Talking LTL with Con-Way's Gerald Detter

Talking LTL with Con-Way's Gerald Detter

Gerald Detter, senior vice president of CNF Inc. and president and CEO of its most profitable business, Con-Way Transportation Services (www.conway.com), sees renewed strength in the less-than-truckload (LTL) business dating back to July 2003. Con-Way had a very good second half of last year and a particularly strong fourth quarter, and that's carried into what through May has been a good 2004 as well.

There are several factors at play that have helped boost business for regional LTL carriers generally and Con-Way specifically, Detter observes. For example, improved consistent service by ground transportation has attracted what at one time were airfreight shipments. Too, he sees a shift from truckload to LTL, partly because of new hours of service (HOS) regulations that went into effect at the beginning of the year.

“Truckload carriers began to increase charges for stop-off freight that required substantially more time,” Detter points out. “Before, a typical stop-off charge by a truckload carrier might have been $50 a stop. Now rates have been increased as much as 200%-300%. So, increased stop-off charges and increased shipment rates combined have made LTL rates for these larger shipments more attractive. Freight has migrated back to the LTLs, where it was some years ago before truckload carriers got into handling larger shipments with stop-off fees.”

Another reason for overall growth in transportation is that shippers see great value in not having inventory carrying costs. Just-in-time ( JIT) in particular is very important to shippers today, says Detter. “They see the value in reducing their inventory,” he says. Instead of keeping supplies in the back room, shippers nowadays are relying on daily deliveries to replenish their stock.

Offering a variety of services to meet specific shipper needs is important for all carriers. Sensing that not every shipper needs JIT service, Con-Way designed a deferred service. The carrier picks up a shipment on one end, uses rail in the middle as its line haul, and then delivers it on the other end.

“The service is a bit slower but we reduce our standard price to our customer,” explains Detter. “Whatever the discount, we reduce that by another 20%, and pass the line haul savings on to the customer. For example, our ground express service from Boston to Los Angeles is four days. Our deferred service is seven days, but it's cheaper.”

Though business is good for most regional LTL carriers, there are a number of challenges they all face, some of which can cause problems and even higher costs for shippers.

According to Detter, capacity is an issue. “We plan to purchase 400 more tractors than we thought we'd need last year,” he says. “We also decided to delay retiring some trailers. In fact, we are adding some trailers, which we hadn't originally planned to do.”

Like other carriers, Con-Way has a sliding fuel surcharge scale that goes up and down with average costs issued by the U.S. Department of Energy. It is a necessary, uncontrollable cost passed on to customers by all carriers.

Detter says that rising insurance costs are as big a concern to the transportation industry as fuel costs — maybe more so, since carriers don't have a mechanism to easily pass insurance costs on to customers. At the end of 2003, Con-Way tried to introduce an insurance surcharge. “Our competitors used it to sell against us in a negative way,” Detter says, “so we've retrenched and are now trying to recoup those increased costs through our general rate increase.”

Of major concern to Detter is that the country's infrastructure that hasn't kept pace with the growth of traffic and the deteriorating condition of highways and bridges. However, he doesn't think that truck-only toll roads are the answer.

“Whether we like it or not, taxes are going to have to go up because we have to build more roads,” he observes. “Our economy depends on our infrastructure. As that infrastructure slows down transportation, it will slow down our economy. The economy, infrastructure and transportation are all directly linked.”

Detter caused a bit of a stir at the recent NASSTRAC conference when he said that if the transportation industry was to attract quality people, it would be necessary to increase compensation between 25% and 50%.

“Some 15 to 20 years ago, trucking industry jobs — both blue and white collar —were very attractive because they were compensated at a high level compared to other industries,” Detter says. “These are difficult, physically demanding, off-hour jobs. Drivers are sharing increasingly congested highways with the general public. Management jobs are more difficult, too, because of all the increased regulations. We haven't kept up from a compensation standpoint. The industry as a whole, if it's going to attract good people, has to get better — and I think it will.”

— Roger Morton

Logistics Today logo
July, 2004

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