Thursday, June 21, 2012

Increasing interest in the US expedited trucking segment

Increasing interest in the expedited trucking segment is spurring the growth of not only premium solutions but also expansions/M&A into this segment.

The recent acquisition of Panther Expedited by Arkansas Best highlights the growing interest in the US expedited trucking sector.  The expedited trucking market has undergone many changes over the years. However, the basics remain the same – this niche segment provides time-sensitive, door-to-door delivery of various goods, particularly those of a “just-in-time” nature.

The segment is difficult to size due to its fragmented nature. It includes numerous smaller region-specific carriers. However, according to SJ Consulting, FedEx Custom Critical is considered the largest expedited carrier in the US with $329m in revenue for 2011, a growth rate of 14% over 2010. According to the director of operations for FedEx Customs Critical, the company is growing in the upper single digits so far this year. The other major players include Panther Expedited, UPS Express Critical, Landstar Express America and Express -1. Combined, these top five expedited carriers had estimated revenues of $938m, an almost 10% increase over 2010.

Besides the time-definite nature of the business, security is priority for many shippers that utilize this service.  For high-valued goods such as electronics, pharmaceuticals, arts and financial, lost and/or stolen property can result in big losses.

 While security is the top priority when using expedited trucking, many are also turning to this segment to manage capacity. Although capacity within the trucking industry appears to have lessened somewhat recently, it still remains fairly tight. Also, due to economic concerns and supply chain changes, some shippers are opting for leaner inventory levels. As a result, shippers are willing to pay a slightly higher price for already agreed-upon capacity and security instead of relying on other options such as the spot market.

Premium solutions are also on the increase. FedEx Custom Critical recently announced it expanded its SenseAware service to customers in aerospace, arts and finance. This service, originally designed for its pharmaceutical customers, allows for real-time monitoring of high-value, time-sensitive shipments as well as for those goods that require temperature control. Also, as the delivery vehicle travels along a designated route, the vehicle is under constant two-way, on-board satellite monitoring, and instant alerts are issued if the vehicle deviates from the given route.

Other premium solutions offered within the expedited trucking segment include refrigeration, special handling, trade-show support and consolidation services.

As demand for such services continues, larger trucking companies are expanding service offerings to meet the needs.  For example, Pitt-Ohio launched its Fast Track service in May.  The service includes same-day delivery, next-day and second-day delivery service to all points in North America and many international destinations. Fast Track is customizable based where and when the customer needs their expedited freight delivered and also provides mobile alerts for customers. 

 For some carriers, such as Arkansas Best, the decision is to acquire specialized expedited carriers. In fact, over the past year or so, mergers & acquisition activity in this space has increased - Express-1 was acquired by Jacobs Private Equity LLC and renamed XPO Logistics and Canadian small parcel carrier, Transforce acquired US-based Dynamex.

It is likely mergers & acquisition activity will continue in this segment – particularly as trucking companies look to diversify and expand their service offerings. Smaller, region-specific expedited carriers are likely more at risk for takeovers as larger carriers expand their geographic reach.
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