Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

I have a fund and we’re shareholders in Old Dominion so I’m just learning more about everything to do with LTL and competitor dynamics. I know you were involved with building up FedEx’s network so I’d love to talk to you about that, and the competition in the industry – I think you may have some interesting stories to tell. Let’s start with a bit about your background in relation to LTL.

I’ve been in the industry now for about 36 or 37 years. I started out as a package handler for FedEx when I was 19; I was a sophomore in college and had a little too much fun in my first couple of semesters of school and lost my academic scholarship. I was going to University in Memphis where the FedEx hub was, so I started out as a hub employee and worked my way through school, got my undergraduate degree and moved into the Engineering Department. I spent about 28 years at the Express Business Unit.

The original Federal Express is now FedEx Express and there are two other operating companies, FedEx Ground which was formerly Roadway Package System, part of Caliber, and FedEx Freight Business Unit which is a combination of four different companies, Viking, American Freightways, Watkins and FedEx. My last role there was the VP of Global Planning and Engineering so I was responsible for tools and process for the global operations with the exception of air operations which had its own specialized group. I was then fortunate enough to move over to the Freight Business Unit and spent three and half years there as the Senior VP of Strategic Planning and Engineering. I was also responsible for the international operations in Canada, Mexico and Puerto Rico and ran the middle mile for about a year and a half whilst I was there.

Going back to your original question, I was brought over in the Senior VP role by one of my former bosses who was the CEO at the time, to create a strategic plan for the company. We had been through a couple of iterations at FedEx Freight, originally FedEx Freight was east and west; basically, Viking had the west and American Freightways had the east. We merged those two companies together, then bought Watkins and put those two companies together. When I joined, we were still a fractured company. The intent for the role was to create a plan that would take FedEx into the next decade as the LTL leader. That was my main focus in 2016, 2017; we branded it Freight 2020 and I had until then to deliver it.

There were three strands; one was to transition the company from being very analogue into becoming the digital LTL leader; the second was to manage our operational complexity more efficiently given the fact that we were one of the only companies that had two service offerings of priority and economy; and lastly, to collaborate across the other FedEx business units to expand our market presence. After three and half years, they asked me to run operations in Europe which I did for six to eight months. Amazon had been calling me for a while and the opportunity was too good to pass up so I joined them about four years ago.

Could you talk about how the LTL evolved within FedEx. My understanding is that, initially, it wasn’t really a focus but it later became lodged within FedEx?

Fred always had this idea that the different business units would complement each other and I think this was borne out of how the company transitioned from being just an air express company into what it is today. The biggest impetus for that was that UPS moved into express business – by leveraging their ground monopoly at the time to fund it – and they were offering rates in the air part of the express business that we just couldn’t match given our cost structure.

Fred realized we needed to build something and I was part of the original team at FedEx Express investigating building our own ground-up version of LTL which I would call one of the ‘successful failures’. I think we realized, early on, we couldn’t leverage the express infrastructure and build it as fast as we would have liked because we just didn’t have access to capital. That’s when we decided to go into acquisition mode which resulted in the Caliber acquisition which brought in the RPS business, but as a side deal, also Viking Motor Freight, which initially they weren’t sure what to do with. We were about to sell Viking to America Freightways when Fred bought them instead, which was how FedEx Freight was born. He felt that it was complementary, with some really interesting adjacencies and was right for bringing it into the 21st century which was our intent.

When I started at FedEx Freight, I think about 10% of our shipments were processed by computer so the majority was still being done on paper. In the express and ground business, it was about 98% automated with maybe 1% to 2% manual. The manual part created considerable extra work so a large part of our strategy was to automate the process and take advantage of our existing infrastructure and technology.

When I moved to the LTL side, when ODFL quarterly results came out, we’d get a ‘love note’ from the chief asking why our margins were so bad in comparison and what it was they were doing differently.

I guess you had to figure it out?

There were some unique things that OD does and did at the time, although I wasn’t as in touch with what was going on there as I had been in the past. We were offering direct service to every zip code every day, regardless of how remote it was. Our research of OD’s network showed that they were being very specific about when they would go to a zip code every day and, given the volume density and the distance from their service centers, where it made sense to only offer a service a couple of times a week. That was one of the things we ultimately matched because we were able to obtain their service map coverage information. It was brilliant because the expectations of customers, especially in those remote areas, was relatively low. The cost to serve every single day was very high and so they were very methodical about how they approached that. We made some tweaks to which zips we did and didn’t cover based on some of our existing business coverage and customers and, in the main, it was pretty well done.

