How a freight-haul company set out to compete with competitors by providing precise delivery times.
Landair Transport Inc.
Like other trucking companies, Landair Transport Inc. moves cargo from point to point. With 525 employees and 250 trucks scattered from Tampa to Sacramento, it has to live with the same daily pressures as any other freight hauler -- first among them, how to get business and how to make money in a cutthroat industry. But unlike most truckers, which compete on the basis of price or care in handling, Landair has grabbed hold of a new leverage point: the customer's desire to know exactly when the truck is coming, so he can organize his time and other resources as efficiently as possible.
For Landair, time-definite trucking service is the standard by which the Greeneville, Tenn.-based company measures itself. In an environment where most trucking operators can't tell you whether their truck will arrive tomorrow or next Thursday, Scott Niswonger, Landair's founder and CEO, has built a $30.3-million business by setting his clocks to his customers' needs. Not just to the day or the hour. "We can be as precise as they want," he says. Niswonger boasts an on-time record of 99% within 15 minutes of schedule.
Landair's first major customers were air-freight operators, which, in the wake of trucking deregulation in 1980, wanted to establish reliable ground transport systems. They still make up the lion's share of Landair's volume, but a growing number of its customers are manufacturing companies looking to save money with just-in-time inventory systems. With those customers, Landair functions more like a consultant/coordinator than strictly a freight hauler (although it does that, too).
You'd think that the ability to deliver such high-value services would translate into incredible profits. But Landair's margins (around 6% pretax) are no better than a lot of trucking companies offering much less -- and they've been worse. Why? Because of the extra costs involved in assuring on-time service, Niswonger explains.
To attract and keep the best drivers, for instance, the company pays at the upper end of the industry scale. And it assigns two drivers to most trips of 400 miles or more; most operators take their chances with one. Also, the company replaces its tractors every three years -- faster, Niswonger says, than 95% of industry operators -- and is outfitting its trucks with more than $1 million worth of satellite tracking equipment that will allow the company to stay in touch with all of its drivers and customers on a real-time basis.
Obviously, these "extras" add up. But Niswonger believes that short-term profits aren't everything. One of the payoffs to investing in service, he notes, is customer loyalty and the opportunity this provides for future growth. Another is the sheer challenge of doing things faster and better. "It's more work," he admits. "But we feel it's more fun running a business this way."