ArcBest
Surviving the Pandemic

Fort Smith, Arkansas USA
January, 2021
By: Richard Armstrong

ArcBest Overview

ArcBest, like many third-party logistics providers (3PLs) and trucking companies, had an interesting year in 2020.  Revenues dropped 19% in 2Q20 in reaction to the COVID pandemic.  By the end of the third quarter, revenues and profit were up.  Both the asset and non-asset operations were on similar roller coasters.  Non-asset operations are now 34% of revenue.

During the worst of the pandemic, 90% of office workers operated from home.  In December, 70% were still operating from home offices.  Longer term, there will be continued home office activity for certain teams because it has worked well and employees like it.  Spending 1-2 days a week in the office may be sufficient facetime.

Recovering operations are geographically diverse.  About 40% of over 200 terminal locations are still catching up, 60% are caught up and 2021 looks like it will be a strong year.

In the enhanced market approach, most services are now offered under the ArcBest brand to facilitate ease of doing business and a best-in-class customer experience.  These logistics services include:

Sales, marketing and customer service for both ArcBest’s asset based and asset light offerings (ABF Freight, Panther Premium Logistics, truckload and other solutions) were combined under Chief Customer Officer, Dennis Anderson.  Cross selling ArcBest’s services allows its customers visibility across their logistics activities and gives clarity to performance standards.  The unified customer-facing team structure also enables ArcBest’s trusted advisors to provide customers with unique insights into optimizing their total supply chain efforts.

ABF Freight started in the trucking business in 1923 and became a major less-than-truckload (LTL) carrier, later branching out into U-Pack moving, domestic transportation management/freight brokerage and other areas.  Judy R. McReynolds led the recent reorganization efforts, with a major emphasis on expanding supply chain solutions, since she became CEO in 2010.  With the enhanced market approach in 2017, customer support operations and other functions were reorganized.  In addition, ArcBest added modern, analytical research and yield management functions.

The current company goal is to expand asset light operations to 50% of total revenue.

Vertical Specializations for ArcBest

ArcBest’s Expedite solution, offered through Panther Premium Logistics, is a guaranteed on-time service.  Shipments are picked up and delivered within 15 minutes of scheduled times.  Panther meets these deadline requirements 98.5% of the time 365 days a year.  Panther has 1,100 regular owner-operators.  Contract providers are prequalified through the Carrier Excellence Program.

ArcBest has a particular focus in six identified verticals:

  1. Third-Party Logistics Providers & Freight Forwarders
  2. Automotive & Heavy Truck
  3. Government & Defense
  4. High Value Products
  5. Life Sciences
  6. Manufacturing

Specialized equipment is used as necessary.  For example, life sciences shipments need carefully controlled refrigerated equipment.  As needed, Panther utilizes the LTL network for special handling of partial shipments.  Usually these are air shipments.

Panther operates cargo vans, straight trucks, dry vans, reefers and flatbeds.  All power equipment larger than cargo vans, has sleeper cabs.  Hazardous material certification for drivers is standard.  The major service center locations for Panther are Medina, OH; Fort Smith, AR and Laredo, TX.

Customer Stories

Fitness Equipment

This company manufactures fitness equipment like treadmills, ellipticals and exercise bikes for residential and commercial use.  The company has been providing exercise equipment to North America for decades and is one of the fastest growing brands in the industry.

The company has seen record sales this year.  Due to the COVID-19 pandemic, fitness gyms have closed, people are staying home and there is discretionary money to spend in lieu of taking vacations, etc.

The equipment is manufactured in and imported from Asia.  The company primarily does sales and distribution through its own website and has several retail clients that sell its product in stores and also online through the retailer’s websites.

ArcBest has supported the supply chain from manufacturer in Asia to final mile delivery for many years.  The company drop ships for the retail client for both in store orders and online orders.  Historically, the company has utilized one warehouse distribution point in California.  ArcBest Managed Solutions established a second warehouse along the east coast that increased capacity for daily orders.  Positive trade-offs include lower LTL pricing and quicker transit times to consignees.  This second warehouse was established in September of 2018.  Their third and fourth warehouses are being set up right now due to the increase in demand for product.  These new locations are in Texas and Pennsylvania.  The additional warehouses changed the Ocean, LTL and Warehousing rates.

The main drivers for change include:

  1. Additional order capacity with more warehouses
  2. Less reliance on the California facility for capacity
  3. Improved transit time to consignees

With a surge in demand for product, the company required a model that can process 2,000 to 3,000+ orders a day.  Warehouses can generally ship 500 to 800 shipments a day.  During Peak Season (November through January) this increases to about 1,000 a day.  Pre-COVID shipments out of the warehouse were a mix of LTL curbside and Final Mile room of choice assembly.  With the impact of COVID and restrictions on drivers and final mile providers in the home, LTL shipments that are curbside have dominated as the final delivery option.  Due to this, there has been an increase in ArcBest International shipping from 2019 to 2020, with container growth of 312% year over year.

Fashion Retailer

This customer is an admired fashion and lifestyle company with some of the most recognizable brand names in the world.  In the past, it utilized only one carrier for its LTL shipments.  After a change in personnel within the customer, new management began to look at options outside of their sole source provider and began talking with six companies for their LTL process.

ArcBest data scientists evaluated the fashion company’s LTL spend and quickly determined that substantial savings were available.  ArcBest then presented a Managed option.  Traditionally, this company had been resistant for allowing 3PLs to handle substantial pieces of its business, especially the day-to-day LTL, but after presentations, the company decided it would visit with the top two candidates, ArcBest being one of them.

In 2020, the retailer’s execs visited Fort Smith and met with a team of ArcBest leadership, including ArcBest Chairman, President and CEO, Judy R. McReynolds.  The customer was very impressed with ArcBest’s culture and “boutique feel” and felt that the energy and comfort level of the leadership team was unlike anything it had felt from a logistics provider before.  Activity with this company has quickly ramped-up ahead of schedule and ArcBest’s Managed LTL solution proof of concept was validated this summer.

A mini truckload bid will go live in the next 45 days.  Full truckload and dedicated truckload rates/capacity have been presented to the customer, and store delivery, which was not part of the initial award, has already been given to ArcBest with additional opportunities on the horizon.  This fashion retailer plans to re-design its store delivery network and ArcBest will be highly involved in this process.  This process could result in over 1,000 weekly store deliveries through 25-30 pool networks or new ArcBest solutions.

Department Stores

This customer is an American, multinational off-price department store featuring apparel and home fashions.

ArcBest has a long history with this company through its LTL carrier, ABF Freight.  A couple years ago, ArcBest opened a discussion with the company about utilizing its Managed Transportation solution to help improve efficiencies and decrease costs.  The company eventually carried out a Request for Proposal (RFP) process, which included other 3PL competitors.  However, its long-term relationship with ArcBest and its ability to execute over the years played in ArcBest’s favor.

Today, ArcBest manages 75% of the company’s LTL business, through three contracted carriers.  ArcBest is currently in the process of presenting alternative solutions for the company’s 2021 LTL business that includes a diversification of carriers which will help with cost and provide a better capability to flex up or down to meet peak surges.

ArcBest is also now an approved truckload brokerage provider for the company and in a position to grow its asset light offerings through its brokerage service and Panther Premium for expedite shipping.

Sources: A&A Primary Research, https://arcb.com

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