ORLANDO, Fla. — Acquisitions are nothing new in the LTL industry. What is new, in a world of scarce assets, are the reasons for the deals.
Carriers that are short of drivers, equipment and facilities will be pushed into acquisitions to get access to resources they have trouble obtaining on their own, said Geoff Muessig, executive vice president and chief marketing officer of Pitt Ohio, a regional carrier based in Pittsburgh. That is a departure from the traditional acquisition strategy, which was to expand the acquiring carrier’s territory and its book of business.
Privately held Pitt Ohio, which operates 22 terminals in the mid-Atlantic and Midwest as well as a North American door-to-door network in partnership with six regional carriers, has found it difficult to purchase or lease suitable land to expand its terminal infrastructure, Muessig said Monday at the Transportation & Logistics Council’s annual conference in Orlando. Acreage at a particular location may be too small to support the volume of dock doors that the carrier may require. Expanding a door operation to an acceptable size could cut into the amount of yard space the carrier needs to operate.
Adding to the challenge for all LTL carriers is the slow and cumbersome local permitting processes. Municipalities often drag their feet in acting on a carrier’s request to build a terminal. Some local governments believe that the development of an LTL terminal will disrupt their constituents’ quality of life. Often lost in the argument, industry advocates contend, are the well-paying jobs that typically accompany such an expansion.
Available land is just one of Pitt Ohio’s challenges. Tractor orders placed last year are just trickling in, according to Muessig. Parts shortages are also an issue. The carrier has been harvesting older tractors for parts because it can’t obtain components from traditional sources in a timely manner, he said.
To counter rising cost inflation across its organization, Pitt Ohio is turning heavily to digitalization. The carrier has set a goal of digitizing 85% of its bills-of-lading, Muessig said. It is currently at 25%.
Founded in 1979, the year before trucking deregulation, Pitt Ohio grew rapidly in the 1980s and 1990s. Many of its longtime drivers are nearing retirement age, and the company has launched a driver apprentice program to bring in new blood. The company, which has more than 1,700 drivers, hired 100 drivers last year and has brought on another 35 through mid-March. It has enough drivers to move its customers’ freight, according to Muessig.
Pitt Ohio has repeatedly improved the compensation packages of its drivers since the pandemic began, Muessig said. For example, the carrier has raised the wages of drivers living in smaller markets, who in the past didn’t make as much as their big-city brethren, to levels at or approaching parity. It also paid a driver retention bonus last year for the first time in its history.
LTL drivers typically are paid more than truckload carriers. In addition, they are home each day based on a 24-hour cycle, unlike truckload drivers who can be on the road for weeks at a time. Not surprisingly, LTL driver retention rates are much higher than in the truckload sector. Historically, LTL driver turnover rate has hovered in the low double-digit range, a much more stable retention rate than in the truckload sector.
Labor will continue to have a large influence in how supply chains function, Muessig said. Increasingly, a driver’s work-life schedule can dictate whether a shipper’s load will be picked up at what used to be considered odd hours. Pitt Ohio’s mantra is “when drivers leave on Friday, we want to make sure that they’ve had a good week and that they will come back on Monday,” he said.
Pitt Ohio generated revenue of $780 million in 2021 and ranked 15th among LTL carriers in revenue size last year, according to SJ Consulting data.