Major motor carriers merge logistics businesses

By Staff -- Logistics Management, 4/1/2000

Six major motor carriers have agreed to merge their third-party logistics units into a single independent company. The new company, called Transplace.com, will combine businesses that reported total revenues of $650 million last year.

The transportation companies involved in Transplace.com include J.B. Hunt Transport Services Inc., Covenant Transport Inc., M.S. Carriers Inc., Swift Transportation Co., Xpress Enterprises Inc., and Werner Enterprises Inc. In addition to merging its logistics business into the new company, each partner is contributing $5 million to get the venture off the ground.

All six companies operate truckload carriers that are among the 10 largest in the United States. That market presence gives Transplace.com immediate clout and visibility among the growing crowd of Web-based logistics businesses. "We are leveraging our existing relationships, bringing in $650 million in freight," says Dr. Jun-Sheng Li, chairman, president, and CEO of the new company. Li is currently president of J.B. Hunt Logistics.

According to Li, Transplace.com's top priority is being able to assure shippers of the availability of capacity. The venture, which is marketing itself as a "one-stop solution" for transportation, will offer shippers a variety of services, including transportation, logistics management, brokerage, information systems, and consulting. Initially, the company will provide truckload, intermodal, and refrigerated services. Company executives say they intend to expand into less-than-truckload, package and parcel, airfreight, cartage, and household delivery services. Another important part of the carriers' business strategy is to offer a Web-enabled transportation/logistics platform linking shippers and carriers.

The carriers, meanwhile, will benefit from cooperative purchasing of products, services, and supplies, plus the opportunity to improve freight density. "The challenge in this industry is not the lack of software, but the lack of freight density by a single shipper," says Li. "Part of our purpose is to create critical mass." In addition, he says, the ability to improve density for carriers and offer consolidations to shippers will reduce total transportation costs. "Through density," he says, "we can drive a lot of inefficiencies out of the system."

The company plans to establish partnerships with additional service providers. It expects small carriers in particular will be attracted to the venture because it could help them improve driver and vehicle utilization.

The transaction still must undergo federal and some state antitrust reviews before it can be completed.