Distribution fleets run on tight, highly controlled schedules requiring high levels of corporate discipline to mesh route start times with unforgiving delivery windows. Owner-operators relish their freedom, picking loads as they choose, turning down loads for reasons sometimes known only to them. Merging these two seemingly contradictory approaches to business might seem impossible, if not insane.
Don't talk to Greatwide Logistics Services in Irving, Texas, if “impossible” or “insane” is part of the discussion, because the largest provider of refrigerated transportation in the country has found a way to make discipline and independence work toward a common goal for some of the most demanding shippers in the food industry. Greatwide styles itself as a logistics provider, not quite like the third-party companies that essentially function only as brokers, but instead offering the service of independent contractors organized into dedicated fleets. Rather than claiming to operate as a non-asset based logistics company, Greatwide is an asset-light organization with few company trucks but a fleet of more than 7,000 refrigerated trailers.
While relatively new to the market in the services it provides, Greatwide can trace its lineage deep into the history of refrigerated trucking in Texas. In its earliest version, the company was formed during World War II to provide food transportation to military bases in San Antonio and south Texas on temporary operating authority. Following the war the authority became permanent as Refrigerated Transport of Texas, so named to distinguish it from another refrigerated transportation pioneer, Refrigerated Transport Inc based in Forest Park, Georgia. RTI as it eventually became known was founded by Cyrus B Weller, one of the Weller brothers also involved in the formation of Frozen Food Express.
Dedicated grocery delivery
In 1976, Weller and his brother Mack sold RTI to K L Breeden and other members of the company management team. In 1988, Breeden with his sons Wynne and David, diversified the company into dedicated grocery distribution as well as traditional truckload services. The dedicated fleet operations are the part of RTI that eventually became known as Transport Industries and now as Greatwide Logistics Services. The original truckload operations still survive and are run under separate ownership by Sam Bishop and his son Gary, also a family with deep roots in Texas trucking.
The modern history of Greatwide began in August 2000 with the acquisition of Transport Industries by Fenway Partners, a private equity firm. At the time, Transport Industries was the largest provider of dedicated grocery distribution services in the country. The company operated under the Transport Industries name until January 2006 when the new Greatwide Logistics Services name was adopted. Between 2003 and 2006, the company made a number of acquisitions including other dedicated transportation providers as well as warehousing and brokerage operators. In its current form, Greatwide Logistics Services operates four business groups — dedicated transport, truckload management, truckload brokerage, and distribution logistics.
Dedicated transport is just what the name on the box says, a group of dedicated fleets providing wholesale and retail distribution to clients such as Wal-Mart, Target, PepsiCo, Nordstrom, and Sysco. Truckload management handles freight distribution in 32 states for a client list that includes Wal-Mart, Ford, General Motors, and others. Truckload brokerage operates from 18 offices across the US providing truckload service to Coca Cola, General Tire, Kraft, Kroger, Wal-Mart, and others. Distribution logistics is a full-service warehouse and distribution system with 3.6 million sq ft of warehousing for clients such as Coca Cola, Pier 1 Imports, Target, and Walgreens.
Greatwide's ability to grow in a highly competitive market is based on its commitment to the use of independent contractors rather than company-owned fleets, says Ray Greer, president and CEO. Leasing tractors from owner-operators gives Greatwide more flexibility to control costs than organizations with company-owned fleets, he says. With owner-operators, the customer pays for a tractor only when it uses one. In addition, dedicated fleets of leased contractors are virtually union-proof, because they are made up of highly motivated, independent business owners with a strong entrepreneurial spirit. Contractors allow Greatwide to provide high levels of service at low cost and with low personnel turnover, he says.
To support his statements, Greer notes that in 2005, Greatwide Dedicated Transport handled more than 800,000 loads requiring almost 401 million highway miles. These loads were delivered with an on-time record of 99.97%, recording only 0.31 accidents per million miles in the process.
