Innovators: Breaking the bottleneck

USA Logistics Carriers maintains efficiency and customer service by focusing on McAllen as an alternative to the congested Laredo port of entry.

In Monterrey, Mexico, and in several border towns, a number of factories called “maquiladoras” ship a steady stream of freight into the Rio Grande Valley of south Texas.

In this part of Texas, the cities of Laredo, McAllen and Brownsville are the designated ports of entry for commercial vehicles. Laredo is closer to Monterrey and the major hub of San Antonio than the other two. For this reason, Laredo always has been the busiest port as well as the least expensive traffic lane from Monterrey, the city with the largest concentration of maquiladoras.

In late 2000, McAllen residents Aurelio Aleman and Sergio Lagos saw an opportunity to bring a larger share of the traffic through their city. The two trucking veterans started USA Logistics Carriers in McAllen with two trucks. By creating a company focused on customer service, relationships and financial discipline, USA Logistics Carriers has succeeded in capturing a large share of cross-border freight, growing about 50 percent a year to more than 550 trucks today with 2007 revenues of $114.6 million.

The McAllen advantage
Located about halfway between Laredo and Brownsville along the Texas border, McAllen traditionally has been a major trade route for produce from Mexico. Early on, the owners of USA Logistics Carriers decided to target dry van freight because of the booming south Texas economy. U.S. companies had been moving their factories to Mexico to take advantage of shorter lead times than China, as well as low labor costs.

The distance from Monterrey to Nuevo Laredo, Mexico – Laredo’s twin city – is slightly less than from Monterrey to Reynosa – McAllen’s twin city. However, complicated border-crossing procedures in Laredo add to the already congested conditions to delay traffic between eight to 24 hours, says Aleman, the company’s co-owner and chief operating officer. By contrast, freight moves through Reynosa to McAllen in one to four hours, Aleman says.

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Although less traffic moves through McAllen, USA Logistics Carriers has gone to the McAllen bridge authority and asked them to stay open longer in order to cross more equipment. “They say that we don’t get enough business here to justify it, so we tell them how we’re promoting more business through McAllen,” says Robert Long, chief financial officer.

To further relieve border congestion, the McAllen bridge authority is building a third bridge, the Andalzua, between its two existing bridges. USA Logistics Carriers plans to buy more property directly in route with the new crossing, Long says. “We’re promoting McAllen as a strategic location,” Long says. “With all of the sales staff that we hire, it’s all we talk about.”

One of the advantages of going through McAllen is that the same Mexican carrier that picked up the load in Monterrey or any other city can deliver the load directly to USA Logistics Carriers’ facilities. Its headquarters is located on 36 acres less than three miles from the border – closer than any other carrier in McAllen, Long says. Mexican carriers also can pick up loaded trailers with raw materials that USA Logistics Carriers brings in as backhauls from California and other locations. Freight coming into Laredo, on the other hand, must be carried from Nuevo Laredo by a separate transfer company into the United States (and vice versa), Aleman says.

Satellite tracking, embedded in every truck and trailer, enables USA Logistics Carriers and its customers to track every shipment. Not all customers want to pay a premium to move their freight through McAllen, however, so the company has terminals at all entry points from Mexico, from Brownsville to San Diego, Aleman says. “We want to make it easy for our (Mexican) counterparts to get freight through,” Long says.

USA Logistics Carriers also is heavily involved with the McAllen Economic Development Corp. (MEDC), a not-for-profit contractor with the city of McAllen, to attract new industries to McAllen and Reynosa, Long says. According to MEDC, McAllen is one of the fastest-growing cities in Texas and leads the nation in job growth.

Improving efficiency
In addition to using its location strategically, USA Logistics Carriers says it remains focused on growing to meet customers’ needs, but only by doing things the right way – for its drivers, its customers, the community and its own financial success.

“We are trying to do everything the correct way,” Long says. “Does that mean we should think small? We don’t look at it that way. We want to be the best we can be in order to provide a great service.”

Before joining USA Logistics Carriers in 2006, Long worked for the company behind the scenes to obtain financing, first as a lender for The Associates and then for CitiCapital. Long also helped the company entertain customers and acquire equipment to meet the growing demand from major customers such as Panasonic, Black & Decker, Kohler and LG Electronics.

To attract drivers, the carrier pays about 4 cents per mile more than its competitors, Long says; drivers start out at between 36 to 42 cents per mile. It also provides drivers with all the comforts of home by spec’ing trucks with leather seats, automatic transmissions, refrigerators, GPS navigation, auxiliary power units and satellite radio.

“We know drivers are the heart and soul of our company,” Long says. USA Logistics Carriers’ driver pool is about 98 percent Hispanic. By being a major minority employer, the city of McAllen has given various tax credits to the company, Long says, and the company also has obtained special finance rates from banks.

For fuel savings, USA Logistics Carriers uses APUs and single-wide tires, and sets its maximum speed to 65 mph, Long says; lower speeds have saved about 2 mpg. The company also works closely with its network of lenders and dealers to keep vehicles on a three-year trade cycle to maximize fuel economy and trade-in value.

As a fleet, the company is averaging about 6.8 mpg. It recently purchased some trucks that weigh 900 pounds less and noticed a significant improvement in fuel economy at about 7.6 mpg. “We are noticing that weight was playing a big part of fuel economy,” Long says.

Whereas most trucking companies have experienced a slowdown in freight volumes by 12 to 15 percent, Long says being located next to the maquiladoras has helped keep traffic in outbound lanes busy. Overall, the company has seen its business drop by about 6 percent this year, he says.

While USA Logistics Carriers runs a modern fuel-efficient fleet with a stable supply of freight, rising fuel prices may push customers to more cost-effective shipping modes. The company is prepared to quickly ramp up an intermodal rail service between McAllen and its Dallas terminal. It could use the railroad line that passes through the north end of its property to transfer freight to Dallas, where it would make final deliveries by truck to any U.S. destination, Long says.

No matter where the future leads, the executives of USA Logistics Carriers are confident they are in the right place.

“We’re aggressively trying to get freight through McAllen,” Long says. “We’re not the first, but we are one of the largest because we knew it was going to be a niche.”

Innovators profiles carriers and fleets that have found innovative ways to overcome trucking’s challenges.

If you know a carrier that has displayed innovation, contact Avery Vise at [email protected] or (800) 633-5953.