newsworthy

Old Dominion raises
non-contract rates 4.9%

Old Dominion Freight Line said it would raise rates by 4. 9 percent on non-contract traffic effective Sept. 6, a move that dramatically undercuts the rate increases already put into effect by its key less-than-truckload (LTL) carrier rivals.

In a statement, Thomasville, N.C.-based Old Dominion said that unlike other LTL carriers that have imposed across-the-board rate increases, its increases would be based on a shipment’s length of haul. As a result, some shipments may be subject to higher increases than others, though the increases are expected to average out at 4. 9 percent, the company said.

The Old Dominion move, which has occurred a bit later in the pricing cycle than similar actions by its rivals, is likely to put pressure on competitors that have already committed to much larger increases. UPS Freight, YRC Worldwide Inc., ABF Freight System Inc., and Con-way Freight, all of whom compete with Old Dominion, have increased their non-contract rates by 6. 9 percent. FedEx Freight, the LTL unit of FedEx Corp. and the nation’s leading LTL carrier by sales, raised its non-contract rates by 6.75 percent.

Old Dominion’s actions are a turnabout of sorts from the strategy it employed through much of the 2006–2010 freight recession. The carrier, for the most part, chose not to become embroiled in the fierce rate wars waged by other LTL carriers in a bid to gain market share and to drive YRC, then the market leader, out of business through underpricing.

By contrast, Old Dominion chose to walk away from unprofitable and marginally profitable freight, an approach that helped it maintain strong yields and profits as its rivals struggled. Today, Old Dominion is considered by a number of analysts to be the best LTL carrier currently in business.

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short takes

New Penn Motor Express Inc., a subsidiary of YRC Worldwide Inc., is celebrating its 80th anniversary serving the next-day less-than-truckload transportation needs of customers in the Northeast. … Total Quality Logistics has opened an office in Lexington, Ky., and will hire 45 new employees by the end of 2012. … Old Dominion Freight Line Inc. is expanding its service offerings with the introduction of Vault Logistics, a neutral third-party provider of supply chain solutions. Vault Logistics unites several existing business units within Old Dominion into an independent operating division that includes warehousing, business solutions, dedicated services (fleet and warehouse), and truckload brokerage units.

In recent quarters, LTL carrier yields have strengthened as carriers have become more selective about the freight they’ll accept and as rate increases have gained traction with small to mid-sized shippers that often lack the volumes to negotiate lower contract rates. In a broadly improving pricing environment, Old Dominion may feel more comfortable coming to market with lower rates than it would have a year or two ago, when rates were weak and discounting was prevalent.

Separately, Old Dominion said it has launched a third-party logistics (3PL) unit to respond to customer demand for increasingly complex supply chain solutions.

The unit, Vault Logistics, will operate as an independent division within Old Dominion and also as a neutral third-party service provider, meaning it can use other carriers besides Old Dominion if customer needs warrant.

The unit is headed by Michael Venegoni, who joined Old Dominion in June 2010 after 12 years at YRC, where he left as group vice president. ;

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