The other issue which I think FedEx will announce, is moving to a space and distance-based pricing structure. I don’t know how familiar you are with the NMFC class system? This was something I needed to look into when I joined, because when I was at Express and even in the ground business unity, you really sell two things; space and pace. Space is, essentially, how much room the box takes up on a truck or airplane, and pace is about how fast you want it to go; priority overnight, standard overnight, economy and so on? They have all these different permutations of the pace fees. When you look at LTL, it’s radically different. The National Motor Freight Carrier Association classification system creates rates based on a commodity, so if you are shipping something inexpensive the rates will be lower because damage/loss rates are lower. As you go up the classes, the higher the class, the higher the rate. The whole infrastructure for LTL is, in my opinion, overly complicated.

It works in some cases for the shippers because it’s so complicated that a lot of people just don’t understand it. I think the number of companies that still have traffic managers these days is much less compared to 10 to 15 years ago. The traffic managers know those tables inside and out; even where consultancy companies were brought in to check rates, the class system made it much more difficult to understand. ODFL was the first to market with a space and distance-based pricing structure which they announced about a year ago, and FedEx finally announced their version of it about three weeks ago. ‘Space and pace’ was a quote I used when I was trying to sell this concept to the board of directors.

My hunch is that, even at ODFL, less than 10% of the volume is moving in that dimension and distance-based approach, but it will transition. I think one of the big things needed to make that happen was the dimensioning machines. We installed static dimensioners at almost all our terminals and I know ODFL uses some of the same technology. Essentially, it takes the dimensions and weighs the shipment so you have better information on the DIMS.

Then your pricing is based on that?

Yes, and you can verify it. That was the trick in the parcel business too when we went from a fixed rate to a distance and dimension-based approach. You had to have dimensioners and scales, otherwise customers would provide the dimensions and weight which could turn out to be inaccurate. I think ODFL use these as well. We were working with two different companies on a drive through dimensioner because one of the challenges with the static dimensioner is that it slows the pace of work, but you can set up drive throughs in strategic locations in the docks. I know FedEx was deploying this technology and I’m fairly certain that ODFL was too.

Would you say there is now more transparency for customers or is it still complicated for them?

It allows the shipping companies to be more effective in pricing their shipments. We had some situations where pricing based on class didn’t make any sense because the dimensions of the shipments meant they were taking up inordinate amounts of space on the truck, but we were still pricing below the actual dimensions.

The first thing you mentioned was OD’s network being more specific about where they go and secondly pricing. I’ve heard Old Dominion is a premium product and their pricing is higher; does that play into it as well?

It does. Their network is interesting because FedEx had taken a regional and national LTL approach and created one network that offered two services. Where OD had an advantage, was that customers could only ship one kind of LTL with ODFL but it was typically faster. As they got into longer distance freight, they didn’t have the same service standard as FedEx freight; if you really wanted to you could get something priority from one place to another coast to coast in three days which is pretty fast for an LTL. OD only offered one option which actually enabled them to be more efficient when it came to their network design. When you add the complexity of offering customers a choice between priority and economy there was probably 2% of operating margin difference between the two companies based on the fact that FedEx had a two-tier product structure versus the one tier that OD has. They are certainly known for being on the fast side compared to Yellow Roadway or some of the other national carriers that are much slower.

Is there another factor that OD did better, other than their network and pricing?

I think their network design allowed them to run a much more efficient line haul so their ‘empty miles’ was lower from the information that was available at the time. I think they did that in two ways; one was the network design which we’re going to replicate, but the other was their leveraging of spot rates and market rates to fill back haul. They had a really firm and well put together team that managed that. I wouldn’t say that we copied that; we tried to come up with a more technology-based solution but you could tell that their empty miles were in a better position than ours. They were very specific and targeted about selling into that unused capacity in a way that made economic sense.

You mentioned that FedEx wasn’t going to replicate certain things because they are going to continue with their two-product model. Fred had this idea that there would be some benefit in bundling these services together; do you think that is right? Are there pros and cons of doing that?

