Feature Article

Don't Mess with Estes

It's not easy growing 15 to 20 percent a year in a mature industry like less-than-truckload trucking. The secret at Estes Express Lines is using information technology to keep operations lean and nimble.

By James A. Bacon

When the remains of Hurricane Gaston blew over Richmond, Va., in August 2004, it dumped a foot of rain on the city. Basements that had remained dry for decades were flooded. At the Estes corporate headquarters on West Broad Street, water rose waist high in the bottom floor.

That was a very big problem: The data center for the less-than-truckload (LTL) trucking company was housed in the basement. Water fried the data center, threatening to paralyze the carrier's vast logistical network.

Responding to the emergency, Estes terminals around the country reverted to manual systems for billing and tracking freight, but there was no way that truck drivers and dock workers could keep the system going for long without critical technology. The system had become too finely tuned and interdependent. A mishap in one spot could ricochet unpredictably around a system that encompassed dozens of terminals and thousands of trucks in finely meshed schedules for thousands of customers.

Thanks to the round-the-clock exertions of the Richmond IT staff and beyond-the-call-of-duty efforts of vendors like IBM, Estes managed to restore its computer system within a few days. Nuno Valentine, the executive in charge of the company's IT operations, actually looks back upon the crisis with equanimity. Employees rose to the occasion, he says. "It was a bonding experience." As a benefit, he grins, the company replaced the old gear with cool, state-of-the-art equipment.

Estes' edge in the trucking industry: information technology

Rather than being traumatized by the near catastrophe, Estes has built upon it. The trucking company now equips its truck drivers with hand-held communication devices, embeds computers in its forklifts, runs sophisticated algorithms to help make incredibly complex scheduling and routing decisions, and is integrating its system with those of customers and partners.

"If this dies, we die," says Valentine dramatically, gesturing to the racks of servers and IBM memory banks holding some 20 to 30 terabytes of data. He says that, knowing it will take a lot more than a hurricane to disrupt operations again. The data center in Richmond has a sister site in Arizona. Every bit and byte is backed up and redundant. If something happened to the Richmond center, operations would seamlessly shift to Arizona. Says Valentine: "We can jump back and forth at will."

To the general public, which equates the trucking industry with the tractor-trailers that roll down the highway, the business doesn't appear terribly different from the days the teamsters began hauling freight across the nation's nascent highway system in the 1930s. But the spread of information technology into every nook and cranny of the economy has made no exception for trucks. IT has made the industry far more efficient.

Estes Express fancies itself an industry leader in the application of IT. "We develop our technology to make us efficient, proficient and enhance the customer experience," says COO Billy Hupp. "It's almost as important to deliver information to the customer as it is to deliver freight." 

The company got its start in 1931 when W.W. Estes purchased a used Chevrolet truck and set up a local trucking business hauling farm produce and supplies in Southwest Virginia. With no driver's seat or windshield glass, W.W. ran his first load "sitting behind the steering wheel on an upturned crate and looking through a discarded window," recounts the company's history.

By the time W.W. died in 1971, the company had moved to Richmond and grown to 650 employees and $10 million in revenue. Under the leadership of W.W.'s son Robey W. Estes, and his grandson, Robey W. Estes, Jr., the company has grown to 13,000 employees and a fleet of 30,000 trucks. With a network of almost 200 terminals, the company focuses on less-than-truckload shipments, primarily in next-day deliveries, although it is competitive in two-day deliveries and is leveraging its customer relationships into service anywhere in the United States and into international deliveries.

Two years ago, Estes Express generated $1.5 billion in revenues, says Hupp, a 30-year veteran who has run sales, operated terminals and rose through the ranks to the number two position in the company. Revenues took a hit last year, partly due to a deliberate refocusing, and partly due to the housing downturn, he said, but he expects the company to recoup this year. Other than last year's stumble, the company has been growing by 15 percent to 20 percent a year, he says.