Greer says that as much art as science goes into operating dedicated fleets with owner-operators. “The magic comes in knowing how many owner-operators to have in a fleet,” he says. “To make that determination, we need a high level of detail about our customers' businesses. With the right information, we can set up an agile organization that provides improved service along with flexible pricing.”
Find the magic number
Every Greatwide dedicated location — 40 of them — runs a fleet tailored specifically to that operation. “We're always looking for the magic number, the precise fleet size for every location,” says Rob Newell, Greatwide vice-president for recruiting and retention. “The number of tractors at any location is based on customer delivery requirements and an assumption of an availability rate of at least 85%. Rates are negotiated with the customer based on the mileage and other financial needs of owner-operators in the area. Our first operating principle is a refusal to over-truck a fleet, because we know that we can add capacity fairly quickly when needed. As demand at any location increases, we know that most owner-operators can absorb about 30% additional work before reaching their limit.”
“Our intent is to dominate distribution in the food and grocery industry,” Greer says. “At present only 40% of our sales are with non-grocery customers. In order to reach our goals, we want to be the preferred place to work for owner-operators. We have that ability, because we can offer almost exactly the work environment any contractor could desire. We have predictable daily to overnight loads available in our dedicated fleets or traditional long-haul loads in our truckload group.”
Greatwide even has a hybrid of the two concepts at Sysco's first regional redistribution center in Front Royal, Virginia. That operation revolves around improving inbound efficiency at Sysco's operating companies by moving truckloads from single vendors to the redistribution center. At that point, products from multiple vendors are consolidated into truckloads for delivery to Sysco's wholesale foodservice distribution outlets. Backhauls are scheduled as often as possible so that following delivery to a Sysco operating company equipment is loaded with Sysco freight or product for a receiver in the Front Royal vicinity 70% to 80% of the time. The Front Royal fleet currently has 135 tractors and is projected to grow to more than 200, and it operates 270 refrigerated trailers.”
Pushing contractor success
That is possible, Newell says, because Greatwide works hard to make its owner-operators a success. “We have available many of the things owner-operators say they want,” he says. “We have the attraction of a home base. In fact, we want contractors in our dedicated fleets to live within 50 miles of the distribution centers they serve, because we need to get the trailers home for the next delivery route. Our contractors operate on a predictable schedule, and all miles are paid. We have an aggressive fuel surcharge program to help keep contractors financially whole in the face of volatile fuel prices. We have discount programs for fuel and timers. We offer insurance at competitive rates, and we just introduced Greatcare, a health insurance program that allows owner-operators to purchase coverage for their families at reduced rates without endangering their tax status as independent contractors.”
Greatwide's dedicated fleet terminals have a fuel island to provide fuel for refrigeration units and to sell fuel to contractors at a discounted price. Owner-operators charge fuel using a Comdata data card that allows fuel purchases to be taken out of weekly settlements. The card also serves as the contractor's payroll account with payments posted the card weekly. In addition to the electronic payment, owner-operators receive a hard copy of settlement papers.
Part of that drive for contractor success is a financial consulting service known as American Truck Business Services based in Lakewood, Colorado, and run by Jeff, Todd, and Matt Amen who gained their trucking experience as the operators of Trans-Western Express, a truckload carrier of refrigerated products that operated from Denver. ATBS is the largest provider of owner-operator business services in the country. Although convinced that the program provides valuable information and training, Newell says it is a hard sell to established owner-operators, “because they already think they know exactly how to run their business.”
In addition to helping established contractors become better business operators, Greatwide has a program to get new owner-operators started. The Greatstart program matches prospective owner-operators with equipment vendors and financial services — all from third parties completely separate from Greatwide. The only requirement for Greatstart, beyond financial qualification, is that potential new contractors agree to use the ATBS consulting service.
When Greatwide takes over a private fleet, many of its owner-operators come out of the retired fleets. Historically, the company has experienced a 55% conversion rate to Greatwide from customer fleets, Greer says.
