Dive Brief:
- Lone Star Overnight is allowing its existing customers to increase their volume thresholds with the regional parcel carrier as shipper concerns persist over a potential UPS strike this summer.
- Current LSO shippers can receive 30% additional capacity based on their current threshold volume, Chairman and CEO Andrew Townsend told Supply Chain Dive. This means a customer shipping 10,000 parcels a day would gain 3,000 parcels' worth of incremental capacity.
- The increase is contingent upon the additional volume transitioning to LSO by the end of May to prevent any negative impacts to service, Townsend said. "We think that we've come up with a pretty balanced and equitable approach that's most importantly going to protect us as an organization and protect service."
Dive Insight:
LSO and other carriers say they have received increased interest from shippers aiming to minimize the impacts of a possible UPS strike on their businesses. UPS’ current contract with the Teamsters expires July 31, but it has expressed confidence that a "win-win-win" contract for the carrier, its employees and its customers is achievable prior to that date.
Texas-based LSO, which has delivery coverage in the Southwest and Central U.S., has capacity available to take on more volume. However, the company is also preparing to make sure that opening the door for more deliveries doesn't lead to a repeat of the 2021 peak season, Townsend said. LSO and other carriers were inundated with excess packages during that period, which challenged service levels.
"Our customers gave us forecasts that seemed like reasonable volume assumptions that we could handle," Townsend said of the 2021 peak season. "Then, come the first week of November, they all reached their capacity with the nationals and blew through their forecasts with regional carriers."
After those holiday challenges, LSO prioritized "cleaning up" its existing network in 2022 over expanding its service coverage into new locations, Townsend said. The company improved its technological capabilities and increased visibility throughout the package delivery process. LSO’s on-time delivery performance network-wide is now between 97% and 98%, up 10 percentage points from a year ago, Townsend said.
With service improved, LSO is pushing to expand into new markets. It launched in Tennessee on March 1 with facilities in Memphis and Nashville, and the company will look to open up service in Knoxville at some point in the future, Townsend said.
LSO also aims to have a hub in Chicago in the next nine months. Townsend said LSO establishing a secondary air cargo injection point outside of Dallas/Fort Worth International Airport is important, noting there is plenty of capacity at Chicago O'Hare International Airport.
"We're seeing a lot of demand to have boots on the ground in Chicago, not only for that injection point, but for the surrounding areas as well," Townsend said.
