Transportation Drives the Economy, Bank Study Says

Transportation is the high-octane fuel that is powering America's economic boom, according to a new private sector study.

"In these times of economic expansion, the nation's transportation industry - long considered a mere cog in the economic machine - has become a crucial provider of logistical services and trade solutions," said the Bank of America.

The study, produced by the bank's Economics-Policy Research Department, examines the massive changes shaping each of the major transportation modes, including trucking, which dominates domestic freight hauling.

"The transportation industry has always played a key role in the economy," Brian O'Connell, Bank of America senior economist commented August 15 during the Teamsters strike against United Parcel Service.

"Just how crucial this role has become is dramatically demonstrated by the mounting toll of the Teamster's strike against UPS. As industries turn to leaner production schedules and inventories to keep costs down, the risks of any disruption in the supply chain rise significantly."

Mr. O'Connell pointed out that large-scale restructuring and price volatility will continue to affect transportation for the foreseeable future.

These and other changes in the industry will impact the economy, he noted. In 1996, transportation-related businesses accounted for 7% of the gross domestic product, and freight charges represented between 5% and 10% of the delivered cost of most goods.

Trucking moved about 27% of U.S. freight traffic last year, accounting for 81% -- $367 billion - of the nation's freight bill, according to the report, "Transportation: Fueling the Economic Expansion."

"The industry capitalized on corporate America's shift toward leaner production and shorter customer response cycles," the report said. "The key issue facing the trucking industry is controlling capacity, a difficult task considering the many small firms the industry has attracted since deregulation of interstate markets in 1980."

In spite of a small surge since 1996, trucking profits remain 84% below 1986 levels, Bank of America found.

"The battle over price and profit will result in a few large companies increasingly dominating the value-added sector of the industry," Mr. O'Connell predicted.

Another mode that has grown by targeting high-value, high-service freight is air cargo, which grew 11% annually between 1985 and 1995. But the report said declining prices that depress profitability will only get worse because new aircraft orders presage another surge in capacity.

Although railroads carried about 40% of freight by volume in 1996, most of that was low-value bulk commodities like coal and grain, which meant that rail revenues accounted for only 7% of America's transportation bill.

However, Mr. O'Connell pointed out that railroads have become increasingly important intermodal links between U.S. ports and internal transportation hubs. "Thus, the fortunes of the U.S. rail industry will be increasingly tied to the expansion of global trade."

The future profitability of the rail industry is inextricably linked to its ability to control costs and utilize new technologies to compete with other modes, he observed.

But it will be tough for railroads to accomplish these goals while industry is trying to digest recent rail mergers, he said. "It will take time to realize the cost savings from, and achieve the revenue gains, promised by those mergers."

David L. Sparkman, TT News on-line

National Industrial Transportation League Conference

The National Industrial Transportation League's (NITL) TransComp '97 will be held at the Anaheim Convention Center on November 16-18, 1997. The TransComp is in it's 15th year and has become one of the transportation industry's most respected expositions. The show offers opportunity to network with individuals from all walks of the transportation industry. Please join us at the conference, L.A. Xpress will be in Booth No. 205.

L.A. Xpress A&D, Inc. History

For those of you who may not know the history of our company, here's a copy of the History section of our L.A. Xpress Web page WWW.LA-XPRESS.COM.

In 1986 an enterprising young freight salesman named Mike Wichert needed a better way to get his L.A. area freight delivered. He had tried several agents, but found their service to be below the standards he set for his customers. After careful consideration, Mike decided that the best way to serve his customer needs was to start his own company. It was this commitment to "Quality Service" that created L.A. Xpress Assembly & Distribution, Inc.

The first "Home" of L.A. Xpress was in Vernon, CA. This 1 1/2 acre site on Bandini Blvd. included two office areas and a covered cross dock. During the first few years, the dock and office space was shared with another company. As our business grew, so did our need for space. Early in 1988 we took over the entire Vernon terminal.

From 1986 to 1989 our business was made up mostly of assembly and distribution work for interstate carriers. In mid 1989 we made the decision to enlarge our Intrastate California PUC business. We increased our Sales and Executive staffs and set out to make our mark on the intrastate market.

As our intrastate business grew, so did our service area. In 1989 we opened a terminal in San Diego. In 1991 we moved to a larger facility in San Diego, which we still occupy. In 1992 we had the opportunity to open a terminal in the San Francisco Bay area. This terminal was located in Union City, just north of San Jose. In 1995, to better service our customers, we moved the Bay area terminal to our current Oakland location.

All of our hard work paid off. By 1993 we had outgrown our Vernon terminal and started looking for a larger, more suitable location. In late 1993, Mike found the "perfect" location, in South Gate, just 4 miles south of our Vernon terminal. We moved into the new South Gate facility in January 1994. The South Gate facility is over 4 acres of property, including offices, cross dock and shop areas.

In 1995 we utilized the shop area by opening a new venture called Xpress Trailer Repair, Inc. XTR, as we refer to the business, is a refrigerated trailer repair and "pre-trip" service provider and general trailer repair shop. This new service has been well received by our customers.

As 1996 comes to a close, our revenues are in excess of 8 million dollars and we will handle over 100,000 shipments to points in California. For 1997 we are looking forward to several growth areas. One of these areas is our expanded service into and out of Mexico. Another is our continued growth of EDI capabilities and our new document imaging systems.