CCJ 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 CCJ Editor Jeff Crissey at email@example.com or 800-633-5953.
“A company is founded to do something. You need to stick to what you do well, especially in our low margin, capital-intensive industry,” explains Joey Hogan of Covenant Transportation Group (CTG).
On July 19, Hogan, president of CTG, is seated in a boardroom on the second floor of the company’s white, palatial office in Chattanooga, Tenn. A large portrait of David Parker faces the table where he and other CTG executives meet with CCJ.
Parker founded Covenant Transport in 1986 with 25 trucks and 50 trailers. From day one, the motor carrier has specialized in expedited truckload service using driver teams.
During the meeting, CTG executives discuss new technology CTG has developed to solve complex problems, automate processes and improve performance of team operations.
“The infrastructure, the psyche, the emotion the process, the system — everything is built on getting, keeping, and running a team,” Hogan says.
A new direction
Like many trucking companies, Covenant Transport flourished in the 1990s with an expanding economy and low fuel prices. Business was growing at 20 percent annually when in 1994 Covenant made an initial public stock offering.
In the latter half of the decade, growth tapered to 15 percent. In response, Covenant formed CTG to diversify. In 1998 it purchased Southern Refrigerated Transport (SRT) and, with other transactions between 1997 and April, 2000, the company went from 1,600 to 4,000 trucks.
Carrying too much debt when a recession hit in 2001, CTG entered a “chapter of rationalization,” Hogan says, that lasted from 2002 to 2010. “We learned a lot of lessons during that period of time.”
CTG reduced its overall fleet but not all of those years were lean. During a banner year in 2006, CTG started a new brokerage division and acquired STAR Transportation out of Nashville.
With Star, CTG gained dedicated and regional operations to complement the teams at Covenant, he explains.
The turning point came in August, 2011, when for the first time in its history CTG had a strategic plan. The plan called for growth in e-commerce, organic produce, high-value and cross-border loads.
Executives saw all markets as ideal opportunities for team operations. In e-commerce and organic produce, CTG competes directly with airfreight for long-distance loads with time-sensitive delivery points. Rates are significantly higher than in freight lanes that compete with rail intermodal, says Richard Cribbs, chief financial officer.
Amazon and parcel carriers FedEx and UPS are among CTG’s largest customers.
[related-post id=”136490″/]Team operations are also a growing opportunity for regional e-commerce freight lanes. Shippers do not like surprises, Cribbs says, and driver teams eliminate the possibility of delays from hours-of-service restrictions. As the speed of e-commerce increases, Hogan believes that within a few years all shipments of more than 450 miles will be pulled by team drivers.
To keep up with demand, CTG has increased its team fleet by 250 trucks since June, 2014. It now has 1,000 trucks with driver teams of 2,600 total power units across all fleets.
Its brokerage and third party logistics business, Covenant Transport Solutions, specializes in expedited freight as well. Two of the largest customers are Fresh Express salads and Delta Airlines’ fleet maintenance. Both, Hogan says, “were very impressed with our technology, speed and responsiveness.”
Keeping teams separate
One reason CTG runs three separate motor carriers (Covenant Transport, SRT and STAR) is because team and solo driver operations do not work well in a single fleet, Hogan says.
The freight network, pay and mileage for team drivers at Covenant are markedly different than for solo drivers at the other companies.
“Most people want to run by themselves,” he says. “So, there is a differential in pay at which someone is willing to team up and run with someone else.”
Team drivers are paid more than $.50 per mile and average 5,000 miles per week, he says. They pull up to two loads per day and most of the freight in Covenant’s network is drop and hook, he says.
Solo driver jobs at SRT and STAR Transportation give team drivers at Covenant an option to trade higher pay for more home time to run dedicated lanes, he adds.
CTG executives say technology developed for drivers and for teams is reducing delays, increasing safety, optimizing routes and schedules to maximize driver income.
As the electronic logging device mandate takes effect, CTG will be a preferred workplace for team drivers in the trucking industry, says Doug Schrier, vice president of continuous improvement. Its freight network and optimization solutions will provide drivers with the miles and income they were used to getting before running ELDs elsewhere, he explains.
CTG has been able to significantly improve its business using advanced analytics and technology to solve problems in routing and driver management. Some of its most recent projects are summarized below:
Weather routing system: In 2003, after significant increases in insurance deductibles and a rash of winter accidents, CTG launched an application that gets information to drivers — especially those with less experience — at the right time to avoid dangerous road conditions, says Rick Reinoehl, senior vice president of safety and risk management.
The application displays location-specific weather status updates from drivers on a digital map. Red markers indicate where drivers are shut down due to weather; green indicates where drivers reported safe road conditions. Risk management monitors the map to make decisions for what trucks to shut down or reroute.
Since the application was launched, accidents have decreased 50 percent and accident costs are down 88 percent, he says.
Last year the company took the weather routing system to a new level. Developers created a unified, web-based system that gathers information from multiple sources, including the National Weather Service. Algorithms then predict road conditions up to seven days in advance for every driver’s route.
The system makes real-time recommendations for where drivers should shut down or be re-routed to avoid problem areas. The project was led by Chris Orban, vice president of advanced analytics.
Strategic routing: In 2014, CTG launched a strategic routing initiative that gives drivers optimized trip plans and turn-by-turn navigation. The solution presents options to drivers through the in-cab workflow for where to purchase fuel and take breaks. The routing system uses proprietary algorithms that consider the cost, safety, parking availability and other variables.
All customer locations — more than 35,000 total — are marked or “geofenced,” in the system. When drivers approach a location, the navigation app gives drivers specific instructions for the entry points and procedures.
Driver relationship manager: CTG developed this application to gather critical safety events from multiple systems and display key metrics in a single application for a holistic view of driver risk. Workflow tools give driver managers the information they need to have positive coaching conversations with drivers, Orban says.
The software monitors speeding compared to posted speed limits, hard braking, hours-of-service status and more. For the more severe infractions, the workflow has an escalation process for safety managers.
“We want to know as much information about drivers as possible,” he says. The application also gives a real-time view of driver status to improve communication and relationships. Fleet managers are notified when a driver calls payroll to report an issue, for example, or contacts maintenance with a problem.
Predictive modeling: Using advanced analytics and SAP software, CTG is able to quickly identify patterns in data to predict drivers that are more likely to have an accident or voluntarily quit. For instance, its turnover model routinely identifies the 20 percent of drivers in the fleet that account for 40 percent of fleet turnover, Orban says.
Fleet managers are able to use the information to reach out to at-risk drivers to make a positive phone call to reduce turnover and accidents, he says. The company also uses predictive analytics in other areas like preventive maintenance and equipment trade cycles.
Since developing its strategic plan and making continuous improvements with technology and processes, Covenant has seen revenues increase from $653 million in 2011 to $724 million in 2015, and its operating ratio decrease from 0.98 to 0.90.
While the trucking industry is in a freight recession, 2016 is on track to being in the top five in company history, and leaders are looking forward to what comes next.
“It’s been a neat journey,” Hogan says. “The next five years is going to be one of most exciting and rewarding times for the organization.”