Messenger services and regionalized carriers have been around for quite some time. In fact, they probably date back to before the medieval ages when some entrepreneurial lad conceived the idea of making deliveries for several companies rather than just working for one. Remarkably, the faceplate of the regional carrier industry has changed little in hundreds of years.

Then railroads became the way to ship in the 1800s if you needed to ship outside a relatively small geographic region. In the 1950s, the newly developed US highway system ushered in nationwide trucking. But in 1946, an event took place which would change the face of transportation as we know it today. John Emery started Emery Air Freight, and the air freight forwarder was born. From Emerys concept of transporting shipments by air, Federal Express evolved in the 1970s, creating the small package airline.

That industry has proven to be the most robust segment of the entire transportation industry when compared to anything that came before it. In the late 70s, the industry gained the nomenclature of express carriers and in the 1980s became integrated carriers. In the 1990s FedEx, DHL and UPS became dominant as global carriers.

Not only have these carriers grown in size based upon the geography they have chosen to serve, but they have grown by increasing the total weight of shipments they carry and the methods of transportation they utilize to carry those shipments. Outside the US, these carriers typically contracted with small ground-based agents for pickup and delivery and when the operation turned profitable, they usually purchased the agent. In the US, they rapidly acquired trucking companies in the first few years of the 21^st Century to continue to fuel their growth and expansion.

Moving Forward

Heading towards the end of the first decade of the 21^st Century, what will FedEx, DHL and UPS, as highly competitive companies, do next to fuel their growth? Their histories show that these companies prefer acquisitions rather than going it alone. While their strategies commenced with utilizing agents for specific geographic markets outside the US, their focus has transitioned back to the US market. Here they can become dominant players in new transportation segments (such as trucking) by literally acquiring established carriers overnight in established markets.

It would appear that they have few business segment choices left, and it now appears that regional carriers specializing in same day deliveries may be their most viable target. Acquisition of the right carriers will not only give them entry into a new market segment, but any next day deliveries can be merged into their existing systems. Its merely icing on the cake for them to increase the market share they already have in that crowded marketplace. You can probably expect UPS, FedEx and DHL to target regional carriers with the greatest geographic scope rather than those with the greatest market share. Assume geographic scope to be same day delivery within a general radius of 250 to 400 miles.

It would be highly desirable for UPS, DHL and FedEx to acquire the assets of their targeted companies and then treat the employees as Independent Contractors. But with the current legal problems confronting FedEx on the Independent Contractor issue, coupled with Barack Obamas introduction of Senate Bill 2044 (The Independent Contractor Proper Classification Act of 2007), expect the process to move slower than you would anticipate. However, expect the Big Three to be doing their due diligence during this period in order to act quickly once the IC issue has been resolved.

While the Obama bill has not yet even gotten to committee in the Senate, expect that he will put pressure on Congress to move the bill through quickly if he is elected President. That in itself may be good news to the Regional Carrier as it will provide a clearer definition of an Independent Contractor in a compressed timeframe.

Whatever the future outcome of IC status, expect the IRS to take a hard look at the regional carrier industry where ICs are the norm. Regional carriers should be evaluating their Independent Contractor status right now and having discussions with labor law attorneys. You dont want the IRS to determine that your ICs are actually employees and you are liable for all past employee taxes.

So what will the Big 3 look for in targeting a regional carrier? Typically, the first thing theyll look at is size and market dominance. Like the rest of us, if theyre going to spend money, they want the biggest bang for the buck. As theyll want to consolidate and reduce costs whenever possible, theyll also evaluate the specific geography covered and compare it to their own lane segments. A carrier that covers all of California is more suitable than one who only picks up and delivers in Los Angeles, even if the Los Angeles carrier has more same day deliveries. Remember that once they acquire a carrier, all other carriers become the competition.

The technology a carrier uses or doesnt use is an issue also. If UPS, DHL and FedEx choose to go the IC route, they may not allow, as they have done overseas, the IC to access their proprietary systems. So the bottom line is that if you are interested in hooking up with one of them as an agent or an acquisition, you will potentially need a compatible system to provide electronic pickup and delivery information including digital signatures. Waiting to implement a system only if you receive interest from them is a definite deal killer.

Last, but not least, is that they will target a professional company that mimics their values. Uniforms, clean trucks, professional looking drivers and customer service representatives are all a plus.

Keep in mind also that if one of these companies does not target you for acquisition, youll be competing with them directly for years to come. So the word to the wise is to prepare for the future, one way or another.

Bob Ferri and Rob Shirley own XPship, a company focused on future technology for the transportation industry. They can be contacted through the companys website at www.XPship.com.