Volume 8 | Issue 1 | Year 2005

Amazingly, David and Jacqueline Parker started Covenant Transport with just 25 tractors and 50 trailers in 1985. Since then, the company’s fleet has grown tremendously. It now consists of 3,800 conventional tractors, 8,200 trailers and 800 temperature-controlled vans. Revenue has also grown. In 2002, Covenant’s revenue exceeded $540 million. With more than nine acquisitions since 1996, Covenant is continuing to grow and prosper with the help of its drivers. “We have completed nine acquisitions over the years which have added about $100 million in revenue. Therefore, about 80 percent of our growth has been organic,” says John Arthur Daniel, Covenant’s vice president of marketing. “One of the most recent acquisitions was SRT which operates independently of Covenant. We assist SRT by leveraging our purchasing power, and by systems and financing, but leave them to run their own show. We are pleased with this model, and will look at others such as this in the future.”

Currently, Covenant Transport is among the largest truckload carriers in the United States and operates one of the industry’s largest fleets of team-driven tractors. Covenant features just-in-time and other premium transportation services, focusing on longer lengths of haul and selected traffic lanes to enhance equipment utilization, improve operating efficiency and provide the equipment availability demanded by major shippers. The company’s primary customers include manufacturers, retailers and other transportation companies. It also provides dedicated service, and has seen a dramatic increase in its dedicated service in 2004. In the fall of 2004, the company launched its new Guaranteed On-Time Linehaul Delivery (G.O.L.D.) Service. This program provides shippers with an alternative-to air-service and utilizes Covenant’s stature with approximately 1,000 teams to provide guaranteed expedited deliveries. “The service is designed to provide emergency capacity to shippers who are left with few alternatives to have their urgent shipment delivered on time. Our G.O.L.D. desk is staffed 24 hours, seven days a week,” explains Daniel. “We encourage shippers to try this service.”

Covenant Transport headquarters and main terminal are located on approximately 180 acres of property in Chattanooga, Tenn. The facility consists of a 182,000-square-foot office building, a 65,000-square-foot principal maintenance facility and a body shop of more than 15,000 square feet, complete with its own truck wash. Covenant also maintains 14 terminals throughout the United States, all located on major traffic lanes in the following cities: Chattanooga, Tenn.; Hutchins, Texas; Horizon City, Texas; Pomona, Calif.; Oklahoma City, Okla.; Indianapolis, Ind.; Dalton, Ga.; Sayreville, N.J.; Long Beach, Calif.; Laredo, Texas; French Camp, Calif.; Greensboro, N.C.; Tipp City, Ohio and Little Rock, Ark.

Technology Centered
Covenant uses proven technology to make sure both its drivers and customers get the best. QUALCOMM systems allow it to increase operating efficiency while improving customer service and fleet management. Omnitracs allow direct communication between drivers and fleet managers and also updates load position every 30 minutes, permitting customers to locate freight and accurately estimate pick-up and delivery times. Sensortracs allows Covenant to monitor engine idling time, speed, performance and other factors to increase operating efficiency. With the average tractor age at around 18 months, the company believes this ensures reliable service without breakdowns.

As an additional service to customers, Covenant offers electronic data interchange and Internet-based data communication permitting real-time information flow. Customers can receive updates as to cargo position, delivery time and other important information about their delivery. Covenant also uses a document imaging system to reduce paperwork and enhance access to important information

Driving Factors
Over the last three years, approximately 13,000 trucking companies have gone out of business, causing about 15 percent of the capacity to leave the market. During this time period, truck drivers migrated into other industries that offered more attractive compensation and the ability to be home more often. “The issue confronting most trucking companies today is to attract drivers back into this industry and to retain them. Obviously, increasing driver pay and working diligently to return drivers home more consistently are our major goals,” says Daniel. To this end, Covenant is focusing on its dedicated segment as well as looking for opportunities to build intra-regional short haul business. “By focusing on these two segments of our business, we can ensure that drivers are able to return home more often, which increases driver retention, reliability and safety and decreases our recruiting and training costs.”

Drivers remain the big wheels at Covenant. “Our company is all about encouraging the success of our drivers, from its pay rates and equipment to its programs and benefits. We know that when a driver is well compensated and well respected, our customer’s freight is well cared for and our business prospers,” says company president, David Parker. “A satisfied driver is our number one concern. With a 99 percent on-time performance rate, we know it is our drivers that make us great.” Covenant is being diligent about the driver issue and in the last year, has raised driver pay, and plans on continuing to raise driver pay into 2005 and beyond. “Shippers have had to absorb significant rate increases in 2004 to ensure there is enough capacity to move their products to market,” explains Daniel. These are not the only trends facing the industry that are predicted to present challenges in the future.

Another enormous challenge is the skyrocketing cost of fuel. Most carriers have instituted fuel surcharge programs many years ago that began at a base of $1.05 per gallon, along with increments and a rate per increment. The surcharge is calculated by taking the spread between the current DOE national average for fuel and the base. From September 2003 to October 2004, the price of diesel per gallon increased from $1.43 to $2.21, an increase of 78 cents per gallon (55 percent increase). “To say that fuel has reached unprecedented levels is an understatement. Unfortunately for truckload carriers, the current fuel surcharge programs only cover billed (or loaded) miles. This represents only 80 percent of a carrier’s fuel cost,” says Daniel. “The remaining 20 percent of our bill comes from out of route miles, deadhead (empty miles), idle time (when the engine is on, but the truck is not moving), and less fuel economy from the new federally mandated emissions compliant engines. While the cost has risen 78 cents, the carrier community is only recouping the “loaded miles” portion of the total fuel bill. It should be important to carriers and shippers alike to capture the fuel component in a fuel surcharge that rises and falls with the volatility of fuel prices. This way, rate structures are separated from the fuel issue and are driven by more predictable cost elements. Fuel is an enormous challenge for us, and we are currently implementing new surcharges that should recover more of the incremental operating impact of this fuel situation.”

People Powered
Covenant company president, David Parker, has a long history in the trucking industry and came up through the operations and marketing departments. Since day one, he has always been service focused, and that is what he built Covenant Transport around. “Our customers grade us on service, based on their definition of service, and our service has been at or above 99 percent the last eight years,” says Parker. “Every link in the chain must operate efficiently from our drivers to our customer service reps to our fleet managers and terminal managers. This is just the front line; our maintenance department ensures that our tractors and trailers are in tip-top shape. It truly takes a team effort to ensure that our service level remains at this high level. At the end of the day, each department must be well coordinated within itself and with our supporting functions to produce the high level of service on each load.”

At Covenant, no matter what the challenge, the company treats each employee, customer and vendor with the utmost respect and concern. “We demand a great deal from each, but believe strongly in promoting a caring environment,” says Parker.

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