new reefer business

[ATeam]

People said I had my head in the sand (and the clouds) when, as someone researching the trucking industry, I described as possible the lifestyle and income we enjoy today. Actually, the income is higher than I believed possible then.

People said I had my head in the sand when I said several months ago, with 100% certainty, that a recession was coming and that marginal producers would be wise to think about getting out of the expedite business while the getting was good.

The fundamental fact that drives my views on this "new reefer business" is my income statement and statement of net worth. The fundamental fact is that our run count is higher and revenue is higher than ever before. That is while FedEx acquired and integrated Watkins into their system. That is while FedEx rolled out Expedited Freight Services. That is while "One Size Fits All" was purported by some to be comming and but never matarialized.

Sure, things may be changing in ways that negatively affect contractors. Nothing new about that. I can only say that our real-world numbers produced over a 4.5 year period show our one-truck, independent contractor expedite business to be profitable and growing more so.

Who will be hurt by this, if anyone? People who do not see the big picture accurately and fail to adapt to the economic and industry conditions that are constantly changing.

Careful readers of the Open Forum will notice that there has always been people that offer up industy trends, real or imagined, and predict they will be the death of White Glove contractors. They miss the point the FedEx Custom Critical is not a static organization. It has a distinguished history of changing with the times and developing new markets.

Diane and I are commmitted to changing with our carrier. We like the idea of prospering as expediters, and not being destroyed because we failed to see where the money is and failing to position ourselves in the revenue stream.

Our business model is debt-free truck ownership (very, very close to achieveing that) and providing high-end, highly specialized freight services. So far (and yes, 4.5 years is a short time), no change has happened at FedEx, in the industry at large, or in the economy that has moved us off this strategy. When is it time to move? When our balance sheet tells us to. Right now, Mr. Sheet says, "Stay!"

A while back, TallCal's numbers told him to move, and he wisely did. But that is an apples and oranges comparison. He had fleet owner and driver issues to deal with that we do not.

It may very well be true that freight rates may plumet and drive people out of the industry. The smart ones and the prosperous ones will be, among other things, those who run debt free operations.

Things are always changing in expedite. One of the changes that may well be underway right now is that expediters will no longer be able to send their banker's childeren to college while they finance a truck and eek out a living hauling freight. It may soon be that having truck finance costs or not will be the difference between having a successful expedting business or not. As freight rates plumet, freight will not stop moving. But it will be owner-operators configured for profitability that will be left standing.

 

[Jefferson3000]

Ok, as far as hiring emplyees vs. contractors goes, here's my 2 cents worth of knowledge, having watched this within the air freight industry for a number of years. A P & D company starts out with a couple of forwarding clients. They buy or lease a couple of trucks to handle mostly the local business. They then bring on contractors to deal with the outer limits or "beyond areas" as they are sometimes termed. No skin off their backs if it is really slow. They owe nothing to the contractor, who only makes what he delivers. Suddenly, because of good service, they begin to grow. More and more customers call. Pretty soon, the trucks are full when they leave and full when they return. Wow. Th manager notices this and realizes that he is paying out 60% of his earnings to these contractors. Hmmmmm.... How about we buy a few more trucks and get rid of the contractors. Now we can pay some steering wheel holder $10 an hour to drive OUR straight truck and we keep the rest.

But the steering wheel holder doesn't care about packing as much onto his truck or getting it all off on time. He makes as much on a full truck as he does an empty one. So the service suffers and the customers run to company B down the block. Trucks are empty and comapny A has to pay the insurance and lease on the trucks, so they let them go and return to contractors. And the cycle begins again.

Such is life....

 

[juliewray60]

WOW! Phil Madsen & Diane Madsen....WOW!
GREAT STUFF!

Nice that you took the time to add
a positive comment about the Madsens.
The beauty of his writings is that they
come from the "actual" drivers seat.
He directs the majority of his input soley
directed towards the expedite arena.
I and others have gleemed a great deal
of usefull knowledge from his writings.
A heck of a alot more credible than that
basement poster working on his 4,820th
post. $800 dollar suits flying around in
private planes amuse me. Like i'm
actually gonna believe 1/10th of those
stories.

