The Motor Carrier Act of 1980 changed the trucking industry forever when it was signed into law by President Jimmy Carter on July 1, 1980. The act deregulated our industry, eliminating barriers to entry and creating a market-driven rate environment which brought competition, innovation and tremendous efficiencies to the supply chain.
It was the birth of the truckload industry. We saw a generation of entrepreneurs and leaders across our country embrace the opportunity and start new businesses or grow their existing businesses to unthinkable heights. Truckload was the new frontier, bringing cost savings to shippers as carriers capitalized on the lower cost truckload model to move freight by the truckload directly from shippers to their customers in a more timely manner and “just in time."
I was in college in 1980, majoring in accounting and didn’t have a clue about the trucking industry except what I heard from my friends that were transportation majors. Some of them had family members that worked for a company in Fort Smith, Arkansas, called ABF. I thought it was kind of an easy degree and didn’t give it any thought.
I was going to be a CPA and was on the road to do so. That road took me through business classes like ECON 101 (economics) and cost accounting (accounting for widgets), both necessary but just something I had to do along the way.
After graduating in 1982, I went to work for the largest accounting firm in Arkansas and the first big audit I worked on was for a chicken company in Springdale. My job was to work on verifying inventory numbers and I spent two solid weeks driving around rural Northwest Arkansas counting chickens, actually by counting chicken houses that were full of chickens.
Accounting was great! Also on that audit, while working in Tyson’s board room with some of my colleagues, I remember one of our managers asked if any of us were getting in on the JB Hunt IPO. I didn’t know who they were and didn’t have any money anyway, so it never really was a consideration for me.
Fast forward two years later I decided public accounting was not my forte and decided to pursue a career in private accounting. The first opportunity I had was a controller position with a small mobile home trucking company. Trucking. Go figure. Five years later, after working for a couple of other trucking companies as their controller, I went to my dream job at Maverick. I guess it is fair to say it has been all about trucking for practically my entire working career.
What does all this have to do with a pendulum? I learned over the years that the class that I thought was not very important, ECON 101 which taught the law of supply and demand, was actually very important and very real. As simple as it sounds, it is the most important economic principle that impacts our industry.
When freight demand is high and truck capacity is in short supply, pricing goes up. When it is the other way, pricing goes down. It’s like a pendulum swinging back and forth as the market adjusts. The trucking industry is on the bad side of supply and demand right now and times are tough. Rates are down and costs are up.
We can’t control the economy, so we must focus on things we can control and work as efficiently and cost effectively as we can until the market gets better. That is where the other class from college I thought was not that important, cost accounting, comes in. It was the second most important business class I took and has been incredibly valuable.
Our industry is capital intensive, labor intensive and extremely competitive. It is imperative to know and understand our costs to be successful for the long run. One of the key focuses of the Truckload Carriers Association (TCA) is to provide opportunities to help our members improve the financial sustainability for their companies which is so important in these challenging times.
We offer meetings, events, programs and educational opportunities to help our members better understand their costs. We also have networking and benchmarking opportunities to share best practices in our industry to help us improve our operations. Some of us are hurting more than others, but we’re all feeling the pain right now.
Together as an industry, through organizations like TCA, we can work together to face our challenges and strengthen our companies during these difficult times and prepare ourselves for when the pendulum swings back in our favor.
I have seen it swing many times throughout my career and what I have learned is that it is not a matter of whether or not the market will change and the pendulum swing the other way, it is a matter of when. Keep fighting and hang in there. The pendulum always swings.
