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April 1 2019

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28 The Journal of Commerce | April 1 2019 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

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