That's pretty impressive for an industry where, according to the American Transportation Institute, shipping volumes have increased only 6 percent a year since 1985. The economy has slowed this year, but in March the company was confident enough to open 13 new terminals in the Upper Midwest, allowing it to provide full service to every state in the United States. Meanwhile, Estes Express is investing in its air freight operation and making a bid for international freight business.

"Estes is a great Richmond success story," says Gene Winter, senior vice president of the Greater Richmond Partnership. "The company epitomizes the innovation emerging from the transportation sector here in the Greater Richmond region. The reason we're one of the main logistics centers of the East Coast owes as much to the creativity of the businesses located here as to the conjunction of highways and railroads."

In an industry as competitive as trucking, says Hupp, it's not easy finding an edge. "We all do pretty much the same thing. Everybody in the business is good at picking up and delivering freight. They wouldn't be around if they weren't."

Estes' business has gotten far more complex as the company has grown, offering a wider array of services and appealing to a wider variety of clients. The Estes mission is to provide personalized service and to be highly responsive to customer needs. "We have to be quick, spontaneous and flexible," says Hupp. "We try to make the experience a positive one."

As a practical matter, Estes' edge in the marketplace is the quality of its IT systems that help it run its schedules a little tighter, manage its routes more productively, pack its trucks more efficiently, optimize on fuel and manpower, and reduce irritants like billing errors. To build and maintain the system, the company supports an IT staff of roughly 100 employees.

The challenge of juggling thousands of employees, tractor-trailers and customers over a nationwide system is formidable. "It's a huge jigsaw puzzle and the pieces change every day," Hupp says. "The more pieces you have left over at the end of the day, the more failures you have."

Consider, for instance, the challenge of higher fuel prices. "Things that make sense at $2 per gallon don't make sense at $4.50 per gallon," Hupp says. So, instead of running three trucks from Richmond to Emporia, the company might adjust schedules to pack the same amount of freight in only two and still deliver on time. Similarly, the company might alter its load patterns, loading freight through a more direct Pulaski route instead of a more round-about Atlanta route, but reducing frequency means changing time schedules.

Another option: Trucks can improve mileage by one mile per gallon by driving 10 miles per hour slower. When the truck is getting 6.5 miles to the gallon, that savings is not insignificant -- diesel fuel is now the biggest cost of running a truck, more than hiring the driver or paying for the truck itself.

All these trade-offs are made immensely more complicated by the fact that Estes consolidates less-than-truckload shipments at its terminals, runs a truck from one terminal to the next, then reshuffles loads for the final leg of the trip. Not only do dock workers try to maximize the use of space in a trailer, they must balance light freight with heavy -- too much weight in a truck can trigger fines.

Compound those complexities with the fact that the system is always adding new customers -- and losing a few -- and the fact that customers rarely have the same needs every day. There are a mind-numbing number of variables to juggle. If people don't get it right, it's very easy to wind up, as Hupp says, "with 18 guys in Orlando when you need them in Atlanta."

"You start out every day and you don't know what you're going to get," says Valentine.

Most big trucking companies build their systems to optimize either long-haul shipments or short-haul. "We have a system that allows us to be proficient at both," says Hupp. That capability, he adds, is one of the company's great competitive strengths.

Estes management gives loads of credit to the team of truckers and dock workers who actually move the freight - the company enjoys very low turnover for the industry, and employees carry a lot of knowledge about how to get things done. But the system has gotten so complex that men in the front lines inevitably would leave a lot of jigsaw pieces on the table without those servers, hard drives and software algorithms backing them up. Says Hupp: "There's no room for error anymore."

-- July 30, 2008

Estes COO Billy Hupp

For more information...

Estes Express Lines

Estes Hires International Expert (05/14/08)

Estes Air Forwarding Opens Global Solutions Office in Charleston, SC (05/14/08)

Estes becomes one of the first major LTL carriers To become TSA-security compliant (03/31/08)

Estes Air Forwarding and CSA Software forge partnership to develop best-in-class global freight forwarding software (03/13/08) 

Estes completes nationwide footprint by opening 13 terminals in 6 Upper midwestern states (03/03/08)

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