28 The Journal of Commerce
|
April 1 2019 www.joc.com
Surface Transportation
THIRD-PARTY LOGISTICS PROVIDERS
(3PLs) hope that as the US truckload
market transitions away from a
seller's market in 2019, more ship-
pers will turn to them as valued
partners rather than adversaries.
Not all shippers use and then
abandon logistics providers as often
as the economics shift, but enough
do that it can be frustrating to 3PLs.
"[Shippers] are reluctant to use
brokers in the 'good times' and then
pay a price dearly by creating a [vol-
atile] spot market that doesn't need
to exist. There is always going to be
a spot market, but shipper buying
behavior makes it three or four
times worse than it needs to be," Jeff
Tucker, CEO of Tucker Company
Worldwide, said at the 2019 TPM
Conference in Long Beach in March.
If shippers weren't as fickle dur-
ing shifts in supply and demand, then
AFTER A SWEEPING, two-year reorganiza-
tion that culminated in a rights offering
that effectively transferred its ownership
in February, Roadrunner Transportation
Systems is a leaner, if not more profitable,
business. Roadrunner's net loss jumped
82 percent to $165.6 million in 2018, and
more than doubled in the fourth quarter to
$58.4 million.
That's the base the company's new
majority owner, activist investment firm
Elliott Management, and the Roadrunner
executive team will have to build on as
rates could be more stable, Tucker
said. For shippers, it's about the bot-
tom line. When spot rates climb too
high, shippers seek relief in the con-
tract market. When spot rates drop
low enough, shippers turn to 3PLs to
get a better rate on the open market.
A year ago, spot rates climbed
after Hurricane Harvey and the
electronic logging mandate was
enacted in December 2017. Shippers
said goodbye to 3PLs, eliminated the
middleman, and tendered directly
to large asset-based carriers. Not
every shipper axed their 3PLs; many
maintained those relationships but
with lower volumes.
Twelve months later, spot rates
are down 10 to 12 percent, according
to an analysis of data from DAT Solu-
tions, returning to late-2017 levels
in several markets. Contract rates,
meanwhile, rose about 14 percent on
they work through a five-step recovery
plan that is still only on its second step,
according to data filed with the US Securi-
ties and Exchange Commission.
For shippers, the good news is that
Roadrunner, the 15th-largest truckload
operator and 18th-largest less-than-truck-
load (LTL) carrier in the US last year, is
still rolling, unlike at least one smaller LTL
operator, New England Motor Freight, that
shut down in February. Roadrunner mostly
uses owner-operators to provide LTL and
truckload capacity.
average in 2018 and are up another
nearly 6 percent this year.
As a result, shippers are coming
back to the spot market — and to
3PLs. Even as fair-weather friends,
money talks, and any profitable
business with a strong yield is good
for business.
The adversarial relationship
goes both ways between trucking
companies and shippers when the
pendulum swings too far in one
direction. When capacity is tight,
as it was between mid-2017 and
end-2018, trucking companies raise
rates. The demand is greater than
"We continue to see our business
grow," CEO Curt Stoelting said. Compa-
rable revenue, excluding the sale of one
business unit, increased 9.5 percent in
2018 to $2.2 billion, he noted. "As we've
stated in the past, during a turnaround
period there are always some bumps along
the way," Stoelting said. But the company
"has a positive financial outlook."
In the fourth quarter, however,
Roadrunner's overall revenue dipped
1.6 percent to $551 million, as declines in
LTL and truckload revenue offset higher
third-party logistics revenue. The LTL reve-
nue drop was expected: Roadrunner is still
rebalancing the business through planned
reductions in service areas and pricing dis-
cipline to build density in its biggest lanes.
"Lower shipment counts were partially
offset by higher rates and average shipment
size, which yielded an increase in revenue
per shipment," the company said. In the
truckload and express (TES) division, lower
revenue was tied to lower air and ground
Relationships matter
Shippers and 3PLs told they'd do best
to abandon their adversarial posture in trucking
By Ari Ashe
Beep, beep. Roadrunner
signals its recovery
The trucking operator is in the early stages
of a plan to get back on the road to profitability
Trucking | Rail | Intermodal | Air & Expedited | Distribution
