Re-thinking the box

In 1982, David Morgan was preparing to launch a nationwide truckload trucking company. Just as Morgan was ready to roll, Atlanta’s largest drayage company, Southern Region, ceased operations giving Morgan a chance to reconsider his plans.

“Intermodal was not the direction we had planned on taking,” says Morgan, who founded Morgan Southern Inc. after working 10 years at less-than-truckload (LTL) carriers Roadway Express and Yellow Freight System. “I was contacted by a number of shippers who told me there was a huge void in Atlanta and wanted me to take a look at it.” After establishing his corporate headquarters in Atlanta, Morgan branched his drayage services to 10 new major rail centers by 1986, including terminals in Houston, Los Angeles, Miami, Chicago, Memphis, Tenn., and Charlotte, N.C.

“Intermodal is a relatively small community of people who control the business,” Morgan says. “They already controlled business in the locations we opened up and knew who we were.”

Return to the rail
For more than 10 years, intermodal freight was the carrier’s principal business, but responding to market conditions, the company chose to expand its over-the-road division in 1996.

After three years of building this division, however, the cost of equipment – particularly the 3 to 1 trailer-to-tractor ratio – was deteriorating Morgan Southern’s profits, especially during the idle periods of the Christmas holidays through the January slow times, says Ben Kirkland, vice president of operations.

“We were marketing the road and that did help us grow, but it was not the foundation we needed for long term growth and profitability,” Kirkland says. Three years ago, company executives returned their focus to intermodal freight. In hindsight, Kirkland says, the timing was perfect as TL became “soft” and fuel prices suffered a sudden spike in early 2000. The past three years – a period in which many OTR carriers have struggled just to survive – have been the best ever for Morgan Southern. Revenues more than doubled from $16 million to $38 million, Kirkland says.

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“We found ourselves in a pretty good position,” Kirkland says. As intermodal once again became Morgan Southern’s core business plan, the company accelerated its growth by acquiring assets, including drivers and customers, from two intermodal carriers that ceased operations: TruckRail Transport in Birmingham, Ala., and Manufacturer’s Cartage in Grand Rapids, Mich. With 430 trucks (230 of which are owner-operators), 60 trailers, and terminals in 16 major U.S. cities, Morgan says the company could feasibly double its sales again within the next few years.

“We can grow in virtually every location we’re in without expanding to new markets,” Morgan says. One of the reasons the company is positioned for growth is its national presence.

Except for the Pacific Northwest region, Morgan Southern provides drayage services for intermodal marketing companies (IMCs) and shippers at both origin and destination rail ramps. This type of nationwide service with one carrier is rare in the intermodal industry, Kirkland says, as only a few drayage carriers operate more than 5 terminals.

“Most drayage companies are one or two-terminal shops. There are not very many that fit the bill of coast-to-coast drayage companies.”

In twenty years, Morgan Southern has grown to become one of the largest national trucking companies in the intermodal industry under the direction of its president, David Morgan.

Creative thinking
Adding value in pricing and services to attract more business requires the carrier’s operations personnel to continually “think outside the box,” Morgan says. Operations are not only responsible for matching drivers with loads; they also coordinate the exchange of equipment among shippers, IMCs and the railroads. One of Morgan’s strategies is to offer customers a reduced rate (comparable to a one-way trip) for moves that other drayage carriers commonly price based on a round-trip.

To deliver a loaded container in Knoxville, Tenn., to the Memphis rail ramp, for example, a drayage carrier in Memphis would probably source an empty container in Memphis and take the empty container directly to Knoxville, make the pick-up, and charge the customer a full round trip rate to bring the loaded container back to the Memphis ramp, Kirkland says.

To offer customers a reduced round-trip rate, Morgan Southern works closely with IMCs, railroads and shippers to coordinate the exchange of containers. Kirkland says that Morgan Southern will often load empty containers from Memphis with freight into the Knoxville area to eliminate and/or reduce empty miles.

“By sourcing our own freight to Knoxville, we can pick up IMC freight to Memphis and give customers a break on what normally would cost a round trip. We’ve taken a lot of empty mile charges away from them.” This type of action typically saves 30 to 50 percent below the standard rates, Kirkland says.

In addition to reducing empty miles to save money for the company and its customers, operations personnel work with all parties to limit the time drivers spend at rail ramps.

“We try to get customers to arrange pickups early or late, rather than going in there at peak times,” Morgan says. “We have offered incentives to customers to deliver off-peak to minimize the congestion at off ramps.” Another cost-saving strategy is to reuse containers with two different customers instead of going in and out of rail ramps each time a customer needs a container, Morgan says.

