The Trucking Recession How to Get Through It

tenth of a cent increase in revenue per mile the carrier will gain $5,000 to the bottom line! FROM: MENAKER & UPDATE ASSOCIATES, Fall 2007 LTD Volume 14 Issue 1 Consultants to the transportation industry The Trucking Recession…How to get through it What I am hearing is a ‘full court press’ across all areas of the company; a little bit in a lot of places It doesn’t take a genius to know 2007 has been a goes a long way! very difficult year for trucking. Home building, real estate, auto, durable goods…all of these Here are some examples, as explained by carrier industries have suffered through problems all year managements: long and where are the indicators that suggest things are getting better? -Eliminate your parts vendors coming in monthly to manage and restock your parts inventory. It is We have to operate with the expectation that easier and helpful for them to do this, but their what has been our experience up to now in 2007 objective is to sell you parts. Your objective is will continue for the foreseeable future. This having the right parts when you need them. means operating like you did in 2003 through early Manage your parts inventory yourself. 2006 won’t work. -Make sure when there is a delivery window all I have talked with a lot of trucking companies drivers are told to be at the consignee at the during the past three months and here is what earliest legal time. In that way dispatch knows they are telling me. when the driver will be available for the next load and can preplan accordingly. It eliminates waiting, 1.The aggressive rate increases by customer service and by the driver. And customers had to accept earlier this decade left a waiting usually means fewer loads and fewer miles bad taste with them and they are doing everything hurting the company and the driver! they can to recapture that money. Carriers who were more cautious with rate increases back then -Dispatch company trucks first. If a truck has to are still getting pressured on pricing, but not as sit because of no freight, company trucks are still severely. Maybe in the future we should be a little costing you money. No one wants anyone to sit, but more careful with our demands. in tough times you have to protect your investment. Whether they like it or not, What to do now? Make sure you know exactly what independent contractors realize the economics and your lowest rate limits are. What are your fixed if handled properly by managers these drivers costs to own a truck and trailer? What is the usually end up over a week or two with the revenue, variable cost of driver pay, fuel, maintenance, and and the loads, they want. operations? What is the leeway you have with your debt service? How far out on your payables can -Manage your fuel like a hawk. Spec your you go without triggering vendor issues? Are equipment for fuel efficiency. Yes, it may cost a there ways to speed up your receivables even if it little bit more on the front end, but over 4 or 5 means leaving a percent or two on the table? years, the savings add up every mile. There is something sensible about 68 miles per hour, This industry has become a business of tenths besides safety. It’s more fuel efficient. And, we (mills) of a cent. The old adage of cents per mile have the technology to do this. Keep your drivers for revenue and costs is ‘old school’. A trucking in the network. Of course, you have to set up the company that runs 5 million miles a year will save fuel network first! Make sure drivers know $5,000 for every one tenth of a cent cost company policy is to keep idling as low as possible. reduction. And, on the flip side…for every one And, show them why and then hold them accountable. mean terminating the laggard who is only there to keep a truck full.

2. Lots of trucking companies are for sale. And, a lot of carriers are seriously going after acquisitions seeing this as a great time to solidify their position with customers, strengthen geographic coverage, add capacity and drivers, and enter new markets. Survey the marketplace and see if there is a carrier that fits your needs for growth. Like real estate, prices are dropping and there are good carriers in the market for sale. Owners are retiring, owners are scared, and owners are tired, to name just a few reasons that the market is awash with companies. 4. There is excellent management talent It may seem counterintuitive to be investing in a concerned about their future. As with drivers, down market, but experience shows those who can there are managers across all functions of trucking do this strengthen themselves for the market companies who are looking to protect their turnaround. The money is available to make careers. Certainly they want to better themselves prudent investments. This is a time of industry in the process, however, in numerous situations consolidation and those who emerge strong going these managers are with carriers that may not into an upswing have a huge competitive advantage. make it through these tough times. The situation is no different than with drivers; a carrier always 3. This is the best driver environment since has a place for excellent talent. Always keep the 2000. With weak freight demand drivers are management ‘faucet’ dripping. either staying with their current carriers or being let go against their wishes, because their In lean times it is also an opportunity to upgrade employers do not have the freight to move. They talent at reasonable prices. Candidates looking to are looking for the companies that have stable protect their careers may be willing to work at business levels where they can get miles and salaries less than they would when demand is benefits. Of course, when the economy comes stronger. However, this is a tough call, as you do back, which we know it will, all bets as far as driver not want to get into a situation where a new hire, loyalty are probably off. But, take advantage of it at a lower wage, continues to look to better him or when you can and try to build loyalty right now. herself waiting for the market to take off again. Normally, it is a better strategy to pay a fair wage To do this companies are employing a variety of for the position rather than undercut because of strategies with their drivers. the market conditions. In the long run you will have a more satisfied and committed employee. -New drivers are participating in much more formal transition programs to get a more thorough These four characteristics of the trucking understanding of the company and their marketplace offer opportunities for carriers responsibilities. Like customers, the motto for willing to take prudent risks. Despite the tough drivers should be ‘no surprises’. times we have more control than we think! -Tenured drivers are securing more consistent ______runs, better for lifestyle planning, without a hit to the pocketbook. Menaker & Associates now has a website. Visit us -Carriers are upgrading their trucks installing more on line at LarryMenaker.com. The website will extras for a better ride and a better sleep. feature case studies of projects in the trucking -Carriers are protecting the cost of benefits as industry. best they can particularly for those employees who make an investment in healthy lifestyles. For copies or more information, contact: Preventive care in the long run costs less. -Always keep the ‘faucet’ dripping, as a carrier Menaker & Associates, LTD never has enough good drivers. Even if all trucks 3251 S. Parnell Ave. Chicago, IL 60616 are seated, capturing a good new recruit might 312-328-9571 Fax: 312-328-9574 LarryMenaker.com