider National (www.schneider.com) started with the acquisition of American Port Services, a company with operations at six major U.S. ports, including Seattle and Long Beach, last year. Next, it bought American Overseas Air Freight. Within the next few months, Schneider National will purchase a Chinese logistics company to help it gain control of its customers’ freight from the factory door.

“There’s a black hole between the factory and when containers get loaded at the port,” said Schneider National’s president, Tom Escott, in a previous interview. “Did the supplier ship what was intended, and was it on time? Did SKU quantities look correct? How were they sequenced in the container? By gaining control sooner, we can give our customers a couple of weeks’ better visibility into their supply chain.”

To make its way into the Chinese market, Con-way Freight (www.con-way.com) partnered with APL Logistics (www.apllogistics.com) to launch their OceanGuaranteed service, which handles less-than-container load shipments in a ‘port-to-door’ guaranteed delivery service from Hong Kong, Schenzhen, and Shanghai, through Con-way Freight’s Los Angeles terminal to destinations in the continental United States. Transit time for the freight will be 18 or 19 days, which is about twice the transit time of airfreight from coastal China but at a quarter of the cost.

Meanwhile, regional LTL carrier Averitt Express (www.averittexpress.com) made its mark with PortSide distribution centers in Seattle, Oakland, and Panama City, Florida.

As truckers move into overseas market and enhance their product and service offerings, the defining line between transportation service provider and third-party logistics provider begins to blur. How will truckers compete in this new arena?

“It’s a big market, number one,” answers Slagle. “Certainly, we have a lot of worthy competitors. Yet, whether you look at our domestic operations or global operations, it really comes down to an individual customer choosing the best value with the best provider they can to meet their specific needs. When we’re able to do that, and we’re able to do that better than a UPS or FedEx, then we win the business, and when we’re not, we don’t. Those are both great companies and they have a global footprint, but they’re not necessarily the top choice for every customer in the marketplace.”

Sidebar: Opportunities Also Exist Downstream

Although his primary business is airfreight forwarding, William Wascher, president and CEO of SEKO (www.sekoworldwide.com) says his company’s fastest growing business niche is direct-to-consumer truck deliveries.

“As more and more retailers enter the Internet marketing arena, and consumers increasingly turn to the convenience of online shopping, the freight forwarding industry has witnessed a consequent surge in the home delivery business segment, especially during the holiday season,” he says. Wascher points out that according to ComScore Networks, an Internet research firm, during the first twenty-seven days of November 2006, total online retail spending reached $9.48 billion, a 24 percent increase over the same period just one year ago.

“The term Cyber Monday used to describe the busiest online shopping day of the year is also a misnomer,” he adds, “since the busiest online retail days typically occur between December 5 and 15. This last-minute Internet ordering places further pressure on freight forwarders to add additional services as it leads to an increased demand for direct-to-consumer deliveries. SEKO, which has been in the home delivery business for 18 years, has seen a dramatic growth in its direct-to-consumer delivery business this season.”

Wascher says that in 2005, SEKO handled roughly 12,000 deliveries in the month of December alone. That figure has jumped to about 60,000 for this past December. He expects this trend will continue to expand as additional retail companies market their products online and as more consumers turn to convenient, and often more inexpensive, Internet shopping and direct delivery to their homes and offices.

Rapid growth always produces challenges, acknowledges Wascher, “but SEKO has been able to increase its market share in this rapidly expanding business segment due to its strong network of offices, agents and carriers, and a strong understanding of the needs of its customers, as well as their customers, which enables it to handle the growing shipment volumes. For example, to accommodate the flurry of peak season shipping during 2006, SEKO has been able to make its truck fleets more proficient by running dual-purpose trucks that make deliveries to retail stores such as Bombay and other large retail stores by day, and by night are used to make home deliveries, creating more efficiencies for the entire shipment process without adding additional equipment costs.”

Wascher says that the driver behind this expanding shipment trend is technology. “SEKO is well positioned to compete in the direct-to-consumer marketplace with larger, more traditional integrated carriers due to its customer-focused approach to supply chain demands and experienced local offices, but also because of its close relationships with its retail customers and vast investment in state-of-the-art IT advancements that enable it to handle the explosive growth, while allowing SEKO to control overall costs. We’ve developed IVR (Interactive Voice Response) systems to send out automated telephone calls or emails directly to the end-consumer that allows them to either leave messages or schedule appointments for the delivery of their goods, updating its operating systems in real-time. SEKO can also connect directly with customer’s Web sites and/or integrate directly to the retailer’s operating system through EDI, XML or FTP file sharing to confirm when shipments are ready for delivery, expediting the entire shipment process. The consumer also has the ability to reply to SEKO directly indicating a preferred date and time for delivery.”

Wascher says that SEKO’s commitment to integrated customer service and the use of technology is what enables the company to be in a better position to service its clients better than many in the industry. It not only provides a generic 800 number, but a name and face to facilitate the many shipments and appointments throughout the country. In this way SEKO is able to successfully compete with the larger integrated carriers in the home delivery arena.