specialreport PARCEL EXPRESS
According to Rob Martinez, CEO of Shipware, regional
alliances work best when they involve contracted rates based
on the number of stops a driver makes, rather than the number of packages carried. “The ideal customer has multiple
pieces going to a single destination,” said Martinez, adding
that delivery density is the key element in executing a profitable venture.
A MATTER OF DENSITY
Building package density is easier said than done. In fact, Rick
Jones, CEO of Lone Star Overnight, an Austin, Texas-based
carrier that serves Texas, Oklahoma, western Louisiana, and
southern New Mexico—and through an alliance with
Mexican carrier Estafeta reaches all of Mexico—said the lack
of density is probably the biggest reason why a national network would not succeed. Even DHL Express, a major carrier
by any measure, failed to achieve sufficient density in the U.S.
to compete profitably against FedEx and UPS, Jones said.
According to unscientific estimates, UPS alone carries as
many packages and letters in two business days—about 32
million to 33 million pieces worldwide—as the largest
regional carrier moves in a year.
Jones said strategic alliances can broaden a regional carrier’s
reach without the inherent complexities of a revenue-sharing
agreement. Six months ago, Lone Star began a venture with
On Trac, a regional carrier serving eight western states, including all of California. Under the venture, called “LSO Plus,”
Lone Star loads a 53-foot tractor-trailer in Austin and brings
it to OnTrac’s Phoenix facility. There, some of its customers’
packages are inducted into On Trac’s system to be locally distributed. The truck then rolls on to On Trac’s main distribution center in Commerce, Calif., just east of Los Angeles,
where the rest of the packages—those bound for West Coast
markets—are fed into On Trac’s system for delivery.
Lone Star bills its customer for the through move and pays
OnTrac for the regional distribution. Lone Star is the customer’s main point of contact. All surcharges associated with
the service are the same between the two carriers, minimizing
any chance of customer confusion, Jones said.
On Trac does not currently ship into Lone Star’s territory,
mainly because it is too costly for the venture, which has yet
to turn a profit, to run a 53-foot tractor-trailer from
California to Texas, Jones said. Lone Star has enough faith in
the model to seriously consider expanding it into the
Midwest, the most logical adjacent geography for the company, Jones said.
E-COMMERCE’S IMPACT
Yet the need for a national parcel system may be mooted by a
force of nature called e-commerce. Most e-commerce shipments move between 300 and 500 miles, which mirrors the
average length of haul in most domestic truck commerce. The
distance fits smartly within a regional carrier’s territory. In
addition, because regional carriers serve a limited geography,
they can focus their resources on offering later cutoff times
