Old Dominion Freight Lines CEO David Congdon: Family Values

The road to technological innovation is often full of unexpected bumps and turns, but there was never a question how David Congdon would handle the ride when he got behind the wheel of family run Old Dominion Freight Lines as its new CEO on January 1, 2008. He had been preparing for it most of his life.

From the start, Congdon benefited from having the company’s history and guiding principles hard-wired into his DNA. (The Thomasville, N.C.-based company was founded by his grandfather in 1934 and operated in succession by his grandmother and then his father before him.) But he also developed deep insider knowledge about Old Dominion and the trucking business through a variety of critical roles over the course of three decades, starting in 1978 when he joined the company and took a seat on its board and on through being named its president and COO in 1997.

Upon becoming president and COO, Congdon challenged his management team to lay the ground work for strategies that would guide what they envisioned the publicly traded company becoming in 10 years. And all that advance planning came in handy when he finally succeeded his father as CEO in 2008.

Unfortunately for Congdon, the timing of his ascendance coincided with the country’s worst economic decline since the Great Depression.

The market for less-than-truckload (LTL) shipping, historically Old Dominion’s primary business, had been slipping for years, and with capacity now outpacing demand, the increasingly negative impact of the recession put even more pressure on an ultracompetitive pricing environment.

“The pricing environment was, and is, the most challenging that we’ve ever seen in our history,” he recalls, and thanks to overall tonnage declines from Q4 of 2008 through Q3 of 2009, Old Dominion’s revenue decreased 22.3 percent for the first nine months of 2009. But Congdon is determined to continue to resist the pressure to compete on price, instead reinforcing his company’s longstanding credo to never knowingly or willingly lower prices to win new business. “Our saving grace has always been our service levels,” he says, noting that Old Dominion sees opportunities in the pricing environment instead of concessions on the road ahead. “It refocused our efforts on improving efficiency,” he says, explaining the catalyst that raised Old Dominion’s on-time service and cargo claim records to all time highs, bringing Congdon’s long held strategic vision to fruition.

Since 1997, Congdon had noticed that manufacturers and distributors his company serviced were actively expanding their regional distribution centers across the country. It gave him and his team the idea that the same model could transform Old Dominion: It would turn the traditional LTL shipper into a serious regional (short-haul) and interregional (long-haul) player in next and second-day shipping, one that could simultaneously compete with regional competitors as well as nationwide powerhouses like UPS, FedEx, ABF and Con-way Freight.

“There’s an old paradigm that you can do short haul or long haul but you can’t do both,” Congdon says. “We saw these changes coming and knew that we could do it, but we couldn’t have done it without the investment in technology.” Spending roughly $9 million to $15 million annually to upgrade the company’s IT network and infrastructure, Congdon began a deliberate program of relentless upgrades to the company’s pickup-and-delivery service centers and its technology to take advantage of the growing opportunity in overnight and two-day shipping. Now, thanks to a dramatically improved IT network as well as strategic acquisitions that helped speed expansion into new regional markets, the big investments have begun to pay off.

The IT network, which Congdon (a self-described “techno-geek”) helped design, enables orders to be entered electronically by dispatchers and customer service clerks, after which they are sent wirelessly to drivers who use handheld computers to connect with a freight handling system by receiving and sending drop-off, pickup and confirmation data in real time. That data flows through the network at every possible touch point, feeding the dispatching system so that the dispatchers know how much freight they need to turn around that night.

In addition, a dockyard management system has computers on the forklifts at Old Dominion’s origin docks to check exactly how much time it takes to handle moving the freight off one trailer and onto the next one, he says. “Automated dispatching and RFID tags know what time tractor trailers are loaded, what time every load leaves the yard and when it’ll arrive at its destination,” he says, and this helps the company precisely set and maintain its pricing.

Today, Old Dominion is in the beginning stages of implementing new computers in the trucks that will be integrated with the drivers’ handheld computers to provide richer onboard communications, fuel and driver performance data, enhanced GPS and fleet management solutions. And an equally compelling benefit will be improved safety, he says, via electronic driver logs. “We’ll know how many hard braking events a driver has, and how many times he swerves. If we determine we’ve got a sleepy driver, we can send an alarm to his onboard computer to tell him ‘Get off the road, go get a nap.’ If we can stop just three or four major accidents, we’ve paid for the whole program. This is a $10million implementation for us.”

The enhancements to technology have clearly affected the entire business, says Congdon. The company now boasts an on time service performance record of approximately 99 percent for Q3 2009, and, despite decreases in revenues, has remained profitable, with net income of $25.2 million for the first nine months of 2009.

According to Congdon, Old Dominion is now the sixth-largest multi truck load carrier in the country, with a $1.3 billion market capitalization. No longer thought of as just a particularly savvy regional carrier with a rich legacy of traditional values and extreme price discipline, the company is now considered an international force in shipping, providing a broad range of expedited, logistical and warehousing services throughout the Americas and Asia for both small and medium-size businesses in the markets it serves.

“In the last 12 years, we’ve consistently gained market share,” says Congdon. “We’re not just a trucking company anymore. We’re a single-source provider of transportation solutions.”