Trucking companies in Arkansas, like others around the country, are increasingly turning to logistics services to drive growth. One example of that shift: PAM Transport’s Clint Elcan.
Elcan was hired a little more than a year ago to be the vice president of logistics for the Tontitown transportation company. Elcan moved into his office, carved into some spare space in the back of the company’s headquarters, and now oversees a room of approximately 25 employees.
None of the employees are drivers, but their work is helping drive PAM’s foray into the newest growth opportunity in the transportation industry. The logistics division of PAM reported revenue of $33 million for the first three quarters, double what it reported in 2014.
The division’s share of PAM’s total revenue has increased from a little more than 7 percent to almost 13 percent in the past year.
“That has been a trend developing over the last few years,” Elcan said. “Without a doubt, that’s the direction companies are moving toward. We haven’t listed a specific goal, but we’ve got a focus on growing our logistics offering. We are very happy with the amount it has grown in the past year, but we want to accelerate that growth.”
PAM isn’t the only one. While PAM hasn’t set — or at least been willing to share — any goals for its logistics division, other companies aren’t so reticent.
ArcBest Corp. of Fort Smith announced in November that it had a goal to increase its asset-light revenue to 50 percent of its total revenue. ABF Freight, its tried-and-true trucking division, had revenue of $1.93 billion in 2014 compared with asset-light revenue of $723 million, approximately a 72-28 split.
“Many people that look at our company continue to only focus on one part of our company: our ABF Freight LTL business,” ArcBest CEO Judy McReynolds said at the Stephens 2015 Fall Investment Conference in November in New York City.
What Is Logistics?
McReynolds pointed out at the conference that ArcBest is a logistics company, and USA Truck Inc. of Van Buren has rebranded itself as a “Capacity Solutions” company. Hardly any major transportation company can be considered a trucking company.
“We’re talking about logistics companies that have trucks,” said USA Truck’s Tom Glaser, who stepped down as CEO last week but remains on the company’s board of directors.
McReynolds said ArcBest sees a “significant growth opportunity” in logistics and its related brokerage services. Glaser said USA Truck has been champing at the bit to dive into logistics but its struggling truckload division had prevented that until recently.
Logistics, without getting too complex, is when a company uses outside assets to serve its customers. Companies can use available truck space — or train space or barge space — on other carriers in their network to solve customers’ needs.
A transportation company, through its logistics division, can use a two-truck company in Idaho or a 100-truck company in New Mexico without having to expand its actual operations.
“We run a very defined network,” Elcan said, referring to truck lanes. “We can go outside the network to find solutions.”
Glaser said USA Truck has constricted its truck lanes — thereby reducing costs of tractors, trailers and drivers — but expanded its services by using logistics and brokerage. Glaser, who came from trucking, stepped down as CEO to make room for Randy Rogers, who has a logistics background.
“When a customer calls up, they’re looking for a one-stop shop,” Glaser said. “They’re looking for someone who can handle their transportation needs, and that’s not just moving from point A to point B; it may also be managing the entire process. The whole idea was: You call us up and we’ll manage the transportation from pickup to delivery and do it in the most efficient manner.
“We’ll find another carrier that might go to Butte, Montana, because our trucks don’t go to Butte, Montana. Or we’ll put it on one of our trucks because they go to Atlanta every day.”
McReynolds said ArcBest believes there are billions of market-share dollars available, and ABF Freight’s customer base gives it a great starting point.
“It really comes in the form of services that are beyond LTL, our historical market that we serve through ABF Freight,” said McReynolds, referring to less-than-load freight. “The larger part of that growth opportunity is really in the brokerage business. It ends up being a total opportunity for logistics services of about $12.8 billion with the ABF Freight customer base.”
Customer Service
Elcan said whether the service is with a PAM truck or an independent truck hired by PAM, it’s still all about service.
“Most customers are looking for three things: They’re looking for capacity, they’re looking for price, and they’re looking for service,” Elcan said. “You leverage your relationship with your existing customers by offering those three things in lanes that didn’t work for the asset division. You utilize a partner carrier network to find those solutions.”
Glaser said expanding the logistics and brokerage services was a big initial goal of former CEO John Simone, who was hired to turn around USA Truck in 2013. Simone resigned in July 2015 to focus on his diagnosed lung cancer but not before turning around the company’s struggling trucking division.
Glaser said USA Truck started its logistics division in 2009 but couldn’t invest in it until recently. Meanwhile, Glaser said, he watched as Coyote Logistics grew from a 2006 startup to a $1.8 billion acquisition by UPS in 2015.
“There was a little bit of frustration there,” Glaser said. “What we’re doing is we’re beginning to strategically position ourselves for a future like that. What you’re going to see USA Truck do, now that we have truckload restarted on their path to success, we’re going to start focusing more on the asset-light business. [Coyote] shows you with a little bit of effort and a lot of knowledge you can do great things.”
Glaser said logistics will transform the transportation industry as much as deregulation did in 1980. In a few years, the big players will be those who took advantage of the opportunities in logistics.
ArcBest, which formed ABF Logistics in 2013, bought Panther Premium Logistics in 2012 and Smart Lines Transportation Group in this past year. McReynolds said at the Stephens Conference that ArcBest was “actively looking” for more acquisitions to speed growth, and USA Truck in announcing Rogers’ hire touted his logistics expertise.
“You’re investing in people and technology to arrange the transportation versus investing in trucks and trailers and terminals,” Elcan said. “The whole key to this is finding the right people.”
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