Premium Trucking: The Right Tools for the Right Job
For many high-value shippers, enhanced efficiency, customer service, and profitability offset the cost of investing in DCC, white-glove, and last-mile services.
Perceptive transport buyers recognize that sometimes their business can benefit from paying a premium price for premium service.
Shippers of high-value merchandise such as pharmaceuticals, furniture, and fine fabrics call on the expertise and resources of premium service providers to penetrate new markets, handle unusual situations without disrupting normal supply chain activities, and ensure security by providing sealed trailers and satellite tracking.
Transport buyers weigh the extra expense of these services against the reliability, consistency, technology, security, and ease of use they afford. For high-value commodity shippers, the primary goal is not to save money on transportation, but rather to use premium trucking services to boost efficiency. Ultimately, that's an investment in their company's success.
A wealth of top-shelf service options are available to meet shippers' needs. Premium service providers fall into four general categories: specialized carriers and 3PLs that only provide premium services; line-haul truckload or LTL carriers that also offer enhanced services; small-package delivery firms that are moving into freight; and van lines expanding from their base of providing household moving services.
One irony of premium trucking services is that drivers don't spend much time driving.
"Our drivers only spend about 25 percent of their time behind the wheel," says Will O'Shea, executive vice president of sales and marketing for 3PD, a last-mile services provider based in Marietta, Ga. "They spend the bulk of their time in the consumers' homes.
"We arm drivers with shipper-specific installation training," he says. "Our teams are certified for assembly, touch-up, and light repair."
Shippers who begin working with a premium services provider such as 3PD may soon find themselves sharing more of the load with their new partner by turning over logistics concerns and customer interactions.
"We can handle routing, scheduling, and scanning for the shipper," says O'Shea. "Shippers look to us to provide more than just execution. They want to leverage our technology, especially the small shippers. They also expect a return on investment because they are offering free delivery to their customers."
From furniture importers and pharmaceutical manufacturers to national retailers such as CVS Pharmacy and Carvel Ice Cream, here's a look at how shippers use premium trucking services to enhance efficiency and profitability.
CVS Dedicated to DCC
Dedicated contract carriage is the premium service of choice for national drugstore chain CVS Pharmacy, based in Woonsocket, R.I. CVS relies on 14 distribution centers to serve its 6,200 retail outlets.
The company's proprietary fleet handles inbound traffic at six DCs, while Miami, Fla.-based logistics service provider Ryder System supplies seven DCs under a dedicated contract carriage (DCC) arrangement. A different carrier handles shipments from the remaining distribution center under a separate dedicated contract.
CVS carefully considered its service needs when it rationalized its national distribution system last year. Although the company operates nationally, each of its 14 distribution centers put out a separate request-for-proposal (RFP) for its store deliveries.
"We sent RFPs to about 35 transportation service providers," says Joe Estrella, director of transportation and logistics network for CVS. "Then we whittled the list down to five. Ryder stepped up and earned the business separately for each center it serves."
Reliability, not price, is CVS' most important criterion when choosing a carrier. "We never buy just transportation," Estrella says. "Service is paramount. The lowest rate does us no good if the carrier doesn't deliver."
CVS has grown its business both organically and through acquisition. With each expansion, its logistics requirements change.
"For example, a few months ago we had to change the distribution centers that were serving several stores in Michigan and Illinois," says Estrella.
That situation created additional work for the DCs called on to serve the new stores, and put pressure on the carrier.
"People talk about seamless transportation, but in this case it was true," says Estrella. "The stores that were served by new DCs didn't notice any difference. That's the key to smooth logistics operations. Some employees at those stores still don't know that the trucks and drivers belong to Ryder, not CVS."
What's more impressive is that the distribution center shift took place in the middle of the company's normal, demanding delivery timetable.
"We will work 142,000 store routes this year, making 365,000 individual store deliveries—all on a stringent schedule," Estrella says. "The driver must make the first delivery on a route within a 15-minute window, and make all subsequent stops within 30 minutes."