I don’t know. I think in the LTL space there was never as much overlap as hoped for. The one place where we were really trying to focus on the overlap was the other company under the express umbilical; at the time FedEx Trade Network, now FedEx Logistics. It was originally a company we had bought for customs clearance but then moving into the international freight forwarding business, so FedEx Trade Network would inject a volume into the freight network at different ports to fill unused capacity, on 20 and 40 foot containers moving on ocean lines. FedEx Trade Network’s team never had enough scope and scale to be able to do that effectively. My hunch is that OD and others are looking at that as well and offering a product to different ocean freight forwarders for them to bring it in to the port and we move it inland from there. It’s another way to fill back haul capacity.

That’s traditionally not done by LTL?

It hasn’t been. The idea was great but I think the execution was not. I know this strays away from your LTL question, but having separate ground and express carriers made sense at a point in time given the fact that, for example, FedEx Express delivery station network and the ground delivery station network overlap. You’ve probably seen in the press where Raj and others are talking about how they are ultimately going to combine those two networks, but I think they’ve taken way too long to do that. There are some labor-organizing reasons not to do it; the express company is governed by the Railway Labor Act; the ground company is governed by the National Labor Relations Act. The difference between two is that in the RLA you have to get everybody in the class across the United States to vote for a union, whereas with the NLRA any local can start up and petition for third party representation and get it for that particular terminal.

It seems like LTLs who do it really well only do that and there have been different attempts to combine and it doesn’t work out as well?

Yes, with one exception. I think in the situation with FedEx, their access to capital was something that a lot of the other companies didn’t have. Because the other two business units were spinning off the appropriate free cash flow, we were able to go to the board with the Freight 2020 proposals and ask for a pretty significant amount of investment; about half a billion dollars in capital over several years. Most other LTL companies didn’t have that at their disposal. Where OD does well is that they manage their business so well that they have free cash flow to invest in the technologies we were all trying to catch up with at the time.

Just to compare the landscape a little more broadly, we talked about FedEx and OD, are there others that are on your radar as being particularly good?

We looked at a couple of companies from an acquisition point of view. Sire was one of those that is pretty well run and would have been potentially complementary to our network, but we ultimately passed on it simply because we felt we had enough capacity at the time. When UPS had UPS Freight it seemed like it was an after-thought; I’m not surprised that they ended up letting it go.

Access to capital was a FedEx advantage because LTL capital had been building up.

The capital piece is one piece. I think one of the untold stories of FedEx was how it was influencing the regulatory space. We weren’t able to implement some things. For example, 33-foot pup trailers, made sense for a whole host of reasons – it was going through Congress – but unbeknown to us at the time, the railroads were against it because they were concerned it was going to siphon volume away from their networks. Same tractor, same driver but five more cubic feet on every trailer which is quite a benefit. If it ever does happen, the companies with access to capital to upgrade their fleet will benefit. We had a very detailed plan with the trailer manufacturers on the trailers we were going to buy or those we were going to retro-fit to get the extra five cubic feet; it was a big deal.

I hear Old Dominion buys their real estate from their terminals?

There was a long-standing aversion at FedEx from our CFO at the time, Alan Graf. His view was that we run a transportation company not a real estate business and so the majority of our terminals were on lease agreements with different big developers, whereas OD was able to leverage some of that real estate to reduce their overall cost or to generate revenue when they wanted to sell it to create profit.

I guess it doesn’t really make too much difference from the customer’s point of view, but I’ve heard that it is easier to expand the terminal if you own the real estate rather than if it is leased?

It was never a big issue for us. Some landlords were a bit difficult but, in general, it wasn’t an issue. However, it did affect the cost structure; there was an element of some which were owned versus those that were leased which provided a small advantage. They tend to do a really good job in that real estate space, I’m not sure if they’ve got somebody who used to be in the business that’s managing that for them.

Can any LTL customer go to any carrier or do you find that there are a certain kind of customer that always went to FedEx and a certain kind of customer that would go to ODFL and certain kinds of customers didn’t care or went to YFC?

The friction is relatively low so we see a lot of transition back and forth based on pricing, on fuel surcharges at a certain time. There was a good core group of customers that would be willing to pay a premium price for the service and I think that’s what you see for both OD and FedEx, where the service performance for both on-time deliveries as well as loss and damage is so much better. There are a core group of customers that are willing to stay loyal, despite the fact they know they’re paying a premium.

