As truck freight begins to recover, industry analysts believe that smaller and more smartly managed motor carriers – those with more regional operations as well as ones with technological savvy – may be in the best position to benefit.
“The smaller, regional-based carriers will be better positioned to succeed because they have a less costly infrastructure and they can be more flexible to meet the needs of the customer,” Doug Sartain, president of Cleveland, OH-based consulting firm Shipmate Logistics, told FleetOwner.
He said shippers and manufacturers have been shifting their plants and distribution centers ever closer to their end users over the course of the last decade, looking to cut transportation costs. And one way to cut those costs is by reducing overall freight miles, with consignees buying their products closer to their operations in an effort to reduce their transportation budgets.
“For example, statistics show that today, 70% of the LTL freight market moves within a 550 mile trip,” Sartain said. “This supports a regional carrier business model vs. a national carrier model.”
He added that excess equipment capacity also remains a critical and costly issue – yet the smaller fleets typically have less of a capacity issue compared to larger ones.
Kenny Vieth, partner and senior analyst with ACT Research, echoes Sartain’s view as even some of the larger truckload carriers – such as Knight Transportation and Heartland Express – realize that the “sweet spot” in trucking is regional freight.
“Over the last 20 years, manufacturing has moved to a JIT [just in time] supply format, and what that’s done is create a lot of regional freight flows,” he told FleetOwner.
What is also important, Vieth added, is that it’s not necessarily “specialized” regional fleets that have the opportunity to win more business here, but those that are smarter in the sense of being more technologically versed.
“It’s the ‘low-tech’ trucker that is really in trouble, whether they are a local, regional or national longhaul player,” Vieth explained. “Shippers demand a distinct level of technological expertise today, such as electronic manifests, real-time tracking and tracing, and the ability for trucker to electronically ‘interface’ not just directly with warehouses but retailers as well. That’s the trucker who will succeed, regardless of the size of their fleet.”
Not all the experts are completely sold on smaller or even smarter truckers being the big winners as freight recovers. Eric Starks, president of FTR Associates, believes a trucker’s success in the months ahead won’t necessarily be based on what type of carrier they are, but whether they’ve right-sized their fleet and have steady cash flow.
“Those are the bigger issues,” he told FleetOwner. “It’s really hard to say if the regionals will do better at that than longhaul [fleets]. In fact, some of our data suggests that long-haul freight may grow more strongly on the front end of any [freight] recovery, but it’s really still too early to tell.”
Starks also thinks more carriers will shut their doors as the economy improves, as banks begin repossessing equipment. “That will affect the competitive landscape, but we will have to see how that plays out,” he said.