Northeast Tough on Regional LTLs

Northeast harsh region for regional LTLs

Deregulation, traffic congestion, and staggering real estate costs make the Northeast, especially the subregion of New England, one of the toughest areas in which to run a regional LTL fleet. This is underscored by the lengthy list of players that have exited the business in recent years— most recently Guaranteed Overnight Delivery (G.O.D.) not to mention such household names as USF Red Star, St. Johnsbury, Hemenway and New Jersey’s A-P-A.

“I think there is more and more consolidation in that (regional LTL) market,” William Joyce, president of the New York Motor Truck Assn. told Fleet Owner. “It requires an expensive infrastructure (and) it appears there was excess capacity and excess competition (in New England).

“They (carriers) have to adjust more to the just-in-time deliveries and pressure in the truckload market,” Joyce said. “There’s also movement among these truckload carriers to ‘pack in the back.’ They (truckload carriers) would pick up some smaller items and put in the back of the truck…it’s an evolving industry. We’re always going to find a more cost-effective way to do business and if you don’t stay ahead of these, you can’t survive.

“I think in the Northeast there’s more of a change in economic regulation,” Joyce said, referring to the deregulation of the trucking industry that began in 1980. “You have a high-density population. When you had the economic deregulation and the natural shift toward non-unionized, we saw a hit in New England more than anywhere else in the country. The national carriers have a better ability to hold on because they get revenues from the rest of the country. I think G.O.D. was another victim of this,” Joyce said.

Michael J. Riley, president of the Motor Transport Assn. of Connecticut told Fleet Ownerthat the waning manufacturing sector in the region has added another wrinkle to the dynamics of the ever-changing business environment. “There’s not a lot of outbound freight— it’s (LTL) an inbound market. A lot of factories that gave the Northeast its identity are closed. The manufacturing base of New England has pretty much dried out, and as a result, outbound freight has also diminished.”

Riley has seen several smaller carriers specialize in a niche market make inroads in a tough market. “One of our members evolved into a transporter of artwork. Another very successful one (carrier) transports printed materials. Some others are high service, offering anytime, anywhere deliveries— particularly in New York City,” he said.

Jon Shevell, vice chairman and executive vp of New England Motor Freight (NEMF), an Elizabeth, NJ-based regional carrier operating in the Northeast, concurs that the region is challenging to operate in. “Our growth has come from the attrition of our competitors because the costs for doing business are so high. It’s getting worse, with the driver shortages, and the prices of insurance are horrible. And you’re dealing with the largest market in the country,” he said to Fleet Owner, pointing out major cities such as Boston and New York City are key to the region.

An effective rate structure has been instrumental for staying in business, Shevell said. “With [the demise of] G.O.D., carriers are trying to pick up their freight and it appears to be heavily discounted,” he said.

“The only solution is for the few remaining [regional LTL] carriers to have customers understand we can’t [move freight] for nothing. The shipping public has to realize that the carriers have to make a fair return. This is the most highly competitive area to do business in. With the bankruptcies [of regional LTLs] and the economy picking up, the Northeast is facing a [freight] crisis,” said Shevell.

A. Duie Pyle (ADP), a carrier that runs LTL in the Northeast, Southeast and Canada, has been successful in New England due to its successful on-time delivery model and its effective rate structures, Pete Latta, ADP president told Fleet Owner.

“No manufacturer wants to hold unnecessary inventory, so the key link to suppliers and our own operations is to get the service when they need it— not before,” Latta said.

With G.O.D. out of LTL, its customers should easily find other carriers with spare capacity. “I would think the business would be fairly readily absorbed. There may be differences in opinions [between carriers and shippers] of pricing levels. This comes with having a good costing model where you’re able to have rational pricing levels. If you’re just strictly basing your price to market demand, that’s the guaranteed path to suicide.”

As more players leave LTL, Latta expects market conditions to approach equilibrium. “It does free up some of the market share. When a carrier goes out of business, the customer base gets routed…(so) it does help,” he said.

However, the cutthroat market and dwindling list of regional LTLs makes doing business something like living in a classic murder-mystery novel, Latta joked. “We are the last couple standing, but we are blessed with good people,” he said.

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