Towne Air Freight

Growth in good times and bad┬áKeith Regan learns how investments in technology made by Towne Air Freight during past economic downturns have set the company up for success and set the stage for a repeat performance. The air freight trucking business is no place for companies that enjoy longevity, with volatile fuel costs, constant consolidation and other challenges creating constant change. Towne Air Freight is an exception to that rule. The South Bend, Indiana-based company is marking its 45th year in continuous operation, offering its freight fulfillment services out of more than 50 locations across the United States.  ÔÇ£If you look at all the companies with 10 or more trucks, out of the thousands there have been, an incredibly small group has lasted that long,ÔÇØ says Joseph Dooley, chief financial officer. Towne Air Freight began with a single van and driverÔÇöcompany founder Eugene TowneÔÇöin 1963, helping to move parcels for United Airlines in and around its home base of Chicago. Along the way, the firm rode the growth of freight forwarding as airlines developed closer relationships with forwarders and brokers. Dooley says Towne has grown to be the number two player in the space and prides itself on offering a quality product at rates that are cohesive and available to all customers. One of its key competitive advantages today is its past investment in documentation flow management and communications tools. The company handles thousands of orders each dayÔÇöwith an average price tag of $150ÔÇömany of them involving international shipments that replenish distribution centers across the country. Towne has an especially strong presence in the Midwest, the Northeast, and now, thanks in part to a recent acquisition, the West and Southwest. ÔÇ£We have several hundred million dollars worth of revenue moving through here in $150 increments, so we need to be able to manage that at the speed at which it happens,ÔÇØ Dooley says. The company took a market-leadership position in creating what he calls a self-checkout express lane approach, relying on self-service Web applications that automate nearly the entire process. Towne adopted an imaging system in 1999, as much as five years ahead of many competitors in the freight and trucking industry. ÔÇ£The company always has been very generous when it comes to IT spending. We refer to ourselves as an information company that happens to have hundreds of trucks and trailers,ÔÇØ Dooley says. The investment has helped Towne attract technology-savvy customers, including major international airlines, and also enabled it to get out in front of the federal governmentÔÇÖs Transportation Security Administration tighter regulations, measures put in place after the terrorist attacks of September 11, 2001. ÔÇ£That security element is part of our reputation for being able to get packages to the right destination at the right time,ÔÇØ Dooley adds. ÔÇ£Every retailer out there is looking to be able to get product to customers when they want it, and weÔÇÖre part of that fulfillment chain, especially when products come into the country from overseas.ÔÇØ With the economy slowing, Towne is sensing another opportunity to add to its information technology arsenal. ÔÇ£WeÔÇÖd like to put some more distance between us and the competition.ÔÇØ The spike in fuel prices during 2008 posed some challenges, though fuel surcharges are fairly standard in the air freight trucking business, and TowneÔÇÖs customersÔÇösuch as the airlinesÔÇöare well aware of the impact of fuel price spikes themselves. The volatility posed the most challenge; Towne went from adjusting fuel surcharges monthly to doing so weekly and more recently in nearly real time.┬á The slowing economy has created its own hurdles, but Dooley feels the firm is sized to grow through thick times and thin. ÔÇ£We were into right-sizing long before it was in vogue,ÔÇØ Dooley notes, and Towne has reaped the rewards of offering above-market-rate pay packages in the form of employee loyalty and longevity. Between 2005 and 2008, the companyÔÇÖs revenue doubled while its employee headcount went down. Part of that is thanks to a move to convert some employee drivers to independent contractors, a transition that can enable drivers to earn significantly more incomeÔÇöin some cases as much as 30 percent. ÔÇ£We create incentives for our contractors. If they grow their route, they can keep a percentage, which creates a de facto sales force while also acting as a pay-for-performance model,ÔÇØ Dooley says. Towne emphasizes the need for safety at every opportunity. ÔÇ£We try to put the message of safety in front of everyone every chance we get, in as many different ways as possible. We have had some significant accidents over the course of our history, but we are proud of our safety record. Any trucking company that can last 45 years under the watchful eye of the Department of Transportation is doing something right.ÔÇØTowne has grown through acquisitions in the past, and the current slowdown may be an opportunity to expand its geographical reach by buying smaller companies. In early 2008, Towne completed the purchase of Arizona-based Synergy Cargo Logistics, which operated out of eight locations in the West and Southwest, helping to fill a gap in TowneÔÇÖs geographical footprint.┬á Towne is also likely to continue investing aggressively to maintain its technology edge on its competitors. ÔÇ£ThereÔÇÖs nothing mission-critical at present, but we have a list of like-to-haves that would add to our capabilities,ÔÇØ Dooley says. Enhanced routing software and handheld computers might be directions the company would go if the opportunities are right. ÔÇ£We have a history of growing through good times and bad alike.ÔÇØ┬á