Truck Topics

Expediting Over the Years

Terry and Rene O’Connell are familiar names to the visitors to ExpeditersOnline.com.  They entered the expedited trucking business in 1989 and have traversed North America as cargo van expediters since that time.  Terry and Rene have contributed their time and labor to making the Expedite Expo and Expediter Workshops a success as well and Terry continues that tradition of service as a moderator on EO’s Open Forum.

In this article, Terry has drawn upon his many years in the emergency freight business and compiled these observations.

In The Beginning

Door to door, exclusive use, time critical surface transportation has been around since the legendary Pheidippides ran 26 miles to deliver a message from Marathon to the Athenian Greeks about 2500 years ago. 

In modern days, this rapid service has been called by different names such as Courier Service, Messenger Service, or P&D, Pickup and Delivery; thus the beginning of expedite trucking.  As with the Greek runner, P&D service was nearly always local in nature for a variety of reasons.

Manufacturers/assemblers and their suppliers were most often located proximate to each other in the manufacturing centers of the United States.  Two prominent examples would be the automotive industry in eastern Michigan and the textile industry of New York and New England. 

These industries operated large warehouses where their parts and raw materials were delivered in bulk and stockpiled, until needed.  They planned for shipping delays by ordering in excess to obviate assembly line shutdowns for lack of material

During the pre-1970’s, Americans were not an “I want it all, and I want it now” society.  Most people were content to wait 4-6 weeks for special orders or catalog deliveries.  People were disappointed, but never angry, because the latest reprint of “Gone with the Wind” hadn’t arrived as expected at the local bookstore. 

Businesses were content to wait for the next railcar arrival on their spur or Reo truck at their warehouse dock because they planned ahead with excess inventory. 

When Ike’s Interstate highway system was started in 1956, dreams of high speed interstate travel would soon be realized.  About the time of near completion of the interstate highway system, the Japanese introduced us to the concept of Just-In-Time delivery of manufacturing supplies and materials. 

This method obviated the warehousing of excess supplies and inventory by planning for delivery of goods when needed, and not before.  Trucks and railcars soon became the warehouses of the business community.  Eventually, computer operators provided the programs for planning the optimum pickup and delivery schedules.

Along with all the latest transportation and technology capabilities of the 60’s and 70’s, consumers began to demand instant gratification and prompt delivery of the newest of all manner of goods and services. 

Manufacturers couldn’t keep up with the consumer’s demands because of parts shortages; parts suppliers couldn’t satisfy manufacturers’ needs because of material shortages; and on it went down the supply chain.

The Early Years

During the 1970’s, a couple of P&D folks recognized the lack of a surface transportation service that could satisfy the need for quick pickup and rapid interstate delivery of vital or emergent freight. 

A P&D company that eventually was named Roberts Express developed a zero asset business model that became known as expediting.  The company obtained operating authorities nationwide and by the late 1980’s grew to an impressive fleet of 500 or so trucks with owners who operated as Independent Contractors under a lease agreement with Robert Express.

The greatest majority of these owner/operators were family member teams, usually husband and wife, that were able to drive cross-country to deliver time sensitive freight on cargo vans and straight trucks. 

Shippers and Consignees were eager to pay premium tariffs for a premium service provided by highly motivated business-owning drivers.

Business was good and rewards were outstanding for the early owner/operators.  It didn’t take long for word to spread about this lucrative new segment of the surface transportation industry. 

Expedite carriers soon blossomed all around the Tri-State region of Ohio, Michigan, and Illinois.  Most of the carriers vied heavily to satisfy the expedited freight hunger of the automotive industry, but there were plenty of opportunities elsewhere.

Expedite carriers soon became known as the ambulance service of the trucking industry because of their ability to quickly provide a truck for pickup and straight through delivery of emergency supplies and repair parts.

Expedite carriers enjoyed a huge growth spurt during the mid-1990’s.  No less than 150 carriers were replicating the Roberts Express business model and signing up as many trucks as they were able to accommodate. 

Owner/operators were moving from one carrier to another, always in search of the promised greater opportunity and greater rewards.  Expedite carriers’ customers also were trying out the various carriers, in search of the optimum service for the least cost.  Therein lay the beginning of the diminution of the quality of service provided by the dedicated, single truck, business owning operators.

Growth Brings Problems

 Up until the mid 1990’s, with few exceptions, expediters owned and operated one truck.  The market had pretty much exhausted the supply of folks who were willing or able to make the financial commitment to own and operate an expensive truck. 

Thus began the era of the expediter fleet-owner.  The prominent carriers began allowing, and even encouraging, owners to expand their truck operation from one, to several trucks, and many did so. 

As fast as many owners could obtain trucks and drivers, they expanded their lease agreements to include as many trucks as their budget could afford.  Nowadays, it is not unusual for an expedite carrier’s leased truck owner to have 10 or more trucks.  With a fleet of trucks; however, comes a fleet of problems.

One of the greatest problems for fleet owners is driver motivation to provide a superior service for the carrier, the owner, and the customer. Contracted drivers usually have no financial stake in their owner’s business; they have no truck payments or repair costs and minimal financial risk due to weather, accidents or lack of business. 

Most of the contracted drivers provide outstanding service, year in and year out.  Motivated owners keep motivated drivers by closely watching for operating trends and adjusting compensation or amenities, as needed, to keep everyone happy and financially solvent. 

 All too often though, a lackadaisical driver does not take the “on-time, every time” motto of expedite seriously and consistently picks up or delivers later than his carrier’s schedule with the customer. 

In the worst case, a disgruntled driver will abandon an owner’s truck, thereby degrading his owner’s and carrier’s service capabilities and reputation. 