 

[greg334]

Yawn....

Phil, I was going to tell you how it was explained to me, but I won't because I don't work for FedEx. It is too complicated and has nothing to do with freight predictions, research or anything you said.

I left because of real credible information and a long long time to make a decision based on a combination of information and finding out the truth (and it is on paper from them) what limited me from creating revenue with them.

I am with a different company, I feel once I get rid of this I need a guardian attitude and run this like a real business, I will be doing well and hope to catch up to my goals. It is a struggle, it has been very slow for me, but that is not because of the economical conditions but me.

It is great that you are making money, I mean that but for those careful reading newbies, don't expect the same.

 

[tmbm]

If I understood the article correctly, this is simply new technology on the envirotainers. Using a small compressor in lieu of dry ice, eliminating FCC from having to purchase the ice, purchase batteries for the container, pay the driver for these addition stops, and now can reduce some of the time and money needed to make the run. Sounds like sound business sense to me. This in no way reduces the need for reefers, when running the envirotainers you still need to run them in a reefer. Any of the ones we have done have had a temp tell on both the inside and outside of each container, and was ran with the reefer running. Also the vast majority of the reefer loads we get would never fit in one of these boxes, as most of them are multiple skids. I don't see this (at this point in time) as something to fear as a reefer driver, rather something to appreciate as it will simplify my job.

 

[Moot]

This sounds exactly like a product from the early 1990's called the Pallet Reefer. At that time I was an employee of a Conway LTL company. Conway had entered into a venture with the inventor of the Pallet Reefer, investors and a manufacturer. We ran the Pallet Reefers for less than a year. If I recall there was some legal issues between the inventor and others.

One problem with the Pallet Reefer at Conway was only a few strategically located terminals were equipped to recharge the CO2. This caused some problems with extended lead times to get a fully charged reefer to the customer. Also because the reefer operates using CO2, which is a hazardous material and the reefer itself was placarded with non- flammable gas decals all drivers hauling a Pallet Reefer needed a hazmat endorsement which was company policy anyway.

I thought these were a great idea. Maybe FedEx can make it work. I still see this as being more of an LTL thing because it requires storage and recharging to be done at a terminal. This requires and extra stop by the FECC contractor to pick up the reefer at a terminal and then return it to the nearest terminal after it is unloaded at the consignee. Could work for loads scheduled well in advance though.

 

[davekc]

A while back, TallCal's numbers told him to move, and he wisely did. But that is an apples and oranges comparison. He had fleet owner and driver issues to deal with that we do not.

It may very well be true that freight rates may plumet and drive people out of the industry. The smart ones and the prosperous ones will be, among other things, those who run debt free operations

Most of the driver issues are a direct result of what the revenue stream is. He can speak for himself, but from what I recall, that was a driving issue in conjunction with contractor status.
Whether one runs debt free or not is not the biggest issue. Since it is a business, return on investment is what I would be paying attention to. Running at cost means your making money. That is much different than whether one is turning a profit.
I don't want to imply one can't make money, but it would be a question mark as to whether one would realize the same ROI over the last 5 years.

Lastly, with regards to the reefer containers, they come in sizes from a small beer cooler all the way to one that is the size of a full trailer. I seen on another site they are looking at this for rail cars as well. I do have to wonder how big the generator will have to be for something that big?

 

[TeamCaffee]

We do not haul these containers as you have to have a reefer hence usually White Glove. From everything we have heard these containers are an improvement on the dry ice containers and will be even more of a guarantee. of temperature From what we have been told and can deduce from what is happening this should improve White Glove reefer freight not reduce it. We also understand that the containers are hauled in White Glove Reefer trucks as a backup if anything fails. So as a Dry Box I sure do not see us getting any of these loads soon.

 

[arrbsthw]

Last edited by ATeam : Yesterday at 07:00 PM.

Did anyone but me see that yesterday A Team said they had already hauled
these reefer units in their truck.. and today the post has been revised and
remark is gone? I know I saw it..it was there and now poof!

