Regional LTL Carriers Take New Approaches to Enhance Interlining Experience, Execs Say

This story appears in the June 9 print edition of Transport Topics.

Regional carriers are reframing the long-used interline practice by forming alliances where they share information, extend less-than-truckload service over a wider area and drive business growth, trucking executives said.

Interlining involves the transfer of freight from one carrier to another in the course of shipping, usually among regional LTL carriers. The reason carriers frame their collaborations as different from interline agreements involves a marketing strategy designed to eliminate unfavorable perceptions of such agreements. New technology also is making it easier for shippers to track shipments.

“We do tend to see the word ‘interline’ used less and less,” said Joe Dohrn, executive vice president of Dohrn Transfer Co. in Rock Island, Illinois. “Reason being, historically, the information exchange was typically an afterthought, so shipments that were handed off to an interline for delivery fell into a black hole from a visibility perspective. So ‘interline’ is a bit of a bad word in the industry, and it tends to be avoided whenever possible.”

Regulatory considerations come into play as well when alliances or networks are being formed.

“There are legal parameters that you have to operate within to make sure there’s no collusion or antitrust type of concerns,” said Dan Acker, senior vice president of research and economic analysis at SMC3. The association is a technology and service provider that helps its members and customers manage delivery and pricing.

As a result, trucking executives now define their collaborations differently. For example, The Reliance Network was established in 2008 to provide less-than-truckload service in the United States and Canada. It consists of eight regional carriers.

The network “has allowed our member companies to be more profitable and grow faster,” said Geoffrey Muessig, chief marketing officer of Pittsburgh-based Pitt Ohio, which ranks No. 64 on the Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers (see sidebar).

And A. Duie Pyle Cos., based in West Chester, Pennsylvania, and ranked No. 85 on the for-hire TT100, has formed alliances with other carriers that operate outside its region, said Anna Hummel, director of brokerage solutions.

By any name, including networks or alliances, these arrangements differ from what have long been known as interline agreements, carrier executives said.

For instance, Pitt Ohio “set up an operating model for the network that works a lot like any other trucking company,” Muessig said. There is an executive committee composed of representatives from each carrier, and operating committees for sales, marketing, pricing, operations, safety and so on, “just like any trucking company might be organized with different departments.” The operating committees meet regularly by teleconference, managing relations among network members, he said.

Muessig also said a concern about interline agreements has been who will handle a problem when it arises.

Typically, he said, “the origin carrier points at the destination carrier and the destination carrier points at the origin carrier — and the customer is not satisfied as a result of that.”

To avoid such finger-pointing, The Reliance Network is structured so that “the carrier that owns the customer relationship owns the problem all the way through,” Muessig said.

The alliances that carriers make can vary.

A. Duie Pyle’s Hummel said, “As we looked at ways to grow the company, a decision was made that we would stay true to our core and remain a Northeast regional company. We know how to service New York, and we know how to service Boston. What we don’t know is how to service Atlanta.”

Hummel also said, “There are markets that our customers asked us to service” beyond the Northeast, so the company formed LTL partnerships with carriers that directly serve other regions of the United States.

Those carriers include Concord Transportation in Elk Grove Village, Illinois; Dayton Freight Lines in Dayton, Ohio, which ranks No. 73 on the for-hire TT100; and Southeastern Freight Lines in Lexington, South Carolina,which ranks  No. 27. To extend its reach into Canada, A. Duie Pyle has a partnership with Midland Transport in Dieppe, New Brunswick.

“It’s important for us to provide comprehensive service to our customers,” Hummel said, but “we did not want any degradation of service [to occur] because we’ve expanded our offering.”

Trucking executives said that such alliances have increasing appeal to regional carriers.

Dohrn said that many regional carriers, such as Dohrn Transfer, have concluded that their competition “is less and less with each other and more with the giants of parcel, who continue to make strides with LTL growth and in creating compelling mixed-mode offerings.”

One of the “primary strengths” of regional carriers is their relationships with customers in their operating region, Dohrn said. Those customers are “by and large not necessarily too concerned with the name on the trailer delivering to their out-of-region consignee” — provided there is reliable pickup service and visibility to the point of delivery through their regional carrier’s tracking system.

The success of partnerships or networks stems largely from “significant improvements in information exchange that enabled seamless end-to-end visibility for the customers,” Dohrn said.

“Fred Smith’s adage continues to hold true,” Dohrn said, citing Frederick Smith, CEO of FedEx Corp., who said, “The information about the package is as important as the package itself.”

FedEx ranks No. 2 on the for-hire TT100.

Trucking companies that work together try to make their operations “seamless” so that a shipper has one place to submit a bill of lading and can go to one source to track shipments, said Ken Weinberg and Ben Wiesen of Carrier Logistics Inc., a company in Tarrytown, New York, that provides software to LTL carriers. Electronic data interchange and application programming interfaces essentially are ways for computer systems to “talk” to each other and are the basis of the technological aspect of such collaborations, said Wiesen, CLI’s vice president of products and support.

In practical terms, this enables the ability to “trace and track and keep control of shipments” handed from carrier to carrier, whether a shipment has one number from origin to destination, or a different number from each carrier that touches it, said Weinberg, CLI’s vice president.

“A shipment could have three numbers from three different carriers,” Weinberg said. If that’s the case, users need to be able to enter any one of those numbers into the system and see the status of the shipment, he added.

Software also can keep track of what each carrier is entitled to financially for their share of the shipment’s handling, Weinberg said.

Under MAP-21, the current U.S. highway funding law, if a carrier physically handles freight and then hands it off to another carrier, the first carrier isn’t required to have broker authority, said Paul Levine, executive director of the National Motor Freight Traffic Association in Alexandria, Virginia. In an

e-mail, Levine called this type of freight movement “traditional interlining.”

However, Levine said if the first carrier never touches the freight and instead arranges for another carrier to pick up the load, the first carrier must have broker authority.

In the past, a carrier that had been tendered a shipment could arrange, under its authority, for another carrier to pick up the freight “because it issued the bill of lading and remained responsible for the freight movement,” Levine said. This practice of “convenience interlining” is now prohibited under MAP-21 without broker authority, he added.