Con-way Freight streamlines terminal network
Con-way Freight announced Monday it will close 40 terminals as it rebalances its less-than-truckload network to provide more efficient service and cut costs.
The move follows the integration of Con-way's three regional LTL carriers during the past 18 months that created opportunities to cut duplication, but is also a sign that the weak economy does not justify holding onto underutilized facilities.
Officials stressed that the company is not exiting any markets, but simply consolidating service in areas with nearby service centers to speed up transit times, reduce service exceptions, and improve on-time delivery. Consolidating volumes more strategically among fewer locations increases network density and enables improvements in both service performance and operational efficiency.
When the re-engineering process is complete in early December, Con-way Freight will operate 303 service centers in the United States and Canada, supported by 70 freight assembly centers, which operate at night in some of the same strategic facilities to create more direct loads.
Changes are also being made to the nightly inter-city line-haul operation, where new load planning, routing and scheduling programs will enable the company to eliminate more than 124,000 miles per day from the system and increase the amount of freight that is direct-loaded from origin to destination, the Ann Arbor, Mich.-based company said.
The route consolidation translates into a 5.2 percent reduction in miles from the 2.4 million miles Con-way runs per day system-wide. Reduced rehandling of freight speeds up operations and also reduces the chance of cargo damage.
“Every customer and every community that receives direct service today from Con-way Freight will continue to receive direct service when our network change is complete,” President John G. Labrie said. “We are simply balancing business volumes across a more strategic network footprint. It makes better use of available capacity and improves service with more efficient operations.”
Con-way, a subsidiary of transportation and logistics conglomerate Con-way Inc., is taking a $20 million charge for the restructuring, but expects to save $30 million to $40 million per year. Con-way will also lay off some employees at affected locations, but said that more than 75 percent of workers will have an opportunity to be rehired at other locations.
Con-way’s move makes sense as a way to differentiate its on-time performance from competitors, according to Stephens Inc. analyst Thom Albrecht. In recent years other multishipment carriers have narrowed the on-time service gap while Con-way's industry-leading service rate has leveled off at 97 percent to 98 percent.
“This probably suggests 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’ versus its competitors,” he wrote in a note to clients. ' Eric Kulisch