 

[RichM]

I saw it but thats typical.

 

[davekc]

It looks like he went in and edited it out for what ever reason.

Linder,
They only started the program 12/1 and these just run on batteries. Their public information says they are running them on dry van express trailers.
A regular CC surface truck I would think would be the same if they have a charging unit on them. I would have to think these would only be used by companies that ship on a regular basis in order to charge or exchange containers, or it would be terminal to customer and back.
Single loads or one offs would still have to have your regular reefer truck or trailer. That might be what they are doing with the 28' reefer pup trailers?
Not at Fedex so that is just a quess. They don't mention it in my mail or stock reports.

 

[ATeam]

Last edited by ATeam : Yesterday at 07:00 PM.

Did anyone but me see that yesterday A Team said they had already hauled
these reefer units in their truck.. and today the post has been revised and
remark is gone? I know I saw it..it was there and now poof!

Wow! Thanks for pointing that out. I did not notice it until you mentioned it, arrbsthw. I did indeed say that we have already hauled these containers...the dry ice variety, not the new compressed air variety. I don't remember deleting that part of my post and suspect someone else did, though, I may have deleted it by mistake without knowing it.

Let me state here again that we have indeed already hauled these containers in our reefer truck. With one or two exceptions, we have picked them up at FedEx terminals. In every case, they paid well (not fantastic, but well enough to accept the load).

As others have also indicated in this thread, we are not the only WG reefer truck to haul these things. The ONLY thing new in this so-called "new reefer business" is compressed air technology is replacing dry ice.

Knowing what kind of freight goes into these things, I see no threat to WG reefer trucks but an advantage instead. FedEx is marketing the service more publicly now than before. That means more of this business for us, not less.

 

[LDB]

Phil et al,

There was a post in another thread that contained an improper sexual comment in an otherwise acceptable post. I was going to delete that sentence and leave the remainder. While this new system is cool and lets us do a lot more than before, it does not allow us to edit posts. We can only act on entire posts, not segments of them.

I can only presume the missing segment in this thread was an inadvertant casualty of other editing you did at the time. I guess it's also possible the system hiccupped at just the right moment to send a segment of the post flying off into space somewhere. I actually wish it were possible to have been one of us so I'd have that ability for the rare times posts actually need it. Now back to our regulary scheduled programming.

 

[ATeam]

Thank you for the explaination, Leo. No harm done.

 

[Jefferson3000]

I've actually had the thing hiccup on me during an edit, but it was while previewing an email I was drafting, not a forum post.

 

[tallcal101]

As my fleet was aging,and the trucks had mega miles on them(all original engines that had been cared for well)I had to decide if investing in new W/G equipment was worth it.The numbers I saw for the last 12 months showed a steady decline,and costs were on a steady incline.My choice was easy for me,but I also never quit my day job,thank God.I was able to wholesale the older trucks for a fair price,and get decent money for the newer ones.It was not without pain,as I have said before.It's becoming a memory of a chapter in my life.I experienced expediting in it's hay day.All drivers were paid in full,and most stay in touch.
I came to view FEDEXCC as the enemy,which is sad.They are not the enemy,in any way,but the changes I experienced over the 7 years that I partnered with them were real and in many ways devistating to my botttom line.I discussed these issues with several management team members when I left,and they did not disagree with my observations.They said they should have seen some things coming,and kept fleet owners in the know.
Debt free or not,I think running a fleet of trucks (over 3 of 4) in expediting is a losing proposition for the time being.Meeting costs and covering overhead is not making money.

 

[nightcreacher]

just an observation,since dupont and ppg both ship paint,and in the winter time,that needs to be heated,and since the portable heaters were done away with,and these paint loads were going to be put on custom critical reefers,and since the price would go up to the customer,this new system they have implanted,will let the drybox trucks haul a load that has to be kept from freezing,at that normal dicount price,and the reefer guys wont be putting custom critical,in a bind,by turning all the loads down.you think this might be a good move now?