The DCC arrangement seems to be working well for CVS. "Through November 2007, our deliveries were close to 99 percent on-time nationwide on the first stop, and better than 96 percent on-time for subsequent stops," reports Estrella.
Dedicated resources play a key role in CVS' partnership with Ryder.
"More than 400 employees serve on the CVS team," says Ed Caulfield, director of customer logistics for Ryder. "We operate 600 vehicles, primarily tractor-trailers branded with the CVS logo.
"We also run special equipment for deliveries to cities that are hard to get into, such as New York. We try to maximize available cube at minimum cost."
While CVS handles its own routing and scheduling, Caulfield's group takes a final look at the routing logic to help keep expenses down.
"Small changes can yield big results," he notes. "The key benefit we bring to CVS is the ability to react quickly, redeploying assets to optimize its supply chain."
This kind of partnership is a major strength of dedicated contract carriage. "We want to understand and anticipate our clients' asset and service requirements," Caulfield says.
That's the philosophy embraced by Rosario Rizzo, senior vice president and general manager of Ryder DCC, after years spent on the shipper side of the dock working for Compaq and PepsiCo.
"The irony of logistics and supply chain execution is that when it's perfect, no one notices," Rizzo notes. "Only when there's a problem does it get attention. But that's the true value of premium service providers. We serve our customers' customers."
Safe and Sound
For Three Rivers Pharmaceuticals, Cranberry Township, Pa., white-glove premium services with an emphasis on security and tracking are not just a nicety but a necessity.
The company, which performs contract manufacturing at several plants around the country, has an extra incentive for investing in premium services: If something goes wrong, lives—not just money—are at stake.
"We do not want to lose control of our shipments," says Matt Rumpler, director of operations. "We're concerned about drug counterfeiting, so we seal the back of the truck when the shipments are loaded, and the recipient breaks the seal at delivery. We use FedEx Custom Critical for that inventory control door to door."
Because he's confident in FedEx's reputation and commitment to quality, Rumpler considers the service provider's white-glove offering a good investment.
"Some carriers outsource to independent drivers, but FedEx uses its own trucks and drivers," says Rumpler. "I inspect all the trucks at the dock and they are clean and reliable. We have some very tight deadlines, and FedEx can meet them."
Rumpler also appreciates that the service provider keeps Three Rivers informed about delays or service disruptions.
This constant exchange of information typifies FedEx Custom Critical's service. "Great communication allows for great custody and control," says Virginia Albanese, president and chief executive officer for the FedEx division, based in Green, Ohio.
FedEx Custom Critical's white-glove premium services provide temperature control and security for shippers moving sensitive products.
The carrier offers two levels of temperature control: TempAssure, with fixed high and low points, and Temperature Validated, a guarantee within two to eight degrees Celsius, validated by a recorder in the box and a satellite monitor.
"Shippers that need extra security can get dual-driver protection, satellite motor surveillance, even an escort," says Albanese. "These security services are hands-on and closely controlled."
It's that assurance of control that Three Rivers most values.
Built for Comfort
Agio International, based in Virginia Beach, Va., imports more outdoor furniture than any other company in the United States. Agio relies on white-glove, last-mile services from Arkansas-based ABF Freight System when its premium fixtures, such as stone-top tables and propane barbecue pits, need warranty replacements.
Goods arrive at East and West Coast ports, and are delivered by rail, truckload, and LTL carriers to most major retail chains.
"The stone-top tables we sell weigh about 200 pounds," says Bobby Dowell, director of customer services for Agio. "Their heavy weight requires two-man delivery, set-up, and removal of the old table in the home. The outdoor fire pits are also heavy.
"The drivers currently assist in some deliveries but don't do any set-up yet. Our customers have asked for it so we are working with ABF to find a way to get it done."
If that sounds more like a partnership than a client-provider arrangement, there's a reason. Agio has relied solely on ABF to handle warranty replacement deliveries for the past seven years.
"We did try another carrier, but that lasted only one month," Dowell says. "The carrier promised a lot but didn't deliver."
All replacement goods are imported to a 100,000-square-foot warehouse in Virginia Beach, from which deliveries are made around the country.
