Not only are rising oil prices pummeling drivers at the gas pump, the cost of fuel is rippling through the region’s distribution system – presenting both dangers and opportunities for Richmond-area businesses.
Frank E. "Pepper" Laughon, Jr., owner of Richmond Cold Storage (RCS), is quick to see the possibilities. Poultry companies, ice cream confectioners and other food processors outsource their refrigerated storage to specialists like RCS. Laughon takes pride in his company's ability to quickly exploit new opportunities in the marketplace to keep his warehouses full. Among the trends he foresees: manufacturers will pare their fuel bills by consolidating shipments, making fewer less-than-truckload runs and shifting to rail. High fuel costs also could hurt retail mega-centers with large territories that count on customers driving long distances, he observes.
Laughon shared those observations with me toward the the tail end of an interview for an article, “Cold Business, Cool Company,” that I posted last week in Greater Richmond Logistics. I’m not sure how the spirited, snowy-haired business owner got his nickname “Pepper,” but it's apt. His colorful rhetoric is, shall we say… spicy. And effective. Laughon has grown the family-owned firm into the 17th-largest cold storage enterprise in the world. RCS is a recognized leader in the field. (Read the article to see how Laughon pursues competitive advantage in a highly fragmented market.)
With the price of diesel fuel selling for nearly $4.00 a gallon, companies are looking to transfer cargo from trucks to freight trains for long-distance shipments. The main bottleneck now is the ability and willingness of the railroad companies, which are approaching full capacity, to accommodate the growing volume. Laughon hopes that shift will benefit the RCS facility near Richmond International Airport, which is located on a CSX rail line. When I toured the facility, RCS management had been negotiating to ship in frozen French fries from Idaho by train.
Other local players who might be affected by rising fuel prices are Richmond-based UPS Freight (the old Overnite) and Estes Express, two of the largest less-than-truckload carriers in the country. With gas prices so high, it's expensive to ship freight in half-empty containers. Shippers are looking for ways to consolidate. As Laughon puts it, they’re asking, “Why are we running past one another with a half-loaded trailer?"
With its mid-Atlantic location, proximity to the ports of Hampton Roads, service by two rail lines and access to three Interstates, the Richmond region is the ideal location to serve markets between New York and Atlanta, Laughon says. "It's a beautiful hub with great spokes going out." With concerted effort, he adds, the region could become one of the leading logistic hubs of the East Coast.