One of my favorite parts of the job was working in my sales team in Chicago, we’d go to customers that we’d lost over a price issue and would ultimately gain them back because of service, although there were some that felt we were way too expensive. The transition is relatively straightforward. I think the reason OD has more stickiness – and what FedEx was trying to do at the time – was moving from paper-based systems to an automated space. We found, on the parcel side, that once you’ve embedded your automation into a shipper’s processes it’s a lot more challenging for them to cut ties because they’ve automated their systems and tied them into yours. It’s a benefit for them because they don’t have to do all the paperwork, they don’t need a traffic manager. It becomes a challenge to switch because you have to go through all the IT work to transition into somebody else’s systems, which isn’t always easy.

What about a long-term contract? I guess that’s not common in LTL?

Long term in the sense of maybe a year. It wasn’t like things you see in other parts of business.

Another difference I’ve heard is that FedEx is more centralized and ODFL is more de-centralized in that the individual terminals were their own profit centers and they had a little more autonomy on pricing and so on.

Yes, and the other thing is that because of the centralization of FedEx, they had done away with P&L at site-level. Each of ODFL’s terminals has a P&L that the center or terminal manager is responsible for and the sales team reports out of that organization, so there is a lot more control and focus. In FedEx, the sales team is literally part of another unit – FedEx Services – which is IT, sales and marketing. It’s a double-edged sword; on the one hand, if not managed well, the sites will optimize for themselves and not for the overall business and that becomes a problem, but it also puts a high degree of focus at each terminal on hitting their profit targets. There are several flaws with site-level P&Ls because you have to allocate certain costs and there is always debate about how much SG&A to allocate, but at the end of the day, it does give the terminal higher motivation and incentive.

Is there bad freight or just bad pricing?

There is definitely bad pricing but there is just some bad freight. I couldn’t believe we were handling some things, and we were pretty picky at the time. I think OD is in the same boat; there were customers they would decline because they don’t know how to package their items, the commodity was too valuable to be handled and they stayed away from those. We had periods where we would go through the customer base and scrutinize the customers where we had the biggest risk from a pricing perspective, especially based on loss and damage claims. I think they did a really good job of that.

Historically, LTL has been very cyclical and it seems like it’s less cyclical now, maybe it’s been a number of good years. What’s your opinion on the cyclicality of the business and how it may have changed?

I think it’s still as much a cyclical business as it used to be. Capacity has tightened over the last few years so you don’t see huge ebbs and flows where there is crazy excess capacity and pricing goes through the floor. If you go back 15 years, there were about 30 more LTL carriers than there are today, so the sheer number of carriers has dwindled and each of those carriers are managing their businesses much more effectively than previously, particularly before deregulation. I think the companies have got a bit better at capacity tightness and the ability to flex up and down but it’s still a cyclical business.

LTL is almost over its peak now and the parcel companies will be gearing up; that’s part of the annual planning cycle. I know FedEx, and I think OD, was considering using a boutique operations research firm, ORTEC, to do some more sophisticated network planning than we had previously done. More effective planning using more operations research algorithms to set the plan versus the way we’ve always done it will improve things too.

It seems as if there has been a lot of consolidation and it definitely seems bifurcated. You have FedEx at number one, ODFL, Sire, XPO and then YRC. If you’re thinking long term, how do you see the market shares playing out? Could this be an industry where you only have four or five big players or will somebody like YRC always have some piece of it?

YRC are the cat with 18 lives. I’ll be interested to see what Jacobs does with XPO; they bought Conway and made some adjustments and changes to it. I haven’t followed it as closely as before and don’t know how well it is going, but it’ll be interesting to see how it goes. I do think there is probably still room for some consolidation. You’ve named the big ones and I continue to be surprised every day that YRC continues to stay in business.

One thing I’ve heard is that there is some freight that want union carriers so it’s hard to break in and unions will always have a little piece for that reason.

It’s interesting that certain customers like certain carriers. When I was at FedEx, the freight business going into Amazon Fulfilment Centers was always a disaster. They just didn’t like us. We couldn’t figure out what it was. It was a trailer-drop contract so we dropped the trailer and, hopefully, they would give it back at some point, and that they would scan the freight in. Amazon is non-union so it had nothing to do with unions but there was a little feud between Jeff and Fred and we ended up saying we were not going to deliver there anymore.

You mentioned the 3PLs; what’s your take on that as far as LTL goes? A threat or more opportunity?

I think it’s more of an opportunity. The 3PL business is tough, super low margins and you have to do it really well. Even the companies that do it well don’t do it well everywhere. There are pockets of excellence in certain markets and there are certain places which are just not good. I don’t see that as a huge threat.

