By Paul Benfer –
With the growth of third-party logistics companies reselling negotiated blanket LTL rates, carriers are reducing and adjusting their sales forces to take advantage of the industry disruption created by Echo Global Logistics, Donnelley Logistics Services (DLS), Globaltranz, Unishippers and a host of others.
I recently had a conversation with a sales manager from a major regional LTL carrier who said their total sales headcount is thirty-five (35) representatives. The carrier’s yearly LTL revenue is $400,000,000. Their primary geographic competitor employs thirty-five (35) representatives. That company’s yearly revenue is $167,000,000. He said the proliferation of third-parties and their web-based platforms enables his company to do much more revenue with less representatives.
Why does one company generate so much more revenue per sales employee than the other? One reason is the value perception of a carrier, but one true driving factor is the embrace of using outside resellers to market their services.
I asked Tom Connery, President of New England Motor Freight, for his opinion on the impact of the resellers. Tom said “Over the last several years, we have definitely adjusted the size of our sales staff due to the impact of 3PL’s. We view the 3PL’s as an extension of our sales force.” He stated that NEMF has reduced head count via attrition, due to retirement or from voluntary separation. Instead of replacing a sales account manager, in many cases NEMF splits the territory up among bordering representatives. NEMF employs approximately seventy-seven representatives. Their annual LTL revenue is $388,000,000.
Another regional LTL carrier said their percentage of revenue from third-party providers has grown to almost thirty-five percent of gross revenues from approximately six percent seven years ago. That is truly astonishing growth.
Geoff Muessig, Chief Marketing Officer, Pitt Ohio Express stated that they have developed a four-pronged market strategy to target key revenue channels. The four channels are:
- National Accounts
- Direct, Mid-Market Shippers
- Transactional 3PL Resellers
- 3PL Mid-Market Accounts
Please note that two of the four channels are third-party logistics providers.
Geoff pointed out that some of the LTL carriers are starting to market their own transportation management systems (TMS), while third-parties are buying carriers. “It is my opinion that we are in the middle innings of a long game. We are starting to see carrier’s market TMS platforms and we are starting to see 3PL’s buy LTL carriers. The sharp distinction between asset based solutions and non-asset based solutions is starting to blur. I am sure that the industry will continue to evolve and look different in five years.”
For years’ many carriers viewed third-parties in a negative light. Those that embraced the evolution of the marketplace are benefiting both in top line revenue and overhead cost reductions. Let’s hope the trend continues as we seek to diversify and expand our supply-chain services to the shipping public.