"ABF manages the scheduling and sends an invoice for every delivery," says Dowell. "We're looking into package pricing, but so far ABF has been fair and competitive on cost."
As Agio's needs grow, ABF will be ready to meet them, says Russ Aikman, manager of ABF's Turnkey by Request premium services.
"The Turnkey service includes delivering the shipment to the consumer's home. We can add unpacking, light assembly, light installation, and packaging removal services," he says.
ABF's premium services make light work of Agio's heavyweight shipments.
The Essential Link
While many major retailers have built direct-to-consumer business on the foundation of reliable premium services from carriers, a new crop of shippers has developed a business model centered around special deliveries into the home.
"About 80 percent of our shipments are white-glove, inside-the-home deliveries," says Ronald Drenski, director of logistics for Masco Retail Cabinet Group, Middlefield, Ohio. The company tasks Cardinal Logistics Management, Concord, N.C., with these duties.
"Our business is kitchen, bath, and home office cabinets," says Drenski. "After we build the cabinets, we provide Cardinal Logistics with details on each delivery—what type of truck it will need, or whether the delivery is to a room up five flights of stairs. So far, the delivery does not include installation, but we're considering it for the future."
Drenski frequently receives bids from other delivery service providers.
"Carrier sales reps are lined up outside my door," he says. "But you have to be careful to choose a carrier that delivers what it promises. The delivery puts my brand in the marketplace. My customers pay for service, and if there's a problem with delivery, they expect to call someone who cares."
In some cases, the carrier calls the consumer directly.
"Cardinal makes 1,200 cabinet deliveries every day, and nearly 99 percent arrive on time," Drenski says. "But with that volume of deliveries, some kinks—traffic, roadwork, bad weather—occur every day. We rarely encounter a problem that elevates past the local level. If a delay occurs, the Cardinal driver calls the consumer, and we're updated on that communication."
Carvel's Big Chill
Since the company opened its doors in 1934, Carvel Ice Cream's products have gained a loyal following—as evidenced by their distribution to more than 500 Carvel stores and 8,500 supermarkets nationwide. The ice cream company relies on dedicated transportation services to handle its specialized distribution needs.
While expanding Carvel's geographic presence from 25 states in 2002 to nearly all 50 states today, the company encountered trouble with its approach of using two different transportation providers to deliver its perishable products.
Customers reported drivers arriving on-site without uniforms and, worse, unresponsive to the customer's concerns. A lack of replacement personnel to fill in for drivers who called out sick resulted in delivery delays, as did malfunctioning equipment such as refrigerated trailers operating at improper temperatures.
Tired of mediocre service, Carvel hired AmeriQuest Transportation and Logistics Resources of Cherry Hill, N.J., a provider of comprehensive fleet management services in the United States and Canada, to find a transportation partner who could service its specialized distribution needs.
AmeriQuest, which later merged with Oakbrook Terrace, Ill.-based NationaLease and now operates under that name, called on All Services Leasing (ASL) of Williamstown, N.J., to provide dedicated transportation services, including drivers, and tractors and trailers for distribution.
In transit, Carvel ice cream cakes, manufactured by Celebration Foods of Rocky Hill, Conn., demand a temperature of minus 20 degrees. The majority of the ice cream goes directly from the ASL refrigerated trailer into Carvel route sales representative (RSR) trucks using racks on wheels across a custom ramp connection.
Carvel uses up to eight dedicated drivers, tractors, and trailers weekly. ASL's multi-stop, and sometimes multi-state, delivery routes created a challenging dedicated transportation delivery program. Drivers constantly deal with the vagaries of weather during the transfer, battling the elements to maintain their delivery schedules with a demanding frozen product in tow.
To prevent problems and unmet expectations, Carvel RSRs, ASL's dedicated drivers, the transportation and maintenance team, the Carvel cake creation center, and the corporate office engage in solution-centered teamwork and constant communication.
