The unprecedented supply-demand imbalance experienced across all of American trucking will extend through the balance of 2021 and at least into the first half of 2022, Estes Express Line Inc. President, Chairman and CEO Rob Estes said Wednesday.
Keynoting FreightWaves’ Small Fleet & Owner-Operator Summit, Estes said the prolonged strength spawned by demand spikes and tight capacity is unlike anything he’s seen in his four-plus decades in the industry. In 1979, Estes joined the family business, which was founded by his grandfather in 1931. He became president and CEO in 1990 and added the chairman’s title in 2001. With about $4 billion in annual revenue, Estes is the largest privately held transportation provider in North America.
All carriers have been affected by the merging of capacity challenges and demand increases in the wake of the COVID-19 pandemic. Unlike truckload carriers, the $40 billion LTL industry from which Estes generates most of its business is highly concentrated. It has been estimated that the top 10 LTL carriers control about 70% of all revenue. The post-pandemic recovery of the industrial economy, the LTL industry’s bread and butter, has been another tailwind for the carriers.
Benefiting from high barriers to entry and pricing discipline that has held following the industry’s near-death price wars emerging from the Great Recession, LTL carriers have regularly raised rates for the past 10 years. Estes told George Abernathy, FreightWaves’ president, that a large customer began refusing to take the company’s calls because it didn’t want to be notified of yet another rate increase. Carriers have said the increases are used to reinvest into their complex, high-fixed-cost networks. Estes operates 7,000 tractors and 30,000 trailers, supported by a network of more than 260 terminals.
The environment of the past year has resulted in a marked change in shipper attitudes toward their carrier partners, according to Estes. Shippers want to be a carrier’s customer of choice and are engaging more productively with carriers than in the past. “It’s a different conversation than we had in 2008 and 2009” in the wake of the Great Recession, when shippers held the upper hand on capacity and prices, he said.
Estes, whose company spends the equivalent of 2.5% of annual revenue on information technology, said it’s critical to generate significant productivity out of its IT investments without going overboard on costs. Cost control is the most important habit an owner-operator can develop, Estes said, noting that his grandfather was pleased at the end of each business day when the receipts in one of his pants’ pockets were thicker than the expenses held in the other.
“Be very conservative with your costs,” Estes advised, saying that unexpected expenses can throw the best-laid plans out of kilter.
Estes affirmed the LTL industry’s clarion call for larger trailers to more productively handle the increases in freight demand. LTL carriers have long been capped at 28-foot trailers in twin-trailer configuration and have lobbied unsuccessfully for years to expand the twin-trailer size to 33 feet each.