“No standing” is one rule successful fleets adhere to religiously. Accepting how the less-than-truckload (LTL) landscape has shifted, this year Con-Way Freight Inc. took the innovative — and bold — step of literally tossing out the business model on which it had been founded 24 years ago, trading tradition for the nimbleness it needs to move forward.
According to John Labrie, president of Con-Way Freight, a subsidiary of Con-way Inc., combining its three regional companies into one centralized operation is a “transformation” that will enable the carrier “to anticipate and respond to customer needs more quickly and intelligently… while improving our cost structure in a competitive LTL market.”
And in something of a one-two punch, parent Con-Way Inc. at nearly the same time announced the purchase of privately held truckload carrier Contract Freighters Inc. (CFI) and is unifying that operation with its existing Con-way Truckload subsidiary. The result will be a truckload unit expected to generate some $500 million in annual revenues. According to the company, put Con-way Truckload with Con-way Freight and supply-chain services provider Menlo Worldwide — the third leg of the Con-way corporate stool — and the result is a suite of transportation and logistics services covering everything from “first-mile” sourcing in Asia or Europe to “last-mile” delivery in North America.
As for Con-Way Freight, the key aim of the operational rollup is to “streamline the structure” to reduce complexity and leverage reductions in overhead, according to David L. Miller, chief operating officer of Con-way Freight. He points out that while the old business model meant that each regional operation had individual goals, practices and pricing models, the new centralized setup will let the carrier put uniform processes and best practices into place.
According to Miller, a change of this magnitude did not come out of the blue. “We could see back in 2000 that a change was needed or we'd be riding the best-looking dinosaur around into the 21st century,” he says candidly. “Our first moves in this direction involved streamlining back-office functions, but by 2006 we decided that market dynamics indicated it was time to move to a new, unified business model. This July, we pulled the trigger.
“Essentially,” he continues, “bringing all our office operations into one footprint — one point at which all back-office functions can be fully consolidated and replication eliminated — will pay off in costs savings and operational flexibility.
“Progressive companies ‘kick’ their business model pretty regularly,” Miller contends, “which is why this new model was envisioned well before we enacted it.” He does concede that what is more remarkable is Con-way had the organizational courage to not just theorize about such a change, but to actually put it into action.
Con-way estimates costs for the reorganization will range from $12 million to $16 million. The company will update its full-year 2007 guidance “as appropriate” to reflect the effect of the Con-way Freight reorganization, as well as its acquisition of CFI.
As for why the “trigger” was pulled this year, Miller says the recasting of the LTL market that's been gradually under way since the '80s had reached critical mass.
“In the past, there were national, interregional and regional LTL carriers,” Miller points out. “In our case, we started with regional operations, but by 1992 we had also become a long-haul carrier. Meanwhile, regional carriers were expanding their reach even to being nationwide and ‘legacy’ carriers were beginning short hauls.
“We felt it was time to take full advantage of what the Con-way Freight operations had to offer — the most extensive coverage in North America.”