Gaining Ground by Sean S. Kilcarr for Air World Cargo There may be no one better than a frustrated shipper to spot an opening in the express delivery market. Some of the biggest competition to express carriers in the United States is coming from the ground, and Rob Ukropina and Douglas Schneider have special insight on why expedited delivery may no longer mean air express. Both left promising, established careers seven years ago to form Overnite Express, which provides regional ground overnight service throughout California, where they both grew up.

The idea grew out of Ukropina's shipper background at Pandick, Inc., a New York-based printer of financial documents.

"It was a 24-hour, seven day a week business where 25 percent of our bills came from distribution costs," he said. To get documents printed and delivered for public offerings on time, the company would routinely spend $30,000 for pick-ups after 5 p.m. and some $5 million a year on Next Flight Out courier services. "We're talking about spending $1,100 per five pound package to deliver documents nationwide," said Ukropina. Because what's $1,100 when you have a $110 million public offering that needs to be filed on time with the Securities and Exchange Commission?"

But he believed he could drastically cut those expenses if Pandick distributed on a regional, rather than strictly national, pattern. He teamed with Schneider, an insurance industry veteran, to put together such a regional service themselves.

"We believed we could offer better and less expensive overnight and expedited delivery on a regional basis," said Schneider. "By using trucks, we have better pricing, since we don't have to pay for a fixed-cost airplane."

"We can also offer different and better services within a smaller territory, such as 100 percent delivery guarantee even if you give us a wrong address," said Ukropina.

"When you start putting things on airplanes, you really can't guarantee it because if you have a mis-sort, it's already gone. We however can correct it."

Regional expedited surface specialists have made their inroads into the air express world as shippers have sought to speed up their supply chains to cut costs and inventory. Many shippers are finding that faster ground options can be a key part of that strategy.

"As you implement 'Just-In-Time' strategies and wring out the safety stock in the supply chain, any kind of service interruption has a negative impact on the shipper's ability to do business," said Theodore Scherck, president of the Colography Group, a Georgia-based research and consulting firm.

"One logical option, therefore, is to try and shorten distance between production and use. That can mean having several smaller, regional plants built closer to suppliers, instead of one central plant. That way, for short hauls under 600 miles, you can get goods to the customer fast and cheap with regional trucking services."

Colography projects domestic ground parcel and less-than-truckload services will control nearly 64 percent of the projected 5.2 billion expedited shipments in the United States this year and some 49 percent, or $36 billion, of the total revenue of $73.6 billion.

That is an indication, says Scherck, that mode is increasingly unimportant to shippers as they try to use transportation to fulfill special tasks.

Scherck points to Con-Way Transportation as an example. Comprised of three LTL companies -- Con-Way Central, Western and Southern Express -- plus expedited, truckload and third party logistics subsidiaries, Con-Way has grown into a nearly $2 billion revenue company from $700 million revenue six years ago.

"The reason Con-Way is doing so well is that they are plugged in to those regional needs," said Scherck. "Because what shippers are concerned with is transit time. They don't want their goods early and they sure as heck don't want them late. The mode, whether it's a truck or a plane, is becoming increasingly irrelevant. The ability to provide consistent and reliable service determines the mode and whether the carrier is a success."

"Regional carriers are finding that while their core competency still is service, shippers want more," said Bryan Millican Con-Way's executive vice president of sales and marketing. "Shippers demand speed, coverage, consistency, on-time service and ease of doing business -- all at a lower cost. They want tools to improve quality and customer service, while reducing overall costs, compressing supply cycles and taking days -- even hours -- off of a JIT distribution system."

Car maker General Motors used that philosophy when it outsourced its after market and dealer support network six years ago to third-party Schneider Logistics, a subsidiary of truckload company Schneider National of Green Bay, Wisconsin.

"We wanted to significantly reduce order cycle times so we could replenish dealer shelves once a day, not once a week," said Darrel Manning, director of logistics and distribution for GM's Service Parts Operation.

His division purchases parts from 3,200 domestic suppliers and ships them to five processing centers nationwide, then turns around and makes more than 3,500 shipments weekly from those five facilities to 16 distribution centers across the country, which support 11,000 car dealerships nationwide. That adds up to about $340 million in yearly transportation costs, said Manning.

Schneider Logistics helped GM shave off $50 million to $60 million in transportation expenses each year by consolidating freight among a core group of dedicated and regional LTL carriers in order to win volume discounts.

But time was also a major factor in those contracts. Six years ago, less than 50 percent of GM's parts orders

"JIT production supply practices rely on fast, accurate delivery of smaller shipments moving frequently between supplier and plant," said Millican. "In some cases, manufacturers employing these practices require their suppliers to relocate plants within a day or two of delivery time, the classic definition of the regional trucking market."