I’ve heard that some portion of market share might remain with certain smaller players that have a certain geography or industry that they are particularly good at?

I think what’s interesting is that we had a whole sales team dedicated to selling to 3PLs. What worked well for us is that most of those 3PLs were automated and so we had a lot more rate flexibility with the 3PLs than we did with our standard customers who were on one-year contracts where we couldn’t do anything until the year was up. On the 3PL side, we could try out lane-specific pricing to see if it drove volume either into or out of the lane. If we had capacity tightness, we could tighten it up a little bit; if we had spaces where we had tons of capacity, we could open it up and the 3PL offered a way to do that more directly from a rating perspective than with a typical customer with a regular contract.

I’d imagine that, given their technical prowess, OD probably has a similar thing whereas some of the other companies are still doing things manually with the 3PLs. That was one of the areas where we were trying to adjust capacity by working with the 3PL sales team to make rate adjustments in certain lanes in particular market spaces. You could see the numbers change much faster than when you were trying to do it one contract at a time.

When you think about LTL carriers more broadly, what are the exciting things on the horizon, really good opportunities for the industry? Is there something that stands out to you?

Two things. I think the transition to a digital platform is super-critical, automating the shipping process to take all the customer data and use it to pre-populate so there is an awareness of what’s happening down the line. That’s a big thing and I think that’s important. The transition to a distance and dimensional-based model is one I believe has a lot of upsides for the market because so many companies are still using paper and the NMFC class system to rate and move shipments. The data also allows companies who are more technologically savvy to adjust their networks on the fly. In a lot of cases, given the way the terminal network for freight works, you could connect up one OD pair through at least three different hubs.

I would imagine that OD has got some similar capabilities so, since you know the information earlier in the shipment process, you can do better load planning throughout the afternoon and evening to take advantage of the capacity you have and route shipments differently. Not real time, because that’s really tough, but near real-time routing of shipments is dependent on the upstream automation and when you do that, that’s a big deal. We knew there was a lot of money in that. The more you do that, the less miles you have to ultimately drive because you can potentially cancel certain lanes when you know you can fill a capacity a different way.

I think that there are a couple of other spaces we were looking at. One was the healthcare space. There are some very specific shipment requirements in healthcare that are not currently well served in the LTL space. If you could offer the right quality and features of service, you could offer the customer a much better deal as far as moving some of their key shipments, rather than having a full truckload or going to the express side. I think that is really interesting.

The other interesting one is that we’re starting to see companies getting into the smaller residential market, and even heavy bulky consumer items. Most LTL is business to business, but there is this capacity. This time of year is perfect for potentially leveraging your existing pick-up and delivery network to manage some low-touch consumer business, such as kayaks or outdoor furniture; things that are not easy to delivery into residential areas. I know FedEx was doing this via a smaller 22-foot box truck low profile Isuzu with a lift-gate for going into residential areas.

It’s funny you mention that because, not long ago, I saw an ODFL truck in my street and thought, I’d never seen that before.

If you think about all the invested capital already in the facility and in the network, you could use your existing line haul network and make slight augmentations to your delivery network; you don’t need another pick up site, it’s a regular pick up from a business, such as going to Wayfair and picking up a truck full of couches. It can move relatively seamlessly through the network; the delivery piece is the only difficult part. The other issue in terms of delivering heavy, bulky items is when customers want you to cross the threshold which gets into a whole different set of liabilities and complexities for scheduling deliveries; that’s where it gets a little complicated.

You mentioned the digital platform and the pricing and technological side of things, it also seemed to me that it’s raised the bar for LTL tremendously. At that point, the big guys just get bigger?

That was one of the things that we anticipated happening as you start to raise the bar; there was going to be some fallout and it was an opportunity for some consolidation. Some of that is still out there. The companies that have the capex to do the investments will continue to do them and they’ll drive profit; the companies that can’t are going to get left behind. The question then is, how much of their networks would be of interest to another company to acquire. Sometimes you’re just buying the customer list and I’m not sure that’s really worth it.

Consolidation is interesting because ODFL don’t really do acquisitions. I think the last one they did was in 2008 where they picked up some terminals from somebody who went bankrupt. In XPO, there is a lot of acquisition; different ways to play it, I guess?

