ANN ARBOR, Mich.¡ªCon-way Freight, the less-than-truckload (LTL) subsidiary of freight transportation services provider Con-way Inc., has rolled out a major re-engineering of its operating network.
The company said that this initiative will boost operations on various fronts, including reducing service exceptions, improving on-time delivery and faster transit times, deploying a lower-cost and more efficient service center network to better meet customer needs and business volumes. Con-way Freight will also be reducing its nationwide service center network by 40 locations, which will bring its total to 303 service centers that are supported by 70 Freight Assembly Centers (FACs). The company said these changes are expected to be complete and fully operational by early December.
In an exclusive interview with LM, Con-way Freight President John G. Labrie said these changes stem from the company¡¯s 2007 announcement to combine its three regional operating companies¡ªCon-way Freight-Central, Con-way Freight Southern, and Con-way Freight-Western¡ªand its holding company into a singular structure as a single Con-way Freight organization.
¡°That set the table for us to pursue strategic initiatives like this one and to look at our network as a single network, as opposed to three separate networks,¡± said Labrie. ¡°Since then we have identified opportunities to improve performance for customers and are doing it in three ways: by improving exception-free performance, on-time performance, and transit time improvements for [shippers].¡±
Labrie added that when Con-way Freight identified these opportunities, the company conducted a methodical analysis focused on the network re-engineering opportunity and ways in which it could improve customer performance and remove network costs. At that point, it focused on identifying how it would implement its plan, which has occurred over the past several months through a two-part process: to identify the opportunity and to create the implementation plan.
No exception when it comes to service: Handling shipments fewer times as they pass through the Con-way Freight network from origin to destination is the most significant aspect of this network re-engineering, said Labrie.
¡°We have taken a significant number of handlings out of the process for a large percentage of our total shipments,¡± said Labrie. ¡°The biggest thing that does is impact our exception-free delivery and claims-free handling, which is the single most important thing to customers. Exception-free performance is the single biggest factor in our customer¡¯s decision-making processes. As part of our strategy, we are focused on being the best carrier in the industry when it comes to exception-free.¡±
Another benefit of this initiative cited by Labrie is being able to improve on-time performance by reducing the number of miles in the network and simplifying the network. And by taking nodes out of the network as the total number of locations are reduced and cut down on the number of miles traveled on a nightly basis, Labrie explained Con-way Freight is simplifying and reducing the opportunity that it will deliver late shipments, as well as get faster transit times in roughly 6,000 lanes.
As part of this announcement, Con-way Freight said it will also make changes to its nightly inter-city line-haul operation, with new load planning, routing, and scheduling programs designed to eliminate more than 124,000 miles per day from its system and increase the amount of freight that is direct-loaded from origin to destination. The elimination of 124,000 daily miles represents a 5.2 percent reduction of the 2.4 million miles per day Con-way Freight currently covers, and Labrie said that this number coincidentally equates to the number of doors Con-way Freight is removing from its network.
Labrie said that part of this effort is Con-way Freight¡¯s plan to open up an FAC operation in LaSalle, Illinois that allows Con-way to shutter other FACs and direct-load some shipments to the East coast, which previously required intermediate handling.
¡°This is a great example of how a new FAC location is going to allow us to direct-load shipments that previously needed intermediate handling and is also directly related to exception-free and on-time performance,¡± said Labrie.
Shipper benefits: Labrie said that in conversations with customers prior to this announcement, the overwhelming feedback was positive as they understand that service ill improve and they are excited about how Con-way is proactively addressing a strategic opportunity to improve overall performance.
Con-way said that this re-engineering plan is expected to reduce the company¡¯s cost base by $30-to-$40 million per year and call for a number of smaller locations to be consolidated into larger nearby facilities. And it added that more than 75 percent of affected employees at closing locations will have the opportunity to continue at a new operating location or consider transferring to any other Con-way Freight locations where there are open positions. Potential job cuts would represent less than one percent of Con-way Inc.¡¯s 20,400 employees, said Labrie.
Analyst insight: Stephens Inc. Analyst Thom Albrecht wrote in a research note that through this network re-engineering, Con-way will not exit any markets and should end up with a more cohesive network, adding that this is a natural byproduct of the merger of Con-way¡¯s three LTL carriers during the previous 18+ months and that the weak economy and 2007 LTL carrier integration have presented the company with this opportunity.
But Albrecht added that it may also indicate that Con-way is not optimistic that LTL volumes will rebound in a meaningful way anytime soon.
¡°However, overall, we like this move and believe it is a legitimate opportunity to improve service (transit times, cargo claims, and safety), reduce costs and create ¡®separation¡¯ vs. its competitors,¡± wrote Albrecht.
