Top 50 Trucking Companies: The strong get stronger

It has been a 12-month period like no other. However, to the best operators in the trucking industry, leading executives say the effect of the worldwide pandemic has been, in the word of Pitt Ohio president Chuck Hammel, “transformative.”

Transformative, that is, if you survived. Some 3,140 fleets did not, and were forced to shut down over the past year. That’s a 185% jump from 2019, according to Donald Broughton, principal of data firm Broughton Capital. Roughly half the 2020 failures came in the second quarter, when freight volumes plummeted amid widespread shutdowns aimed at limiting the spread of COVID-19.

Big decisions about staffing and productivity had to be made on the fly, and nobody could foresee what the future would hold—not even over the course of the coming week, much less the next quarter.

“In my 33 years in this industry, this was by far the most unusual situation we’ve ever faced,” says Mark Rourke, president and CEO of Schneider, the nation’s 2nd-largest TL carrier. “We’re accustomed to going through cycles, but to bounce from a material freight recession in the second quarter and then flip it completely in the third quarter—plus all the unknowns—was incredible.”

Top trucking executives say that the key to success in such an unusual year was flexibility, quick strategic thinking and the ability to motivate people. “We changed everything we did and how we did it—overnight,” explains Rourke. “However, that demonstrated how resilient people are when change is forced upon them. People can do great things.”

Hammel agrees. “Being agile especially in this environment is critical,” he says. “We adjusted in so many different ways from our terminal operations and office staff to our sales efforts that we hardly look the same as we used to. However, all of the changes have been positive and productive.”

Now that we’re heading into the spring of 2021—a full year from the onset of the pandemic—let’s take a deeper dive into the internal strategies of some of the top trucking carriers in the nation and examine how they coped with a worldwide pandemic, stayed safe and continued to stay ahead of one of the most competitive industries in the world.

Top 25 Less-than-Truckload Carriers: 2020 Revenues

Note: Revenue for LTL operations only, unless otherwise indicated and includes Canadian operations

Source: Companies and SJ Consulting Group estimates

Prepared by SJ Consulting Group, Inc.

Top 25 Truckload Carriers: 2020 Revenue

Revenues primarily for truckload operations and may include less than ten percent for non-truckload services

*Publicly Traded Company

Source: Company Reports and SJ Consulting Group estimates

Prepared by SJ Consulting Group, Inc.

COVID-19 effects

The effects of the pandemic tested all of trucking operations last year, and continue to this year, say trucking veterans.

Derek Leathers, vice chairman, president and CEO at Werner Enterprises, the nation’s 7th-largest truckload (TL) carrier, says planning was “clearly one of the more difficult challenges” that he’s faced in his career. “When the dust settled, volumes were up for trucking for the year,” he explains. “What’s not understood was how vast the peaks and valleys were.”

During last year’s second quarter, some Werner shippers saw volumes spiking 50% to 60% while others went to zero. “That puts pressure on your network balance,” says Leathers. “A customer’s portfolio based on load volumes went out the window, as people were counting on that product getting to them. What it meant for us was a network that was highly disruptive.”

Many Werner customers endured complete operational shutdowns, while others had their shipping volumes “go through the roof,” says Leathers. For Werner, it meant a lot more empty miles and slack in its usually tightly run system. “Nevertheless, you had to find a way to deliver,” he says. “We kept it moving and got it done.”

Rather than focus on the bottom line, Leather says that the “driving force” was the desire to work with customers with whom Werner has longstanding relationships. “As they saw their business levels spike, we wanted to be there for them.”

However, it came at a price, as Werner was forced to take on less new, transactional business. “We absolutely had to allocate a scarce resource—our trucks,” adds Leathers. “Those folks who stood with us in tough times were the ones we had to stand with, while others with a more transactional viewpoint would have to wait.”

Werner wasn’t alone. Pitt Ohio’s business levels, beginning last April, fell off 17% year over year. But soon after freight levels dipped precariously, they began to rise just as unpredictably. Thus began an early-summer surge to the point that it was overcapacity and service was suffering, Hammel recalls: “We made a decision to sacrifice business in order to get our service back to historic levels.”

It was a timely decision. Hiring additional drivers was next to impossible, and on any given day Pitt Ohio had a number of employees who either tested positive for COVID-19 or were in close contact with someone who did. “So, labor planning was somewhat unpredictable,” says Hammel.

