LTL News: Con-way Freight rolls out new operating model
Jeff Berman, Senior Editor -- Logistics Management, 8/22/2007
ANN ARBOR, Mich.—Less-than-truckload (LTL) freight transportation services provider Con-way Freight announced today it is rolling its three regional operating units into a centralized operation based at its corporate headquarters in Ann Arbor, Michigan. The company said the impetus for this move was to streamline overall operations and improve processes for customers.
The three units impacted by this initiative are Con-way Freight-Central in Ann Arbor, Con-way Freight-Southern in Fort Worth, Texas, and Con-way Freight Western in Buena Park, California. These units have been operating since 1983, with individual goals, practices, and operating models, according to the company.
In an exclusive interview with Logistics Management, Con-way Freight president John Labrie (whom started in his position last month), said that the decision to transition Con-way Freight to a singular entity is something the company had been discussing for a number of years.
“In 1998, nationwide services really became part of our capabilities,” said Labrie. “And a larger percentage of traffic that moves through our system has become traffic that moves between more than one of our three independent [units], and as that continued to take place it made more sense for us to become one operating company [rather than three].”
Labrie added that Con-way Freight has been operating for a number of years with very closely aligned policies and procedures with similar processes and the same IT system, and said it was time to have one uniform organizational structure that would allow us to have one clear strategy and to execute against that strategy so that it could align processes in a way that helps serves customers more efficiently and allow Con-way Freight to be more nimble in the marketplace.
Regarding ways in which this decision will help Con-way Freight better meet customers’ needs, Labrie explained that things like back-office support functions, which previously had three separate processes for things like pricing and how customer opportunities are evaluated, will now be handled by one pricing department with one way to address the opportunities that arise. He also cited how it had three line-haul networks that were part of a larger network, which will now be overseen by one network which will make all its decisions with one central line-haul department that will optimize one network.
All of Con-way Freight’s administrative processes will now be handled out of the Ann Arbor facility, with one pricing department, and one line-haul department, among others, said Labrie. He added that the company’s service center network, freight assembly centers, and pick-up and delivery locations—or “anything that touches a customer”—will not change as a result of today’s announcement. “This [move] is designed to simply address duplicate support functions that support the business from a field standpoint,” said Labrie.
Best Practices:
Con-way also said that as part of today’s news, it will implement best practices designed to make the company more responsive to the North American market and its customers.
“This really focuses on the fact that we have had three processes in our support functions that support the business,” said Labrie. “We now will put one support process in place for every function, and we will make sure it is the best one.”
Money matters:
According to a Con-way Freight statement, the total costs for this organization are estimated to range from $12 million to $16 million and are expected to be incurred during the remainder of 2007 and the first quarter of 2008. Labrie said there will be some “one-time expenses” associated with this transition, and said Con-way Freight does expect some cost-savings in the future, as it relates to the elimination of duplicate processes. He said the company is still evaluating how much the actual cost reductions will be.
Competitive differentiator:
“The single biggest thing this will do is make it easier [for shippers] to do business with us,” said Labrie. “Our staff has had to internally navigate this rather complex organizational structure with three independent companies for 24 years. And we have presented ourselves to the shipping public as one uniform company, so from a customer perspective we were able to overcome most of the issues and complexities that our organizational design created. But it still created a lot of work and a lot of waste for own people to navigate, and that all goes away with these changes. Now, when our sales people are interfacing with the marketplace, they will have a much easier time of navigating issues relative to things like pricing positions and customer resolution issues.”
Streamlining processes and eliminating waste will result in better decision-making and allow the company to be more flexible, as well as react to the needs of the marketplace in a way that the old organizational structure did not facilitate, said Labrie.
A report from Robert W. Baird & Co. Incorporated analyst Jon A. Langenfeld commented that Con-way Freight's operating model shift will better position the company to compete with UPS and FedEx.
"We view the change positively and as necessary to improve the customer experience and compete with the integrated regional offerings of FedEx and UPS," said Langenfeld. "The single-operation structure should improve operating efficiencies by streamlining communication within the organization, more clearly incent sales personnel and better position CNW to service longer-haul freight that previously crossed multiple divisions."
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