They’ve always been more into organic growth and it’s working really well because they still have the free cash flow to be able to afford it. I don’t know where R+L is right now and how well they are doing, but that was one that we looked at on a regular basis just because their speed and customer profile match up quite closely with what we and ODFL were doing at the time.

Are there any particular risks or any headwind for the industry in the next ten years or so that are on your radar?

Access to capital is going to be interesting, and I don’t think this is coming any time soon, but also the electrification and autonomous nature of vehicles as it progresses. I know even five or six years ago we were talking to Tesla about the future for their electric vehicles; we had futures on 150 of them. I think there is probably future consolidation potential for the companies that progress with this. It may not be fully autonomous vehicles; it may be more tethered. We were looking at Peloton at the time where you could have a very close following distance and it created a lot of fuel efficiency in the network. Volvo was also looking at that. I think those advances in technology will come at a price. There are a lot of LTL companies that will not be able to afford it, and I think the overall cost to run the business will go up relatively to the other companies that can afford to do these things.

Similarly on the technology front, the other big one we were investigating was scan-free sortation. We were investing in RFID technology; basically we put 2 RFID tags on every skid, the company had forklift computers on every forklift and then we put an RFID antennae network in the building that had half-meter accuracy. You could tell, within a half meter, where every skid was so when you picked it up, it could tell what was on the forklift. You could then tell it to take it out of door 52 and bring it to door 107, for example. Instead of having to get it off the forklift, scan the barcode, wait for the forklift computer to populate, it would just all happen. The efficiency that created was worth hundreds of millions of dollars over time. That technology continues to be refined. The two companies we were working with were FR Controls and Impinge. RF Controls had this amazing antenna that Google is actually buying because of its accuracy. I think these kind of technology advances create threats for the companies that can’t afford them because it creates cost per unit advantages to the companies that have them.

Maybe it’s more of an opportunity but LTL is gaining a lot more retail because of the way customers are buying online. I know you’re with Amazon now and we can’t talk about Amazon but it’s an interesting trend and I guess more of that will continue?

Yes, I think so. Even though the ‘just in time’ has fallen out of favor a little bit given the challenges with the global supply chain, even domestically it makes more sense to have less inventory in the stores which means shipping smaller quantities to stores so rather than buying a full truckload, you’re going to buy LTL. As long as the service performance is where it needs to be, that should continue to expand. The last thing you want to do is to have inventory in a store that you can’t use. The pandemic proved that big time when everybody stocked up and, all of a sudden, there were too many of certain items. If you are moving more of a smaller quantity ‘just in time’ piece it does make a lot of sense. LTL will continue to grow and thrive in a space like that. In addition, trucking in general has challenges in just finding drivers. If you can consolidate multiple shipments onto a single trailer, that makes a lot of sense.

Is there anything we haven’t touched on that you think is important to mention?

The only other interesting thing to think about – and this is slightly adjacent versus LTL in general – is some of the larger carriers are doing intermodal, which is interesting. When I was with FedEx, a fairly significant percentage of our line haul was actually running on the rail and it gave us a cost advantage for our economy product. It also gave us a recovery capability when there were weather situations, such as a snowstorm, which meant you couldn’t get something through by truck, but you could actually get it through on the rails, so it enabled us to recover faster from weather events; we would just rail them across versus going through our normal network.

I think it will be interesting to see how the other LTL companies continue to leverage the intermodal network for their line haul capability, and then potentially partner with those companies because the railroad cyclicality is very similar to LTL; if you factor in retail, maybe there is a way to use more of it during the downtimes. JD Hunt and other similar companies have a lot of excess containers and excess capacity that go unused, so I think there is an adjacency there that has always been intriguing. I haven’t quite figured out exactly how to leverage it but I think it’s there.

I think OD runs almost their entire line haul network with their own drivers and equipment; I’m not sure how much they are depending on any truckload to supplement and run on back haul or similar on the rail network.

You’re right and there is a very small amount of purchased transportation where they use someone else, very tiny.

That was definitely something that helped us from a cost structure perspective. It’s a tough thing to do once you’ve established a one-way door where you’re going to use your own drivers and equipment. Adjusting those percentages gets really complicated. I know we had a lot of drivers grumbling when they saw a 3PL or third party shipping company come in with one of their trailers. Another good thing about FedEx is that we had our own shipping containers that could be used on the rail for intermodal, so it wasn’t like bringing in JD Hunt or another company; it would be our own and, in most cases, we did drayage ourselves back and forth to the yard.

Thank you for your time.