January 17, 2012
Diversification. It's a tactic trucking companies have been embracing for a while now,
as less-than-truckload companies get into truckload, truckload companies get into intermodal or warehousing, and everyone, it seems, is getting into logistics. Dry van fleets launch or buy flatbed or refrigerated divisions and vice-versa. We've even seem some companies branch out into real estate and solar power.
It's been a very successful tactic for many. Look at J.B. Hunt, which parlayed its truckload roots into an intermodal empire that helped drive record second-quarter earnings last year. FedEx over the years has moved from simply a fast package delivery business to include LTL, ground package delivery, air freight forwarding, logistics, customs, office services, etc.
Of course, we've seen it on a smaller scale, as well. A livestock hauler, for instance, who branched out into selling trailers. And then there's simply the need to diversify the types of customers you have, as many flatbed companies learned the hard way when the housing and auto manufacturing markets both tanked.
But a headlong rush into diversification may not be the right move for every company. Recently we've seen two very different trucking companies divesting themselves of businesses that don't fit their core competencies.
YRC Worldwide, of course, has been struggling for a while now. Following its massive restructuring last year, it sold a significant portion of its Glen Moore truckload subsidiary to Celadon Trucking Services, one of North America's largest truckload carriers.
"Less-than-truckload shipping is what we do best," explained James Welch, chief executive officer for YRC Worldwide, saying the goal is to regain the market leader position in that segment.
In an interview with a local business publication, Welch said his guiding principle is making the company a pure-play LTL provider, and there could be more divestitures going forward. "There are other things that don't necessarily complement what we do that we'll be looking at," he told the Kansas City Business Journal.
Meanwhile, Frozen Food Express Industries decided to sell nearly all of the rolling stock from of its former dry van business to -- again -- Celadon Trucking Services. The Dallas-based company which, as its name implies, specializes in temperature-controlled services, decided to sell its entire dry van fleet of 435 trailers, while reducing the fleet by 290 tractors. The company's still providing dry freight services using its refrigerated equipment, but only on lanes that make economic sense for customers and the company.
Not that FFE isn't still diversified; it offers TL and LTL, dedicated and intermodal, but in those offerings it's focusing primarily on what it does best, with temperature-controlled offerings. And it's branching out into bulk tank transportation, hauling fresh water to drill sites for a natural-gas driller in West Texas; by this month the company expects to have 40 specialty tank trailers on the job.
With the booming business in fracking, FFE is far from the only company jumping into the opportunities in hauling the water and other supplies needed for this new method of accessing hard-to-get-to natural gas deposits.
And with the economy recovering, there are many opportunities for acquisitions of struggling companies or divisions, as Celadon is doing.
In fact, Transport Capital Partners' third-quarter Business Expectations Survey found that the number of carriers thinking about selling in the next 18 months rose slightly to 28%, the highest percentage of carriers that have been interested in selling long-term since TCP began the survey in February of 2009.
Last year, as part of a story on the changing supply chain, I spoke with NFI and C.R. England, who have been successfully diversifying. One thing they both emphasized was the need to "look deeply" at new ideas, to "do a deep dive" on an exciting new trend. In other words, don't get so excited about new diversification opportunities that you forget to do your homework. From the January 2012 issue of HDT.
Author: Deborah Lockridge | Posted @ Tuesday, January 17, 2012 7:17 AM