Profile of Roadway Express
The only thing worse than sending a "hot"–that is, urgent–shipment across the country is wondering at midnight on a Sunday exactly where it is. Roadway Express, a 70-year-old company with revenues last year of $3 billion, has an answer.
"People have to know where their freight is," says Bill Michael, vice president of marketing (president and COO Jim Staley was not available for an interview). "It has to be instantly visible to customers. We're the only ones who have this. Customers can check their freight 24/7 by checking in with a call center or by using myroadway.com."
Roadway handles more than 60,000 shipments every day–5 to 10 percent of them "hot"–most often for clients in manufacturing, retail, and construction. The minute a shipment hits one of Roadway's 360 terminals, the information is available to anxious clients. The site is a customized, password-protected extranet site that supports more than 15,000 registered users, each of whom can use it to complete bills of lading, receive pricing information, and track shipments. It was formally launched in 1999, the result, says Michael, of more than $1 million in investment.
The company has 28,745 employees and specializes in two-day delivery throughout the US, Canada, and Mexico, with 100,000 routes interstate. The company competes in the LTL, or less-than-truckload, market, where multiple customers put freight on a single truck.
Retail is Roadway's biggest niche, with such names as Kmart, Wal-Mart and Home Depot relying on the company's familiar orange trucks. "We're the biggest in volume and it's the toughest industry to supply into," Michael says. "Their distribution centers are a hubbub of activity."
Roadway must also perennially meet the challenge of razor-thin profit margins–typically 5 percent in a good year. Their short-term challenge is a weakened economy, especially in the manufacturing sector. "When our tonnage drops, that hits revenue hard," Michael admits. "We're making a lot less. But we're better at managing our costs." Tonnage was down 13.3 percent in the second quarter of 2001, compared with the same period in 2000.
"Everyone's in slash-and-burn mode," agrees Kevin Prouty, research director for automotive/ heavy trucks strategy with AMR Research. "They're cutting costs any way they can."
Since labor accounts for 65 percent of Roadway's costs, the company lays off workers as needed–so far 8 percent of the workforce this year. Staley has been quoted as saying that there's not a lot of new technology that will help to make the company more efficient. He has also said that future opportunities for the company will come from its people becoming more involved with the business.
Working with David Cooperrider, an associate professor at Case Western Reserve University's Weatherhead School of Management, Roadway Express recently undertook an initiative called "appreciative inquiry," a philosophical sea change in employee collaboration. Beginning in January 2001, 88 employees, 80 percent of them blue-collar, gathered at a Holiday Inn in the Akron, Ohio area (the company's home base) for a three-day offsite meeting to improve working relationships within the company.
"Management-union relationships are traditionally competitive," Michael says. "This has really transformed how we do business." The idea was not initially met with wild enthusiasm, he admits: "It was a very radical movement and some people were very cynical." Changes have been implemented in only three terminals so far: Chicago Heights (the largest), Portland, Oregon, and Akron.
Another new venture is Integrus, the name given to an air-freight consortium Roadway has formed with American and United Airlines and Unisys. Using aircraft from the two major carriers–who, combined, already haul 50 percent of the cargo in the US–Roadway hopes to go head-to-head with more costly couriers such as FedEx and UPS. The venture will be in operation by December or January 2002 and will focus on the domestic market for the first six to eight months, Michael says.
"Any new revenue is good," says Prouty of the new move. "But the disadvantage is you're dependent on others. It's a logistics and control issue. That becomes very very serious." Between thunderstorms and rerouting and overcrowding at major airports such as New York's LaGuardia, "many issues expose them to risk," he says. It might be difficult to compete with UPS and FedEx, who can more easily shift their own aircraft to smaller regional airports.
Still, Roadway has built its good reputation with manufacturers by getting the job done, so the company may indeed become a viable alternative to the premium freight movers.
AT A GLANCE
Roadway Express Akron, OH www.roadway.com 2000 revenue: $3 billion 2000 net income: $56.5 million Nasdaq symbol: ROAD Stock price: $28.53 (As of 8/3/01) 52-week high: $30.30 52-week low: $16.00
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