Saia Stretches Out

March 15, 2007
When Saia Motor Freight Line, Inc. (Duluth, Ga., acquired Madison Freight Systems, Inc. (MFS, Waunakee, Wis.) in early February, it was

When Saia Motor Freight Line, Inc. (Duluth, Ga., acquired Madison Freight Systems, Inc. (MFS, Waunakee, Wis.) in early February, it was just one more step forward in management's strategy to increase density in current markets and provide full-state coverage, says president and CEO, Rick O'Dell. Saia now serves 34 states with 151 terminals.

Spun off from Yellow Corp. in 2002 along with Jevic Transportation (Delano, N.J.,, under the umbrella of SCS Transportation, the two firms parted company in 2006 when Jevic was sold to an affiliate of Sun Capital. SCS changed its name to Saia to reflect the company's present focus.

"The key items in the Jevic separation were that we received about $50 million of proceeds, including some tax benefits," explains O'Dell "That further strengthened our balance sheet and acquisitions we made from a cost standpoint were pretty small. We were able to pay cash."

How Saia has grown
O'Dell says that customers are requesting a broad geographic coverage through a direct delivery network that offers aggressive transit times. "When you're handing off to another carrier, that obviously slows transit and you lose control, even if you have a quality partner," he observes. At present, Saia covers the Northeast, one of two regions of the United States where it does not have direct coverage, with partner relationships. His vision is to become best in class with coverage across North America with direct delivery capabilities.

Although Saia has a history of expanding organically, O'Dell's position is that if it's possible to find the right acquisition in a crowded market and buy an established carrier, that's always an option. "If there are seven good players," he notes, "and you go in and buy somebody, then there are still seven good players. If you go into a new geographic area and open there, it becomes eight." Although Saia does not do much business with Canada or Mexico, it does have partner carriers for both countries.

Less than 2% of Saia's moves go by rail. O'Dell says rail travel is generally too slow for its needs since 60% of its freight moves overnight. However, as the company expands its geographic coverage, he says there may be some advantage in using rail, particularly in lanes where rail offers expedited service.

Saia is a non-union company. Although it has to manage driver shortages in some pockets, it has nowhere near the problems of truckload carriers, claims O'Dell. "Truckload turnover for drivers is about 130% per year," he says. "Ours runs about 18%. The advantage we have is we get people home a lot more. City drivers are home every day. About 60% of our line haul drivers run a meet-andturn or a lay-down run where they get home every other night or they're home every night. We have about 100 teams and even our team drivers are home on the weekend."

O'Dell says truckload carriers may run a truck for just three or four years With shorter distances to travel Saia can keep a truck in service for as long as 12 years: In road operations for four or five years, and then city operations. "We run it until the end of its useful life," O'Dell explains, "and then sell it for $4,000 or $5,000. We basically replace one-twelfth of our fleet every year. So having an engine specification change doesn't really have that much of an impact on us."

Unlike truckload carriers, Saia doesn't pre-buy. "If you look at someone in truckload," he says, "if they're replacing all their trucks every three years, they can pre-buy and maybe not buy for a whole year and save on a third of their fleet when dealing with a situation like the need to buy new engines to meet new government regulations. For us it's more like 7 or 8% of our fleet is impacted by a spec change. We didn't accelerate our purchases."

Using technology to keep customers aware of shipment status and proactively notify them of exceptions—Saia calls them "jeopardized shipments"—are a necessity that the carrier provides. "Customers have a higher requirement for data than in the past," says O'Dell. "If you're on time 98% of the time, for that 2% when you're not, you have to tell the shipper about it."

As far as keeping up with current technology, Saia purchased 300 tractors within the past year that employ an Eaton Vorad (Vehicle On-board Radar, system. The collision avoidance system keeps drivers aware of safe following intervals and warns of potential hazards. It helps them navigate safely through fog, snow, dust and rain and acts as an extra set of eyes for driver blind spots.

Surveying the market
O'Dell sees a push toward consolidation within the LTL industry that he expects to continue. One driver of consolidation is customer demands for carriers to be complete service providers. As a result some necessary new technology investments for visibility and reporting can be difficult for niche carriers to make and maintain competitiveness.

"As you look back over the last couple of years," says O'Dell, "the freight environment has been good and there are still carriers going out of business. There seems to be more divergence between the haves and have-nots." O'Dell feels that if there's a prolonged economic slowdown, weaker carriers are not going to be able to stay in business, which will lead to further consolidation.

"Bigger isn't necessarily better," concludes O'Dell. "What determines whether you're better or not is how you respond to customer needs, how you treat your employees and whether you continue to work well together. We do a great deal of research on those matters. We use our customer service indicators to measure our performance and are always looking for continuous improvement."

Saia's Rick O'Dell

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