“If we have a delivery in a certain area in Atlanta, and another customer may have a volume pickup 5 or 6 miles away, we can offer discount pricing to each customer, so we don’t have to take the box back empty. We can get paid by two different customers each way,” Morgan says.

Faster transit
In addition to providing pricing efficiencies to shippers within a railroad ramps’ normal scope of operation, Morgan Southern uses its large equipment and driver base to offer customers an expedited drayage service between major rail ramps. Because most drayage carriers are small, locally-based operations, they typically service shippers and IMCs at one major railroad ramp, Kirkland says.

Historically, rail is less expensive than shipping freight by truck, but the service is not as quick, Morgan says. Suppose a shipper normally uses an over-the-road carrier for service between Charlotte, N.C., to California. Moving the freight by intermodal might save money, but the service through the Charlotte ramp may not meet the shipper’s time requirements. Morgan Southern can provide one-way pricing to truck the container from Charlotte to the Memphis ramp and thus speed up overall transit time to California.

Morgan can provide this pricing because they can source an empty rail container in Memphis from the railroad that will provide the line-haul to California and then load freight to the Charlotte area, Kirkland says.

“This will allow Morgan Southern to position the proper rail container into the Charlotte area to make the pick-up from the shipper and return the loaded container back to the partner railroad for the line-haul trip to California,” Kirkland says. “This type of truck-rail service and pricing over major rail ramps allows the truckers and the railroads to work together to provide capacity, service and lower costs to the shipping industry.”

The biggest growth areas for this type of truck-rail service, Kirkland says, is freight moving to and from the Ohio Valley over the Chicago rail ramps. The carrier is also picking up more business for this type of service from the Carolinas and Georgia to the Pacific Northwest and to Southern California.

“It’s not an easy task. You have to have very sharp operating people who understand the business and pricing to make this work,” Morgan says. “We’re working with our customers and the railroads to expand this market.”

Morgan Southern, Inc.
Location: Atlanta
Principal: David Morgan
Equipment: Intermodal division: 230 tractors, 60 trailer chassis; Road division: 60 tractors, 100 trailers. Volvo VN64s day cabs and VNL 660s; Volvo, Mack, Cummins and Detroit engines; Eaton Fuller and Spicer transmissions; Strick and Wabash trailers.
Freight: Rail containers, general commodities
Challenge: Finding a market differentiation in intermodal freight
Solution: Offering nationwide drayage services and efficient pricing by working closely – and creatively – with shippers, railroads, and intermodal marketing companies to eliminate drayage deadhead miles and expense.

On their own
To have a viable fleet management system customized for the company’s complex intermodal operations, Morgan says he decided to develop the system in house.

“I’ve looked at so many intermodal products, but my opinion is that none work like they say,” Morgan says. After more than a year in development, the company is currently in the process of implementing its own web-based fleet management system. In “phase two” of the company’s software development, the carrier will provide customers with timely updates by giving them access to their system via the Internet.

“It’s a dispatch system that allows us to do billing, payroll and accounting, but it’s also a system that allows us to share information with customers in real time,” Kirkland says. “We’re pushing to provide status information to our customers via the Internet to eliminate phone calls and paper.”

The new web-based system will give the corporate office real-time visibility of activity at all its terminals for better event management, Kirkland says. Despite the creation of a what would appear to be a central dispatch system, however, Morgan’s executives do not intend it to become such. Each terminal runs as an independent entity, with experienced managers on site at each terminal who make all the day-to-day decisions. Back at the corporate office, each day by 2:00, Kirkland monitors the previous day’s performance of each terminal.

“We make sure each tractor is seated and running and generating a certain revenue per day to determine if we’re not productive in certain areas,” Kirkland says. He also measures individual terminals with a daily cost-control report or P&L statement. The report also includes a list of every shipment handled and the number of on-time deliveries. While technology is key to speed the flow of such management processes as accounting, Morgan is cautious about the company’s dependence on technology to make decisions.

“The difference between us and a lot of our competition is that the competition puts emphasis on their computer systems for control and less emphasis on the quality of personnel in the field,” Morgan says. “To offer the customers quality service they need takes very capable, knowledgeable, talented managers who can think out of the box.”

While intermodal is the company’s primary business model, Morgan says he is always ready to change to market conditions and new opportunities – just as he was 20 years ago.

“We’re trying to maximize our profit potential in whatever transportation is doing,” Morgan says. Currently, the biggest opportunity in transportation, he says, is offering efficient pricing and service between the shippers and major rail ramps for long-haul routes traditionally moved purely by over-the road trucking companies.

“It’s less money than pure truck, but much quicker and better service than conventional rail intermodal.”