 

[davekc]

That was my point on these set ups. I think it will create some opportunity as a dry van can haul these.

Also, I think Talcal's post kind of amplifies what I was saying. Even more so since it is current. Making money and getting by is much different than turning a profit.
I'm sure the recruiters did see your points as it is difficult to show a return on investment with a push down on revenue either internally or externally.

 

[Moot]

The following is a brief summary from a 1994 patent application for a product called THE PALLET REEFER.


A transportable container for carrying refrigerated products in frozen (sub zero Fahrenheit) or refrigerated (for example, 40° F.) temperatures includes a structural container having an insulated outer shell with an access doorway. The upper portion of the container includes a tray or drawer in which are disposed a pair of spaced apart canisters containing liquid refrigerant (CO2, for example). A gas or liquid feeder tube penetrates each bottle and communicates with an on/off valve. A feeder tube can draw liquid to dispense for cooling, or it can release gas and pressure within the canister to boil the CO2. When CO2 reaches its boiling point, the canister, its bracket, and the cold plate reach very cold temperatures to cool the cargo area through conduction. The gas is released through an injection nozzle into the cargo holding area. A temperature regulator valve dispenses CO2 from the canisters through a header in order to maintain a desired temperature over a wide span of temperatures including, for example sub zero temperatures (-40° F., for example) up to room temperature. Preferably, the container has a base plate having at least two spaced apart, parallel slots adapted to be engaged by a forklift lifting device. In addition or in the alternative, the container can advantageously have a strap lifting system which allows it to be easily lifted by a crane.

 

[ATeam]

I'm glad this topic is being discussed because it is inspiring me to research these containers a bit more. As I do, I am finding that there is a WHOLE BUNCH of stuff I don't know about the logistics industry, especially the packaging and shipping part.

Google searches are taking me into trade journals and publications that talk in great detail about things like the costs and beneifts of all sorts of packaging, new and old. It's more than I want or need to know about and I'm not going into it in depth. But my superficial research leads me to further conclude that the "reefer pallets" are no threat to White Glove, and may well be a source of additional revenue as they come into wider use. But who here knows, really? I certainly don't. Heck, for all we know, these containers may be an additional source of revenue for both WG and dry box expedite trucks.

Anyway, let's consider paint. It's HAZMAT, lots of drivers can haul that. It needs to be heated in the winter. Currently, in the winter, it is a reefer load.

But when we expedite people haul it, it's not a regular run for the shipper. They are paying us top dollar for exclusive use, dock to dock, straight through services. They call us to haul their paint because someone somewhere needs it in a hurry. The rest of the shipper's paint goes through other, less expensive, less speedy carriers, and it can be comingled with other freight. There is no need to expedite paint, unless a true expedite situation exists.

Now, when we haul paint on our straight truck, they never fill the truck. Again, this is an emergency shipment. We get one, two, three, maybe four skids of the stuff and that's it.

A skid (pallet) typically contains three 55 gallon drums, and, importantly, the drums spill over the edges of the pallet. So, if the goal is to replace reefer trucks with pallet reefers, what has to change?

The pallet reefers have insulated walls. The pallet reefers have a fair amount of space dedicated to the mechanisms that keep the inside cool. I have never seen a pallet reefer that keeps the inside warm, so maybe this paint example is off track. But for the sake of discussion, let's continue.

Pallet reefers come in different sizes. There is no way to fit three 55 gallon drums inside a pallet reefer that has a 48" x 44" footprint, or even 48" x 48". The insulated walls and
mechanisms do not leave enough room.

So, if you have say 12 drums to ship (four skids), what do you do? Maybe use six pallet reefers to carry 12 drums. That might work, but at what cost?

In my superficial research, I have not been able to find a purchase price for one of these pallet reefers. These are sophistocated devices. I do not think they will be cheap. So, after adding the cost of using six pallet reefers to ship 12 drums, will it still be less expensive than a straightforward reefer truck?