But Pitt Ohio softened the blow by being more discriminating with whom it chose to do business. And in this tight less-than-truckload (LTL) market, privately held Pitt Ohio actually got more profitable while getting slightly smaller, Hammel adds.

At ArcBest, parent of ABF Freight System, the nation’s 7th-largest LTL carrier, CEO Judy McReynolds says the pandemic “challenged us in new ways.” However, because of the character and heart shown by its employees, McReynolds says: “We turned many of those challenges into opportunities.”

The result was improved efficiencies throughout the corporation, says McReynolds—and they were tangible to the bottom line. ArcBest recorded the second-best operating income in the last 14 years, earning $71.1 million net income last year, compared with $40 million net income in 2019. In fact, at one point early in last year’s pandemic lockdown, ABF reported a 48% increase in residential delivery business—a improvement that requires a much different approach than typical LTL business-to-business freight.

“We were able to navigate through that period and handle it well,” says McReynolds. “So, I credit our operations team for being able to do that well. It just shows the adaptability and flexibility of the network in different circumstances.”

Making changes on the fly

One of the potential success stories is the revival of Yellow Corp., which controls 10% of the LTL market through its four subsidiaries—long-haul Yellow Freight and regional units New Penn, Holland and Reddaway.

Flush with $700 million cash infusion from the federal government as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Yellow is once again buying trucks and fine-tuning its network to achieve long-term financial stability.

That cash is helping Yellow in several ways. It’s buying new equipment, and it’s beginning a costly driver-training initiative that aims to bring up to 1,500 new drivers into the trucking industry. Yellow will pay the new trainees during a four-week program that the carrier hopes will help it expand.

However, the biggest change may be in its operations. It’s no longer one long-haul operation (YRC Freight) with three regional subsidiaries. Yellow president and CEO Darren Hawkins looks at his trucking operation as one “super-regional” LTL operator with emphasis on speed, quick turnarounds and efficiencies.

For example, in Birmingham, Ala., where Yellow previously operated separate Holland and YRC freight terminals, they’re now operating together. “So rather than having two drivers from two of our companies at one customer, we’re able to service that with one driver, one tractor, one set of equipment,” says Hawkins. “That’s what drives that asset utilization in the right direction.”

Yellow’s revival is designed to optimize and structurally improve a network that includes more than 300 North American terminals. In last year’s fourth quarter, it implemented an intermodal change of operations in Memphis, Tenn., that allows for the movement of shipments on intermodal containers to and from their Western operations—saving money on trucks and drivers that can be utilized elsewhere.

In January, Yellow continued its network optimization efforts by integrating five legacy national terminals into operations at a regional terminal. This allows it to now serve markets in Louisville and Lexington in Kentucky, Evansville, Ill., Birmingham, Ala., and Des Moines, Iowa, with one brand, one operation while providing customers with a broader network of Yellow services. This change brings the number of facilities in use to 327.

And according to Hawkins, there’s more such integration coming. When completed, he says that the enterprise transformation is expected to increase property and rolling stock asset utilization, expand service offerings and leverage operational flexibilities gained in its 2019 labor agreement with the Teamsters union.

Rates going in one direction

All these changes, the effects of the pandemic and surging freight demand translate into bad news for shippers who continue to face steep rate increases—perhaps as high as low double digits in TL and mid- to high-single digits in LTL, according to Logistics Management’s top trucking sources.

“The economy is choppy and better in some industries than others,” says Pitt Ohio’s Hammel. “But overall demand continues to be strong.”

Yellow’s Hawkins observes that rate negotiations with customers are returning increases of nearly 6%. “Demand is solid,” he says, “and right now the consumer is standing up well. Construction is strong, and manufacturing is looking good.”

In truckload, if you take a combination of spot and contract rates, Leathers adds, the result is low double-digit increases. “Plus, nearly all carriers’ costs are rising—driver pay, fuel, tolls and insurance,” he says. “There’s also a need for a lot of these companies to become more financially healthy—a lot are not covering their cost of capital.”

According to Hammel, the cost of trucking has spiked especially with regard to driver wages, benefits and tolls. What this means to shippers is that they’re going to have to pay for dependable, on-time service. “As a trucking company, we have to be able to attract the best qualified new employees, and the only way to do that is to be among the best employee-driven companies in the industry,” he says. “Doing that is expensive, but worthwhile in so many ways. Rates must go up to compensate for giving our customers the best of the best.”

These are all encouraging signs for top carriers in 2021. They hope that the operational and strategic changes forced upon them over the last year pay dividends straight to the bottom line this year.