Farming Out Distribution p. 42

By: Tony Case The costs and headaches of fleet operation have caused several
newspapers to hire Ryder to revamp and direct their systems sp.

RYDER'S JACK MASSEY says convincing newspapers they should change is like "pushing a dinosaur by the tail" ? and getting them to actually commit to change is even tougher.
But the Miami-based transportation behemoth has sold some of the country's biggest dailies ? among them, the Miami Herald, Chicago Tribune and Newsday ? on letting it revamp and, in some cases, direct their distribution systems.
While newspapers have historically owned and maintained their own fleets, precarious business conditions and an increased emphasis on streamlining have caused more and more publishers to look into "outsourcing," or contracting with outside sources for specialized services.
Ryder isn't the only trucking concern to get involved in the newspaper business. Penske Truck Leasing has deals with such major papers as the San Diego Union-Tribune and Fort Lauderdale Sun-Sentinel. Other publishers turn to local businesses for their distribution needs.
But Ryder is the old hand at this, having had the Miami Herald's business since the 1950s. Today, it has agreements with some 25 newspapers nationwide ? as well as Smurfit Newsprint Corp., a maker of recycled newsprint ? and has over 1,100 trucks carrying papers every day.
The company offers several arrangements to newspaper customers ? from "dedicated logistics," which takes over the planning and management of an entire distribution system, to "commercial renter," which simply provides additional vehicles as a paper needs them.
Ryder and circulation managers who were contacted couldn't, or wouldn't, divulge how much money these newspapers had saved by contracting for distribution. But Massey, national newspaper sales executive, says: "You know newspapers. Are they going to do something where they don't save
Massey contends that the benefits of handing over distribution responsibilities are "intangible." In doing so, newspapers no longer have to deal with workers' compensation liability, can let someone else worry about training and ever-changing technology, and pass staying abreast of government regulations to some other guy.
Getting into newspapers clearly has been beneficial for Ryder.
According to its 1993 shareholders' report, the Dedicated Logistics division ? of which newspaper relationships are a part ? accounted for 14%, or over $565 million, of the company's total $4.2 billion revenue. Ryder said it expects that figure to increase by 20% to 30% annually.
Philip R. Kennedy Jr., who joined Ryder as national sales executive after 25 years in circulation posts at the Pittsburgh Press, San Jose Mercury News, Orange County Register and other papers, sees outsourcing not as a trend, but as a reality these days.
"The costs and headaches of fleet operation have become overwhelming," he explained. "Increasingly, newspapers are looking at outsourcing as a necessity, not just an option."
Massey related that he'd never come in contact with a newspaper that didn't have more resources than it needed. He noted that most papers, since they have larger Sunday than daily circulations, possess weekend delivery forces that are 30% to 40% greater than they need the rest of the week.
"It's a mindset they've become very comfortable with," Massey said. "It's a security blanket."
Some managers tell Massey: "Our paper uses 50 trucks ? just lease us 50 trucks." But Ryder's approach isn't "a truck for a buck," according to the sales executive.
"If you want a truck for a cost, I don't want to play," Massey said. "If you want a transportation consultant to come in and help you reengineer the way you do your business, then we're very much a player."
The company considers all sorts of mechanical, logistical and human factors in setting up a newspaper's distribution system ? how many trucks are used, the hours they leave and then return to a plant, their capacity, their payload, where they went, how they got there, how many miles they traveled, how many people were involved.
For the Herald, Ryder provides trucks, maintenance, drivers and supervision. The paper directs the distribution operation.
Ryder takes care of getting the daily editions of the Herald from a printing facility in Miami to about 30 distribution points from Key West to Orlando, delivering 600,000 papers each day ? over 200 million papers yearly. The company also drops off bundles at four Florida airports so the paper can meet its Latin American and Caribbean commitments.
Herald transportation manager Justo Farjardo says of Ryder: "We work as a team. It's a good relationship, based on good communication. That doesn't mean, like in any family, there aren't disagreements. But we're always able to communicate."
The newspaper has conducted periodic studies to cost out what it would have to pay for its own fleet, Farjardo revealed, but it always finds that it's better to lease.
"In essence, we're in the newspaper business, not the trucking business," he said.
"So we've taken the approach, let's get professionals involved in the trucking aspect of it, and let's handle publishing newspapers."
Farjardo related that Ryder implemented a more efficient way of delivering bulk bundles of the Herald.
Before, bundles were loaded on the floor of a truck, then unloaded and restacked at distribution centers. Ryder devised a faster and easier system whereby bundles are put on a cart, then rolled on and off a vehicle.
As a result, loading time was reduced from five hours to two hours and the paper saved $300,000 in labor costs alone.
It's just plain good business, of course, for a newspaper to invite other parties to bid for its services. Farjardo reports, however, that no other company has offered a deal that could beat Ryder's.
"They can't provide the service because they're not geared to provide the same service, especially in outer lying areas," the manager said. "A newspaper is like a vegetable ? you've got to get it to market on time. Old news is no news. You're competing with CNN and everybody else and you've got to get the product to the people."
The Chicago Tribune has turned to Ryder for leasing and maintaining its full fleet since the late 1980s. Before, the paper owned and maintained about 270 trucks, tractor-trailers, stepvans and minivans, employed a full staff of mechanics and even kept its own wrecker for towing in broken-down vehicles.
"We really had talented and skilled people who maintained [the fleet]," said circulation director Howard Hay. "But our technological and equipment needs changed, and we weren't out in the [transportation] market every day. What's the best engine? Who has the best mileage? We realized Ryder was in the business every day and that they probably had thousands of situations develop every week, whereas we had one a month."
The paper went with Ryder because it believed the company could reduce its fleet size and downtime, and save money, Hay related.
"The newspaper is our specialty ? we're not in the trucking business," he said. "They've been a terrific company to deal with, very professional. They've improved the kind of equipment we use, given us trucks that require less maintenance at a reduced cost. They've also been responsive when we've wanted changes and made suggestions."
Hay recounted that when the Tribune went shopping for a lease deal a few years ago, it got bids from two local companies ? but, again, neither could compete with Ryder.
One of the main advantages of leasing is that it releases a large amount of capital that otherwise would be sitting in trucks, Hay said. Instead of having a $100,000 vehicle sitting on a lot, depreciating in value, the newspaper simply has a monthly payment.
Chris Tucher, circulation director for Lesher Communications Inc., Walnut Creek, Calif., kept its staff, but contracts with Ryder for trucks and maintenance.
Tucher said that previously the paper had an aged fleet and had to deal with California's strict fuel emission standards, the expense of keeping a fleet up to snuff, stocking and replacing parts, and so on.
Those days are gone.
"It was a costly issue that was removed from our core business of producing and delivering newspapers," Tucher related.
"We think we are able to cut expenses simply through the savings in maintenance ? and improving fuel efficiency of the full fleet and forgoing capital expenditures of having to replace it were icing on the cake."
?(Ryder has been in business with the Miami Herald sine the 1950s.) [Photo]


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