Don't forget that the pallet reefers will have to be stored and kept ready for the paint shipper's emergency needs. They need to be maintained. People need to be trained in their use. And when you are done with them, where do the empties go? Who pays to bring them back or store them someplace else?

A logistics company that specializes in pallet reefers can meet the shipper's needs. They can build them to hold as much paint as possible. They can deliver them on demand. They can service and maintain them. They can store them when not in use. But they will not do it for free, and if they are hired to do it at all, it is only because the paint company has repeated expedite needs. How many of those are there out there? And of those, how many will find it easier and cheaper to go the reefer pallet route, instead of simply picking up the phone and calling FedEx Custom Critical, and passing the emergincy shipping costs on to their customer (assuming the expedite reason is on the customer's end)?

Reefer pallet costs could be reduced by building paint-specialized pallets that hold more drums, or perhaps transport the paint using the container itself as a reefer tote. But then, the reefer tote must be serviced and stored as above. Also, how large of a space can dry ice or compressed air support? The more inside space you are heating or cooling, the more ice or mechanical devices you need.

Whether it is one drum or twelve, or more, reefer trucks can carry paint drums without adding a single additional mechanical device, or more insulated walls that pallet reefers require. Also, when they are empty, paint drums are a whole heck of a lot easier and cheaper to deal with than expensive pallet reefers. Not much technical about a drum.

With freight that is a temperature-controlled commodity, like paint, I just don't see the kind of reefer freight we haul now disappearing into these reefer pallets and onto dry boxes. And the reefer pallets we haul now, be they powered by compressed air or dry ice, will still go on WG reefer trucks because of what they contain.

And even with regularly-scheduled large-quantity shipments of paint, what's easier to handle. Dumb paint drums or sophistocated reefer pallets? As a paint company, what would you rather have, empty paint drums that cost little and can be stored anywhere, or empty pallet reefers that are expensive and require special care? Also, is there any scenerio under which the paint industry will find it more profitable to give up all their drum storage and handling equipment for reefer pallets? Unlikely, since the need to ship paint by reefers is seasonal.

Long before Diane and I hauled our first pallet reefer, there have been some very large logistics companies moving all sorts of products around in these not-so-new pallet reefers . Compressed air technology is new. FedEx's marketing effort is new. The containers are not new.

While FedEx has previously nibbled into this market, it appears now that they are going after a bigger chunk of it; using their portfolio of sister companies to do so. As I see it, that means more opportunities for WG reefer trucks, not less. It's good to be part of a FedEx sister company.

Finally, as with every other type of WG freight we haul, these pallet reefers are only a small part of the business. In a fully-equipped straight truck, with fully-credentaialled drivers, we don't haul a lot of anything. We haul a little of this and a little of that. Sometimes it is non-reefer paint (summer), sometimes it is reefer paint. It may be a reefer pallet. It may be a T-VAL load, or a pads and straps load, or any one of the other kinds of freight we haul for a wide variety of customers.

If, for whatever reason, we never saw another pallet reefer on our truck again, it would not be something that would affect our revenue in a big way.

People who rise to declare WG dead or parts of it miss the larger point. FedEx Custom Critcial has people going to work in their respective departments every day, and part of what they do is figure out new ways to put more freight and more kinds of it on our trucks.

Indeed, the history of expedited freight transport is for FedEx to develop new markets (and even expediting itself in predecessor company Roberts), and then yield market share to competing companies as they come in with lower pricing. I may be wrong, but I know of no new class of expedite freight that has been developed by expedite carriers other than FedEx. FedEx leads. Others follow.

As price competition develops, FedEx continue to compete in the markets it developed. The good news for FedEx contractors, and ultimately for all expediters, is FedEx continues to develop new markets.

It's quite a sight each morning in Green, Ohio. People stream from the parking lot into the building, get their coffee, and go to their desks and meetings. Some of them wake up each morning trying to think of new ways to put freight on our truck and new places to find it.

Types of freight come and go as technology, market conditions and the economy change. For 25 years, one thing has stayed the same. Smart people at FedEx Custom Critical are looking forward with contractors and new freght opportunities in mind.

Viva FedEx!