Many drivers hire on with a fleet owner to test the expedite waters and experience the business first-hand before buying their own truck and becoming owner/operators themselves.  The following scenarios do not apply to these aspiring expediters.

Driver retention by financial reward is another problem for the fleet owning operator.  It is relatively easy to attract a driving team into a tricked-out straight truck with a 96” sleeper.  Keeping that team busy and happy with monetary rewards is often problematic. 

In a typical scenario in the life of a typical Husband/Wife team in a large straight truck leased to a typical carrier, a truck’s owner might receive $1.30 per revenue mile and travel about 3000 miles per week, 500 of which might be deadhead at $.20 per mile for a total of about $3350. Perhaps 50% of the gross will be applied to business overhead and the remaining $1675 will be the weekly pre-tax earning for the family account.

In the same typical scenario in the life of a typical non-related contracted team in a large straight truck leased to a typical carrier, an owner’s truck might receive $1.30 per revenue mile and travel about 3000 miles per week, 500 of which might be deadhead at $.20 per mile for a total of about $3350. 

The owner will usually give the drivers 60% of the total revenue to the truck.  That would provide the drivers a total of $1950.  At sixty percent compensation the drivers would pay fuel plus tolls and would deduct about $900 plus $30 from their share, leaving the team about $1020 to share among themselves.  A typical split between a lead-driver and a co-driver is 60/40 after fuel and tolls so the lead-driver would get about $612 and the co-driver would receive about $408.  Many weeks will be much better, and many weeks will be worse.

In this last example, a truck’s revenue is being shared by three families. The owners overhead, and some return on his investment are realized.  However, each of the drivers are committed to about 60 hours per week in a moving vehicle and the remaining 108 hours sleeping, maintaining the truck, doing paperwork and sitting idle while awaiting a load offer; overall, they are not very well compensated for their time and effort. 

The idle time, which has been inherently a part of expediting, wears thin on fleet drivers who may think they should be loaded quicker than normally expected.  This often leads to their leaving expediting, thereby creating driverless truck problems for the owner and a fleet shortage for the carrier. 

During the 2000’s, the turnover rate of owner/operators, with any given carrier, seems to have increased, either due to their leaving one carrier for another, or leaving the business altogether.

The failure rate of many of the entry level business owning operators has also increased because the monetary successes stories of the past were not realized.  Others have bought trucks that were bigger and flashier than needed and overhead expenses exceeded revenue necessary to support their truck and a modest lifestyle. 

There have been many reasons for driver and owner/operator failure.  Some have accepted failure and others have learned to modify their business plans and change the direction of expediting as we knew it in the past.

 The New Expediters

 Many of the single truck and fleet owning operators leased to expedite carriers will continue to be financially successful because their carriers continue to be successful. 

This is due, in part, because the carriers continuously change with market demands.  The carriers are no longer content with the traditional expedited freight categories.  They seek specialty goods handling in lucrative markets such as museum quality art, precious metals, pharmaceuticals, military armaments, munitions and other government material and hazardous materials. 

The carriers also provide specialty services, such as lift gate use, refrigerated capability, inside deliveries, flatbed trucks, secure packaging and padding, constant surveillance and dual driver security.  

Successful leased owners will keep pace with their carriers and obtain the optimum equipment, security clearances, operating license endorsements, training and qualifications to increase their opportunities and their revenue.

There are no less than four business models, new to expediting, that allow carriers and owner/operators to maximize their revenue streams. 

Expediting does not typically offer dedicated freight runs to its lessors; therefore, an expediter’s wait for run offers can be from minutes to hours and occasionally days. 

 Long waits for run opportunities are often the bane to success, so enterprising owners seek their own freight, report the load to their carrier and, in exchange for a fee, usually about 15%, a carrier will dispatch the load on the finder’s truck.  This is a win-win situation for both the carrier and the owner.

Similarly, many leased expedite owners are obtaining their own government operating authority for the interstate transport of goods and materials. 

During slow periods, or when out of their carrier’s core business area, these owners will obtain their own customers, through the use public or private Broker load boards.  They will book the load, bill the customer or broker and keep 100% of the tariffs.

Mega-fleet owners are entering the expedite field.  These owners will operate their own training facility for entry level drivers and help them get their commercial drivers license.  They will then provide the driver with a truck leased to one of many carriers with which they have lease agreements. 

The drivers will often have specified minimum terms of employment or lease with these mega-fleet owners in exchange for the services provided.  These drivers have minimum financial risk and tend to be successful in the long run because of their access to their experienced owner’s ongoing training opportunities. 

Success in recruiting and retaining drivers in the mega-fleets will hinge partly on the mega-fleet owner’s buying power in obtaining the best equipment with large, amenity-filled sleepers which make life easier for the drivers and encourages them to stay on the road for longer, more profitable periods of time

There are many small expedite carriers that have a few customers which provide adequate freight for the carrier, but the owner/operators with these companies often suffer a lot of deadhead miles because of a lack of customers with freight returning to the carrier’s business center. 

These carriers have suffered heavy owner/operator turnover, marginal profit and high overhead in the recruitment of new owners and drivers. 

At least one entrepreneur has recognized the plight of the many dozens of these small carriers and has established a co-op whereby each of these carriers uses the resources of each of the co-op members to satisfy the requirements of their respective customers.  This is an excellent example of the whole being greater than the sum of its parts.

Expediting is an important and necessary segment of the trucking industry.  It will continue to grow in volume and importance. 

New expedite carriers will continue to enter the expedite market and current truckload and less-than-truckload carriers will expand their services to include expedited freight. 

Some will fail and others will prosper. 

Owner/operators and their drivers will also come and go. Those that don’t fail will remain and prosper with their carriers. 

The key to their respective successes will be the continual review and modification of the business plans to keep pace with market trends and keep an edge on their competition.