Crowley Sees $2.3 Billion Military Contract as Test of Logistics Capabilities
More than a year after winning a contract to handle freight shipments for the U.S. Transportation Command, Crowley Logistics has executed the first cargo move under a $2.3 billion multiyear Defense Freight Transportation Services contract.
The load, which was transported by truck from the U.S. Tobyhanna Army Depot in Pennsylvania on Feb. 12, represents a bold move by Jacksonville, Fla.-based Crowley Maritime Corp. to expand beyond its roots as an ocean shipping firm and establish itself as a major inland transportation services provider.
Weist
“Crowley is looked at as a maritime service provider,” said Bob Weist, vice president of transportation for North America. “But we have a large logistics wing. We thought this was actually a good fit because the services required — less-than-truckload, truckload and airfreight — we provide that to commercial customers every day.”
The two-year DFTS contract — which is followed by five option years — gives Crowley control over cargo moving by truck to and from 41 military depots in the continental United States, plus Alaska and Canada.
It’s also a “different” type of contract, Weist said. Instead of receiving a commission on each shipment, Crowley is paid based on a fixed price agreement covering all lanes of traffic for each contract year.
The arrangement protects the Department of Defense against cost increases and gives Crowley an incentive to keep costs down.
“We will be looking for improvements,” said Shiju Zacharia, Crowley’s senior director of transportation and the official responsible for executing the DFTS contract. “We will do that by instituting best practices and using more efficient modes and methods, such as converting air shipments to ground or creating multi-stop truckload routes and taking advantage of optimization technology.”
Zacharia
Weist said the company has about 400 carriers currently contracted to haul freight under the DFTS contract and is actively soliciting capacity from small and veteran-owned trucking companies.
Crowley was awarded the contract in November 2016, but implementation was held up by protests from the previous contract provider, XPO Logistics Government Services, which argued that Crowley lacked the experience to handle such a large contract. XPO inherited the business as part of its 2015 acquisition of Con-way Inc.
The original contract, known as the Defense Transportation Coordination Initiative, was awarded to Con-way subsidiary Menlo Worldwide in 2007 and was due to end in April 2015, but was extended after Genco Infrastructure Solutions unexpectedly withdrew its winning bid. Genco is now part of FedEx Corp.
Although XPO’s challenge was initially upheld by the Government Accountability Office, a court ruling in June 2017 cleared the way for U.S. Transcom to award the business to Crowley.
Crowley is a 126-year-old company that primarily provides ocean shipping, vessel design and marine salvage, along with liquefied natural gas transportation and fuel sales. The company is privately owned and does not break out revenue for any of its business units.
Logistics services are thought to represent less than 10% of the company’s $2 billion in annual revenue, based on estimates from logistics research firm Armstrong & Associates Inc.
Crowley officials say they are enthusiastic about the DFTS contract and are up to the task ahead.
“This initial DFTS move is a culmination of years of careful and strategic preparation combined with a lot of diligent work on the part of our logistics team and technology partner, 3Gtms,” Chairman and CEO Tom Crowley said. “We are pleased to get underway.”
Crowley Logistics
Crowley is partnering with Tranztec Solutions Inc. to provide load tendering, shipment tracking, arrival and departure notice and proof of delivery capture services for carriers, and unified carrier and customer-facing management portals to aid in decision-making, transportation execution and follow-up reporting. It is using Amazon Web Services to handle data storage needs.
To handle the new contract, a Crowley spokesman said the company added 70 jobs to its corporate headquarters in Jacksonville.
“We have put together a team of experts, including retired military, transportation and technology leaders,” Weist said.
In addition to Zacharia, the company recently promoted Kara Bryant to director of intermodal services and Greg Durr to director of transportation to bolster its logistics capabilities.