"We promised Carvel we'd operate like their in-house transportation partner," says Michael L. Oetjen, then director of national sales for AmeriQuest. "We test routes and vehicle utilization annually, taking into consideration the 'what-ifs' as the company grows, and we recommend the most efficient service, equipment, and manpower approaches to meet their needs."
Carvel estimates that in the past three years, the ASL and NationaLease transportation delivery program has reduced cost-per-unit by 10 to 15 percent.
"We get the most hours and miles out of these drivers and move more product through the dedicated program," says Victor Perry, director of logistics, Celebration Foods/Carvel Ice Cream.
Carvel's business will soon change dramatically when it opens a new production facility.
"That growth will bring many logistical challenges," Perry says. "We'll be looking to partners like ASL and NationaLease to help us work through the transition by adding drivers, equipment, logistical analysis, and other support resources to ensure that we make this change as efficiently as possible."
Perry emphasizes that Carvel's strategic partners have always endeavored to create a win-win situation for both sides. "It's not me always cutting the rates and demanding more, and it's not them always looking for increases or turning down business that's not as profitable," he says.
As in the case of NationaLease's and ASL's partnership with Carvel, carriers that continue to expand their premium service offerings will become an indispensable part of shippers' processes. Carriers grow their businesses, and shippers get service they can count on from experienced partners.
That's an arrangement that benefits both sides.
At Your Service
The ever-expanding range of premium options that shippers request has encouraged many carriers to venture into new service areas.
Once focused on interstate trucking, Yellow Freight and Roadway, both owned by Kansas-based YRC National Transportation, are adding to their assets and systems to support premium service offerings.
"White-glove and last-mile services have been growth areas for both Yellow and Roadway," says Troy Matthews, vice president of marketing for YRC. "We're supporting that expansion by adding resources and labor to the delivery end of the business, including heavy assembly.
"The trend toward manufacturers shipping direct to consumers spurred this growth," he notes. "We now deliver exercise equipment, home appliances, indoor and outdoor furniture—anything a consumer can buy online. Shippers can bypass the distribution center, or we can accommodate the DC in our system."
YRC recently improved its premium services system-wide to reduce inefficiencies and costs.
"We added new equipment with lift gates and brought in a select group of partners to help meet shippers' technology demands," Matthews says. "We currently deliver to 48 states, and plan future service into Canada. We predict an increase in Canadians buying goods online from the United States."
Premium On Demand
UniGroup, the Missouri-based parent of United Van Lines and Mayflower Transit, also wants to play a bigger role in premium markets.
"Both United and Mayflower have offered premium services upon request but we haven't promoted them," says Tom Duwel, vice president of special products at UniGroup. "Now we're being more proactive."
A new premium offering called Zero Hour makes express service available to UniGroup shippers. "This service lets us handle time-specific shipments for just-in-time deliveries," notes Mike Griffin, director of LTL special products operations for UniGroup.
"Pad wrap and lift gate are our expertise. We're adding one driver non-stop to destination. We also make a driver team available when required so the truck never has to shut down. The target markets for this service are trade shows, automotive, manufacturing, and some niche medical."
To support the Zero Hour service, a new call center went live on Dec. 3, 2007, and booked its first business the next day.
While some shippers want their carriers' vehicles to show their logo, the high-end Manhattan department and specialty stores served by National Retail Systems (NRS), a logistics service provider based in Secaucus, N.J., do not.
Given the high value of the consignments, these retail shippers appreciate the anonymity afforded by transporting their goods in trucks branded with the NRS logo.
"We deliver to thousands of retail outlets," says Larry Ravinett, senior vice president of logistics and supply chain solutions for NRS. "We stock the shelves, and in some cases have the keys to the store. We own custody and fiduciary responsibility for these goods."
Targeting New Industries
Ryder System's Dedicated Contract Carriage (DCC) division plans to boost its investment in technology.
"We are aiming for the high level of connectivity that's necessary to run a proactive, nimble supply chain," says Rosario Rizzo, senior vice president and general manager of Ryder DCC. "We also plan to expand our white-glove expertise to serve the construction and high-tech industries.
"And adding the capability to do simplified repairs on site is on our radar screen."