The wide variety of loads available provides an attractive environment for owner-operators. The Greatwide terminal in Terrell, Texas, has loads for the Dallas-Fort Worth metropolitan area that are so short a contractor can make three runs a day as well as routes to Brownsville at the southern tip of the state, requiring 600 miles one-way, says Todd Whatley, the terminal manager. Home time is important to most of the owner-operators based in Terrell. If the location has any drawbacks, it that not enough long runs are possible for all the contractors that might want them, he says.
The Terrell distribution center generates loads in two waves a day, Whatley says. In the morning, the center puts out 40 loads containing frozen foods, dairy, and deli products. The afternoon wave is filled with meat and produce. Greatwide's trailers all have multi-temp capacity with three temperature zones under positive refrigeration. The multi-temp capability is used with every load, he says.
No forced dispatch
To avoid forced dispatch, Greatwide tenders loads to owner-operators giving them a choice among five routes. Contractors are free to refuse all loads. The only drawback to refusing a load is being pushed back in the dispatch order. If an owner-operator passes on all the loads in two successive waves, the next load availability for that contractor is pushed back by 12 hours, Whatley says.
Contractors who come into the Greatwide dedicated distribution system have a challenge to meet in adapting to load requirements, Whatley says. While the choice of loads is attractive, meeting the delivery schedules requires careful attention to detail, because Wal-Mart does all the routing. Greatwide personnel have no contact with freight before starting a route. Trailers are loaded and sealed prior to load tender. If a trailer contains more than a single stop, store personnel at the first stop break the original seal and install a new seal before the trailer departs for the next stop. Trailers are even sealed when returning empty to the distribution center.
Most routes require about three stops per route with 30 minutes set as the standard stop time. The first stop is included in the standard mileage rate for the route. Contractors are paid an additional amount for each success stop. Completing a stop in 30 minutes is relatively easy, because all deliveries are no-touch freight, Whatley says. The contractor simply verifies delivery and keeps track of the attached paperwork. If a route includes a backhaul, the location and time for the pickup have been attached to the route before it is offered to contractors. Backhauls are included in contractor compensation at Greatwide's standard mileage rate. Making a backhaul as part of a scheduled distribution route has a significant impact on Wal-Mart's costs, because the company would be paying for those same miles if the trailer returned empty, he says.
Low turnover rate
Making life flexible for owner-operators results in low turnover rates. Company-wide, the rate hovers around 60%, Newell says. In Terrell for 2005, the turnover rate was 41.3%, Whatley reports.
Greatwide is absolutely committed to owner-operators as its primary source of capacity, Greer says. In its dedicated fleets, Greatwide leases 3,200 independent contractors compared to only 800 company drivers. The truckload group with more than 2,200 tractors has only owner-operators. The preference is always for owner-operators except in a few markets where dense traffic and short routes favor company drivers, he says.
On the asset side, Greatwide owns 7,000 refrigerated trailers, mostly dedicated to Wal-Mart. Even that is not a constant factor. “We are beginning to provide a power-only solution at some locations,” Greer says.
The growing trend to dedicated distribution fleets can be attributed to five factors, Greer says. Since late 2002, the cost of new engines certified to meet ever-more-stringent exhaust emission standards coupled with the lower fuel economy of those engines has put a tremendous cost burden on private fleets. Trailers feed into this cost structure as well as aluminum costs have increased at least 15% in recent years. Obviously, the price of fuel puts pressure on private fleets, especially those with few backhaul opportunities to help pay for return miles. Like all other fleets, private fleets are impacted by the driver shortage and the ease with which drivers can move from job to job. And finally, the new hours of service regulations have begun to limit operational flexibility for private fleets, he says.
By concentrating on grocery distribution and Wal-Mart in particular, Greatwide has followed the growth patterns of its largest clients. With the opening of a new terminal in the Las Vegas, Nevada, area, Greatwide has become the largest single dedicated carrier for Wal-Mart, operating from 13 locations and serving more than 2,000 Wal-Mart Supercenters and Sam's Clubs. The company has also won the gratitude and recognition of clients with honors such as Wal-Mart's Dedicated Grocery Carrier of the Year, Target's Super Target Carrier of the Year, and Sysco's Elite National Carrier of the Year.