Lower freight levels galvanize consolidations, enhanced servicesBy Peter A. Buxbaum, AJOTReduced freight levels and resulting lower freight rates are making for increased competition and tighter operations in the less-than-truckload trucking industry. LTL has even been hit by a syndrome normally reserved for truckload carriers: higher than usual driver turnover. “The economic environment is flat,” said John O’Sullivan, President of USF Holland, a regional LTL carrier and a component of YRC Regional Transportation. “We haven’t seen the peak season start yet.” USF Holland is the largest subsidiary of YRC Regional Transportation, which consists of two other LTL carriers-New Penn and Reddaway-and one truckload company. YRC Regional, in turn, is a component of YRC Worldwide, which encompasses national LTL carriers Roadway Express and Yellow Transportation and a third-party logistics provider. Typically, the latter part of August through November is the busiest time of year in the LTL industry, as carriers move holiday traffic. “We saw the same phenomenon last year for the first time,” said O’Sullivan. When expected business does not materialize, carriers tend to “hunker down and make the most with what we have,” O’Sullivan commented. Part of hunkering down involves attracting more volume with lower prices. “If additional volumes come, they come, if not, not,” O’Sullivan added. “Last year’s peak season was lower than usual and we are planning for the same thing this year. If it turns out to be better, that is upside for us.” O’Sullivan blames the peak season shortfall on slower industrial orders, particularly in the automotive industry. Prime suppliers of the big three automakers are among Holland’s biggest customers. But O’Sullivan sees consumer spending as fairly steady, despite recent credit and housing market concerns. A new business modelLTL carrier Con-way Freight Inc. is responding to the more competitive environment with a company reorganization which will combine its three regional operating companies into one centralized operation headquartered in Ann Arbor, MI. The company had operated under three units-Con-way Freight-Central, Con-way Freight-Southern and Con-way Freight-Western-since its inception 24 years ago. Under the old business model, each region had individual goals, practices and pricing models. The centralized entity will adopt uniform processes and best practices which are meant to be more customer responsive and more efficient operationally. The old model of regional operating companies was meant for an era when supply chains were less globally integrated, explained David Miller, the chief operating officer of Con-way Freight Inc., the consolidated company. “Consolidation and expansion has allowed regional niche players to morph into large regional companies and midsized carriers into interregional carriers,” he said. “Everyone was going for a larger geographical footprint.” The new consolidated operating model will allow Con-way to continue to focus on regional LTL while also supporting a national service. “National networks involve more rehandling of freight,” Miller commented. “Regional networks are denser and allow faster, point-to-point deliveries.” O’Sullivan agreed that a regional focus has the advantage of delivering freight from origin to destination faster. The density of LTL networks allows carriers to skip delivery to an intermediate terminal, which can add an extra day to the service. Being part of a larger group of carriers holds other advantages for regional LTL players, according to O’Sullivan. “We just finished rolling out handheld devices to our drivers,” he related. “They enter when they make pickups and deliveries. As a result, customers now get real time and up-to-the-minute delivery status. Customers like that, but it is expensive. As part of a $9 billion company, we can afford it and it also helps us operate better by having access to information about how long drivers take at each stop and bett