Academic journal article Journal of Transportation Management

Analyzing the Evolution of Class I LTL Motor Carriers: An Examination of Expansion into Warehousing

Academic journal article Journal of Transportation Management

Analyzing the Evolution of Class I LTL Motor Carriers: An Examination of Expansion into Warehousing

Article excerpt

INTRODUCTION

Since deregulation in 1980 the market environment faced by motor carriers has changed dramatically (Corsi et al., 1991; Feitler et al., 1998; Harper, 1983; Silverman et al., 1997). The environmental changes have altered relationships between shippers and carriers and created a mutual dependence (Crum and Allen, 1991). While the bulk of logistics research has typically focused on the shipper, motor carriers also face many new challenges (Corsi et al., 1991). Attracting and retaining customers is one of the most critical challenges facing carriers because it is vital to their long-term success (Stock, 1988). Carriers successful in meeting this challenge can build and maintain a solid customer base, enhancing the future outlook for the carrier (Rinehart, 1989).

Throughout the 1980's and 90's significant changes in the strategic orientation of motor carriers has occurred (Feitler et al., 1998; Silverman et al., 1997). Some carriers have attempted to attract and retain customers by pursuing strategies designed to differentiate themselves from competitors. They believe sufficient customization and/or bundling of services may be one way to differentiate them from other carriers (Rinehart, 1989). There are several reasons why customizing or bundling services may help to retain customers.

First, many buyers of third-party logistics services are reducing their supplier bases (Delaney, 1998). Creating and maintaining a supplier relationship takes up valuable resources. The customer must identify potential suppliers, negotiate agreements, and process paperwork. Unless absolutely necessary, customers are increasingly reluctant to deplete resources to support a myriad of external logistics service providers. Instead they prefer to have a limited number of high quality external providers offer multiple services integrated together. To remain on their customers exclusive supplier list, some carriers are attempting to build long-term strategic alliances with key customers by bundling multiple logistics functions together to expand the availability of service offerings.

Second, carriers face significant competition from other carriers and integrated third-party logistics providers. Previous studies have examined the impact of integrated service providers on both logistics outsourcing usage (Leib and Maltz, 1998; Lieb and Randall, 1996; Sink and Langley, 1997) and motor carrier strategy (Feitler et al., 1998; Harper, 1983). Results of these studies indicate the third-party logistics market will continue to grow (Sink and Langley, 1997) and customers will be increasingly interested in "one-stop shopping" (Leib and Maltz, 1998). Many carriers want to take advantage of these market conditions and establish themselves as a leading edge logistics provider by differentiating themselves from competitors. To establish a credible reputation in the marketplace and remain competitive, many carriers have pursued a strategy of providing a variety of high quality customized services. As a result, some motor carriers have enhanced their competitive position and experienced considerable growth by expanding the number of services offered to customers (Crum and Allen, 1991).

BACKGROUND AND LITERATURE

The Motor Carrier Act of 1980 was particularly troublesome for the Less-Than-Truckload (LTL) segment of the motor carrier industry (Corsi et al., 1991). The net impact of deregulation on the motor carrier industry has generally been positive (Winston et al., 1990). However, adjusting to the free market environment has been a fatal process for some carriers (LaLonde, 1984-1985). Bankruptcies have increased since deregulation (Harper and Johnson, 1987) and LTL motor carrier profits declined by approximately $5.3 billion in the ten years subsequent to deregulation (Corsi et al., 1991).

Prior to deregulation carriers had little incentive to expand service offerings to customers. As a result, most regulated carriers were solely transportation providers. …

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