Regional motor carriers are striving for that winning edge. Although national LTL carriers such as Yellow Transportation, Roadway Express and ABF Freight System continue to dominate the less-than-truckload (LTL) field, their regional counterparts are doing their best to find a competitive advantage in this cutthroat segment of the trucking industry.

Regional truckers—defined as carriers that provide LTL service for shipments traveling fewer than 500 miles—are contending with the same economic pressures as are national LTL carriers. They must wrestle with demands for higher wages and benefits, skyrocketing insurance premiums, rising fuel prices, and the cost of providing additional security measures. They also have to invest in new equipment and technology to maintain high levels of service. On top of that, regionals must deal with the economic downturn while competing with national LTL carriers that are starting to move into shorthaul markets.

Despite those challenges, regional carriers are finding a variety of ways to win over shippers. Many have expanded their service territories, formed partnerships with one another to offer seamless interchange service, and begun offering guaranteed delivery. They've invested in specialized equipment and are providing more customer access to information over the Internet. And they've put together competitive pricing programs in an effort to attract new customers.

Regional LTL carriers are nothing new on the transportation scene; many have been in business for decades. It is interesting to note that eight of the 13 regional LTL carriers that won Logistics Management's "Quest for Quality" awards last year have been in business for 50 years or more. The youngest of the 13 carriers was 17-year-old Averitt Express.

Most regionals specialize in providing overnight and second-day delivery of LTL shipments. As a group, regional truckers handle a significant amount of freight each year. Indeed, last year's "Giants of Shipping" survey, conducted by Logistics Management, the University of Tennessee, Georgia Southern University and Cap Gemini Ernst & Young, found that regional carriers have surpassed national LTL carriers when it comes to total spending on truck transportation. According to the survey, regionals accounted for 13 percent of respondents' domestic transportation expenditures. The survey results also showed that regional trucking was the fastest growing segment of the trucking industry in terms of net change in spending between 2001 and 2002. During that same period, spending on national LTL service declined by 4.4 percent. (See chart at right.)

Data compiled by transportation analysts Reebie Associates supports the contention that shorthaul lanes have become more popular with shippers. The figure on page 36 clearly shows that the majority of tonnage hauled by motor carriers today travels fewer than 500 miles.

Most of the regional LTLs are relatively small, privately-owned companies, many of which have carved out unique service niches. Regionals often operate in rural areas that generate volumes that are too small to attract the larger, national carriers. In fact, regional carriers often are the LTL lifeline of small, rural communities.

The extent of their service territories varies from carrier to carrier. Some concentrate on one or two states, while others have much broader territorial coverage. One example of a regional with wide geographic coverage is Ward Trucking of Altoona, Pa., which serves 11 states and the District of Columbia. Others with similarly broad coverage include G.I. Trucking, New England Motor Freight and AAA Cooper Transportation.

The size of the companies runs the gamut from those operating just a handful of straight trucks, tractors and trailers to major players with hundreds of tractors and thousands of trailers. For example, USF Bestway, based in Scottsdale, Ariz., operates 750 tractors and 2,500 trailers, while Lewis Truck Lines, headquartered in Fargo, N.D., runs 135 tractors and 452 trailers.

Many of the survivors in this fiercely competitive market are low-cost, non-union companies. Although non-union truckers appear to have the advantage in this market, there are a number of notable exceptions. One successful unionized regional is New Penn Motor Express, now a subsidiary of Roadway Corp., which had an operating ratio of 87.5 percent in the third quarter of last year. Another union operation, USF Holland, reported a 92.3 operating ratio during that same period. (Operating ratio, a measure of profitability, is calculated by dividing operating costs by total revenue; the lower the number, the higher the profitability.)

Winning and maintaining shippers' business isn't easy, but regional carriers are trying to do so in a number of ways. Over the past year or two, for instance, many regionals have made operational changes that have enabled them to offer overnight or second-day service to more points than ever before.

Many have also begun offering guaranteed delivery service. One example is New England Motor Freight, headquartered in Elizabeth, N.J., which offers several different guaranteed services. One of those offerings, dubbed "NEMF Today A.M.," guarantees delivery by noon of the normal service day. If the carrier fails to deliver on time, there is no charge—it's not even billed.

Guaranteed delivery has become a tidy profit center for some regional LTLs. With some carriers achieving on-time delivery records of 99 percent or greater for their regular service, the additional premium collected for guaranteed delivery—some as high as 20 percent—have gone almost exclusively to their bottom lines.

Another way regionals have been winning new business is by expanding their service territories into bordering states. Such expansion parallels the actions of their shipper customers. As more shippers have set up regional warehouses and distribution centers, they have been seeking broader transportation coverage. In response to that trend, regional truckers have expanded their direct service to states adjacent to the ones they already were serving.

In some cases, regional truckers have increased the size of their service territories though partnerships and alliances with other regionals or even with national carriers. In most cases, they have entered into interline agreements with truckers with whom they don't compete. For example, Dayton, Ohio-based Dayton Freight Lines, a regional serving 10 states, has formed alliances with New Penn Motor Express, Southeastern Freight Lines, Central Freight Line, Midnight Express, and Canadian carrier Manitoulin Transport. These arrangements enable Dayton Freight Lines to offer service throughout the United States, Canada, Mexico, and even to Puerto Rico and Guam.

Some regional truckers have invested in specialized equipment in a bid to garner new business or maintain existing accounts. Ward Trucking, for example, had been experiencing excessive damage to pallets stacked inside its trailers. To address that problem—and keep customers happy—Ward installed its "Stack Up Loading System" in more than 200 of its trailers. This equipment creates two loading decks inside the trailer. The double decks immobilize the pallets during transit, thus allowing pallet loads to be safely double-stacked. This has made it possible for Ward to reduce damages to such a degree that its claim ratio is now only one-third of the industry average.

In addition to operational improvements, regional truckers are making more use of the Internet to furnish their customers with information services. Most regionals now have their own secure Web sites that can handle such routine services as pickup requests, tracking and tracing, rate quotations, descriptions of service offerings and tariff rules, fuel-charge information, maps showing territorial coverage, and shipping documents such as bills of lading.

Regionals are using software not only to enhance customer service, but also to help themselves gain operational efficiencies. Dayton Freight Lines, for example, recently installed "OptiYield-SuperSpin," a linehaul planning and optimizing tool. It determines the optimal load and routing strategy for trips between their facilities, thus enabling Dayton to provide faster service, maximize utilization and eliminate unnecessary handling.

Another example is the linehaul automation system developed by Con-Way Transportation Services Inc. This program, which took five years to develop, automates the nightly task of sorting and routing more than 100,000 LTL shipments. It also guides operations personnel in assigning resources to handle those shipments. The system employs several complex mathematical modeling tools that identify the most efficient way to move shipments between thousands of origin/destination pairings through the company's freight assembly centers as well as via "meet-and-turn" transfers and rail.

Efficiency gains are crucial in helping carriers stay profitable while meeting shippers' demands for tailored pricing, including deeper discounts, more single-class FAK (freight all kinds) ratings, partial or total givebacks of general rate increases, and simplified pricing, such as pallet and individual piece rates. Regionals are willing to give customers what they want, but are finding it essential to know the cost of serving individual customers to avoid giving away the store.

Given current economic and market trends, the ranks of regional truckers will continue to shrink in the years ahead. The survivors will be those that can combine competitive rates, broader geographic coverage and personalized services with efficient and reliable operations. Those are the carriers shippers will want to do business with, and that's clearly where the regional LTL market is headed.