Shippers are facing more challenges than ever before with an unprecedented driver shortage and fluctuating fuel surcharges and diesel prices ; all along they're striving to ensure that they're receiving optimal service from carriers to move freight through their supply chains. Carriers are well aware of the challenges their customers are facing. Rick O’Dell, president of Atlanta-based less-than-truckload carrier Saia Inc., spoke with Logistics Management’s senior editor Jeff Berman about the myriad challenges both shippers and carriers face on a daily basis, including pricing, the role of intermodal transportation, and Saia’s recent acquisition of The Connection Company, which will boost the company’s North America presence to 34 states with 139 terminals.

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LM: Saia recently announced that it acquired The Connection Co. in an initiative designed to advance its strategic goal of providing complete coverage throughout North America. What is your is your strategy for integrating Connection into Saia?

RO: We have a very detailed work plan that spans from customer issues, changes in terminal operations, closing The Connection’s general offices, and migrating them into our operations.

LM: Can you explain what happens on the customer side with an acquisition like this?

RO: A large portion of customers have either tariffs or contracts with The Connection, and some have overlapping or conflicting tariffs or contracts with Saia. All of these tariffs, contracts, and customer data need to be renegotiated or reestablished legally to be doing business with Saia, because on February 12, 2007, The Connection will no longer exist.

LM: What about the terminal operations side?

RO: On the day that The Connection officially becomes part of Saia, it is like installing a new computer system and process. We have a series of training sessions for the terminal managers and the clerical personnel. Dock workers and drivers do not have a ton of change in their duties. The freight bills may look a little different, but their jobs are basically the same. The dispatchers, office personnel, and customer service personnel need to know how to track and trace freight…and these training sessions allow new customer service and terminal operations personnel to be prepared to work with the Saia system from day one.

LM: What is your take on the ongoing truck driver shortage? Is it as bad as it seems? What is Saia doing in terms of retaining drivers?

RO: I see it more on a regional or specific location basis, as opposed to on a widespread basis. In the LTL market, our driver shortage is not nearly at the level that it is in the truckload (TL) market. One reason is that we pay more, and the drivers have a better quality of life. About 60 percent of our business is delivered overnight, and 80-plus percent is delivered overnight or second-day. And we run a relay network in which 70 percent of our drivers are home every night or every other night. We will run a driver on a meet-and-turn run, and he may come back to his terminal and meet a driver from another terminal. We have drivers in Atlanta that make nightly runs to Charlotte, and they get back home every day. These drivers get more money per mile than a TL driver would and they are not living in their tractors. We also have 105 team drivers that make it back home every weekend, where most TL teams are dispatching drivers for three weeks at a time before they make it back home.

LM: Over the course of this year, the American Trucking Associations’ (ATA) monthly truck tonnage index has seen a lot of fluctuation ; i.e. a good month followed by a bad one. Is this indicative of an industry going through some growing pains? What is driving this fluctuation? Is it the declining automotive and housing markets?

RO: There seems to be a building consensus that there is economic weakness out there driven by those specific factors, and our customer experience by those segments—such as housing—is very soft. We are growing with a major home improvement products retailer, because we are getting a lot of new lanes. It is a little bit difficult to say when you just look at the revenue, unless you dissect it by terminal. In our third quarter earnings conference call, we noted that in a normal seasonality, June is a seasonal peak and then it actually steps up to September. And normally we would expect June to September—the peak for those months—would be up three percent, and it was flat.

LM: And that is indicative of what is currently happening due to a softening economy?

RO: It has been confirmed by what many carriers have released. We actually don’t comment on interim trends, but we did state in October that our tonnage was up about 5.5 percent, and in the second quarter we were up seven percent. There was some further softening versus our trend line in September.

LM: What do you think about the growing role intermodal appears to be playing in the transportation landscape for North American-based shippers? How involved is Saia in intermodal operations?

RO: Sixty percent of our freight is delivered overnight, and another 25 percent is two-day. Most of that is not conducive to rail. We don’t use it very much, but my perception is that intermodal and rail service has improved and there are some expedited lanes that can meet the needs of LTL carriers. From that perspective we are participating in [intermodal] more than we have in the past and it has caused us to re-consider that. I think the ability to get freight off a train and move it on a timely basis has changed, and it is becoming a more cost-competitive opportunity for LTL carriers in the two-day plus lanes. As people begin to look at their costs and get freight coming in from overseas, they may use intermodal and/or rail, but to get finished goods to customers at the end of the day they still have to move them by truck.

LM: What are you hearing from your customers in regards to what their biggest issues and concerns are for moving goods through their supply chains?

RO: They are looking for a reliable service provider with aggressive transit times, a high degree of reliability, and customer responsiveness. Visibility is increasingly important as well. Even if you are highly reliable, if you cannot tell a shipper when something is going to be delivered or where something is, you are not really a viable alternative for them in many cases. It used to be that you had a fair number of niche LTL players that were real good in a few states or certain lanes, but now if they are not willing to invest in things like wireless technology and real-time delivery systems that help customers track freight, they are not helping customers. The other key thing they are looking for is proactive notification, so if a truck breaks down or there is a weather delay, they will know about it in a timely manner. They need to know in advance if something won’t be delivered on time. It is one thing to say you are on time 98 percent of the time, but on the other two percent, did you tell the shipper in advance that something won’t be delivered? At the end of the day, that is what customers are really looking for.