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Landstar System Inc.'s strategic use of I.T. makes this virtual transportation company outpace rivals in driver retention and profit growth.
Harold Brown, or "Butch" to his friends, is working in his home office, which happens to be the cab of his 18-wheeler semitrailer. The 70-inch-long cab features satellite TV, a refrigerator, a microwave, a toilet, as well as all the technology of the modern office. Not to mention bunk beds for Brown and his wife and co-driver, Shelia, and their Yorkshire terrier, Mr. Winston. The trio spends up to 11 months a year on the road, logging more than 100,000 miles. "It's home," Brown says.
Coming off a 20-hour run, hauling explosives from Kentucky to Florida for the Department of Defense, Brown knows what he wants to do first: file his paperwork so he can get paid. Until recently, that meant driving to a truck stop and using an express-mail service to send an invoice to Landstar System Inc., the trucking company for which Brown works as a contractor.
But now Brown has found a better way. He uses a printer/ copier in the back of his cab to scan the invoice, which he then e-mails to Landstar via Wi-Fi from the laptop mounted between the truck's seats.
"You don't have to look for a truck stop anymore, which may be, heck, 80 miles from you," Brown says. "There's no one handling the paperwork except me. They used to say, 'We didn't get the paperwork.' This way you take out the middleman, the paper shuffler. It's just a godsend."
That means Brown can get paid days faster than he used to. Rapid payment might not sound like a big deal, but it's one way that Landstar uses technology to create a virtual company and solve one of the industry's major problems: retaining skilled drivers. "Our business model is information flow," says CIO and Vice President Larry S. Thomas. "Technology makes this happen." Landstar is an old-line business that has redesigned itself to become completely dependent on emerging technology. As a virtual company lacking hard assets, Landstar's competitive advantage is its ability, via IT, to influence and interact with drivers and the sales agents who find them loads.
"It's a driver's market," says Robert Goodwin, a transportation industry analyst at Stamford, Conn.-based Gartner Inc. "There's a terrific shortage of truck drivers. Anything you can do to make life easier for those truck drivers helps retain skilled labor. Technology can really give you a leg up on your competitors."
Landstar System has built a $2-billion business with 23,000 drivers and 1,000 sales agents (all of whom are independent contractors). Owning no trucks, it has leveraged the Internet and wireless communications to create a virtual trucking business. And next year, Landstar plans to push its model into another market: the warehouse business. It will match companies that need storage space with those that have it.
"This is really the future of transportation," says Noha Tohamy, an analyst at Forrester Research Inc. in Cambridge, Mass. "The global supply chain is really driving this model. Most [companies] think transportation is not a core competency."
While Landstar doesn't pay for computers for its drivers, the company does provide an information-rich environment that makes life easier for its army of road warriors, letting them choose their own assignments. "Our turnover rate is 32%, which is unheard of in this industry," notes Patrick Wise, Landstar's vice president of advanced technology. (According to the Owner-Operator Independent Drivers Association [OOIDA], industry turnover is 120% a year.)
"The industry attracts hundreds of thousands of new drivers every year," says Todd Spencer, executive vice president of the OOIDA. "[But] it has a hard time keeping them. The job is hard and demanding."
Even without a fleet of trucks, Landstar exploits the economies of scale of its driver network and negotiates discounts on tires and fuel for the drivers. Not all Landstar drivers are happy, however. The OOIDA has filed a class-action lawsuit accusing Landstar of overcharging truckers for fuel and other violations of federal disclosure law. The company denies the charges.
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