Chief Executive Officer Charles Hammel III (center) often looks outside the trucking industry for senior management in order to obtain diverse outlooks. Chief Financial Officer Ray Johnson (left) headed business development for an aerospace industry firm, while Scott Sullivan, vice president of information technology services, was an IT executive with a leading breakfast cereal maker.
A half-dozen or so young Pitt Ohio Express employees are playing Gazillionaire, a business strategy game, trying to strike it rich in intergalactic trade and transportation. This isn’t a bunch of bored colleagues goofing off when the boss is away. Rather, it’s an exercise to promote creativity among individuals identified by the Pittsburgh-based LTL carrier as among its brightest employees – the company’s emerging leaders.
And it’s one of the many novel approaches to business that has earned Pitt Ohio Express the honor of Commercial Carrier Journal’s Innovator of the Year. By looking at its operation across different disciplines and departments simultaneously, and by truly capitalizing on all the information available to it, Pitt Ohio Express is trying to identify and respond to trends more quickly than better-financed competitors.
The future is now
The game-playing Pitt Ohio employees are members of a team the company calls its Futures Committee. The group began meeting in the fall of 2004 during a period of significant growth at Pitt Ohio. The company was in the process of opening two new service regions for its next-day transportation network serving the entire Mid-Atlantic region, Ohio and West Virginia, and the Detroit and Chicago metropolitan areas.
Management was looking to increase sales and get costs out of its system for these new service regions to fall in line with Pitt Ohio’s vision – to be the low-cost, high-service carrier.
While management was busy focusing on implementing new solutions, Justine Russo approached company Chief Executive Officer Charles Hammel III with an idea. With her forte in data analysis, Russo had worked in several departments at Pitt Ohio for about a decade, but not as a manager. She proposed forming a group of employees from different departments to look beyond the present toward things that might impact Pitt Ohio in the future – even things not directly related to transportation.
Hammel and Ray Johnson, chief financial officer, embraced the idea. The criteria for being invited to participate were fairly loose, but Hammel and Johnson did impose one major rule: No managers or executives could join. A vice president or department head would come to the table with an agenda or at least a mindset of how things were done in the past, Johnson says. “We wanted this group to feel they had autonomy to operate independently.”
Eight employees from diverse backgrounds and departments joined the Futures Committee, which began in September 2004 by researching trends in retail and consumer markets that might impact Pitt Ohio. Each member of the Futures Committee was to be allowed four hours a week during work hours for deliberations and independent research and study. Often, members devoted personal time to the effort, says Tom Gruber, a Pitt Ohio cost analyst who most recently chaired the Futures Committee.
Johnson had suggested the initial subject area for the Futures Committee, but by the end of 2004, the group was charting its own course for research. “Everyone was itching to talk about deeper things,” says Russo, who today is ineligible for the Futures Committee due to her career advancement. The group produced a three- to five-year general outlook of business and the economy; researched productivity trends and different computer applications; hypothesized about how the “terminal of the future” might operate; and discussed how different age generations interact in the workplace.
The committee also researched Southwest Airlines, a company they saw as their counterpart in the airline industry – a low-cost, high-value carrier. As part of this project, the committee arranged a one-hour conference call with Southwest President Colleen Barrett.
Because the Futures Committee was more about developing thought processes than about an end product, the group didn’t produce lengthy reports. Rather, it presented one- or two-page summaries to Johnson and Hammel.
“We tried to get Starbucks in the front lobby, but we were unsuccessful,” jokes Gruber. One item that has been implemented as a result of the Futures Committee is an employee recognition program called “magical moments,” modeled on a Southwest Airlines program that acknowledges workers for going above and beyond their duties. Jodi Kerchenske took the group’s work on generations in the workplace back to her department and helped implement it through training sessions at Pitt Ohio terminals. Kerchenske today is manager of human resources and, like Russo, is no longer eligible to participate in the Futures Committee.
Russo and Kerchenske are examples of why the value of the Futures Committee transcends specific changes in how Pitt Ohio operates. The initiative has given younger workers at Pitt Ohio the chance to learn, grow and develop leadership skills to participate in meetings with executives. Within two years of working at Pitt Ohio, members were talking with vice presidents discussing strategy, and gaining a sense of ownership and satisfaction with what the company is doing, Johnson says.
“Some people may be averse to hearing younger workers talk about how to make strategic decisions,” says Gruber. “At this point, when we go to vice presidents, there is a respect. They understand our perspective and where we are coming from.” The Futures Committee currently is on hiatus while its members work on specific initiatives regarding sales and cost cutting, but the company plans to reconvene the group this fall.
“It was something different, but that’s why I enjoyed it,” adds Kerchenske. And she jokes that she learned a valuable lesson from playing Gazillionaire: Don’t stop to let a stray puppy board your spaceship.
Out in front
Allowing productive workers to spend several hours a week each on unstructured research that might lead to nothing concrete might seem like an unaffordable luxury, but it fits with Hammel’s management style. As Hammel sees it, one of Pitt Ohio’s greatest strengths is its agility – the ability to research, develop and implement new initiatives before its competitors.
“Our service has not changed,” Hammel says. “We have been a next-day carrier from the beginning.” The beginning was 1979, when Hammel and his brother launched Pitt Ohio Express. Although the company was new, the family was quite experienced in trucking. Hammel’s grandfather had started in the transportation business in 1919 with a horse and buggy, and Hammel’s father had built a local trucking operation, Hammel’s Express.
The focus on next-day service positioned Pitt Ohio well for when just-in-time inventory scheduling started to take off. “We knew we had a competitive advantage,” Hammel says. “We were able to grow with that big wave. Creativity and looking at things differently has been rooted in our core for a long time.”
The competition has become tougher since 1979. Today, Pitt Ohio seeks to differentiate itself by capitalizing on trends early, Hammel says. It does this by understanding the demographics and needs of the traffic managers, rather than just focusing on developing products and services to sell across its entire customer base. The company is continuously looking at how it does business with different groups of customers, and how it connects with people, both in terms of technology and customer loyalty.
“The younger generation is electronically motivated,” Hammel says. “From a demographic standpoint, what may appeal more to a 30-year-old traffic manager based on what they are used to?” The company offers a full menu of e-commerce options and has seen rapid growth in the number of customers using its website to handle most, if not all, of their transactions.
In looking for ways to differentiate itself, Pitt Ohio focuses on flexibility and willingness to deliver custom solutions, Hammel says. For example, one customer recently needed a single dedicated driver for just a month. In some other cases, Pitt Ohio drivers perform tasks for customers that require access to sensitive areas and equipment, says James Fields, Pitt Ohio’s vice president of operations.
“We are developing a slogan to ‘just say yes,’ ” Hammel says. “We look at what the customer needs and wants, and tailor a service to that. We provide services that others resist. If it is a difficult shipment or delivery, we welcome those kinds of opportunities.”
As a means to accelerate its understanding of its customers, and to capitalize on new trends early, Pitt Ohio continues to develop advanced information technology systems and tools.
Scott Sullivan, vice president of information technology services, leads a project team called the Business Systems Group, which has individual members assigned to projects in safety, finance and human resources, among other departments. While the BSG often leads the way with new technology innovations, it works to switch the “ownership” of the applications, and the data, from IT to the respective business units.
“There is an alignment between what business units are up to at the tactical level and at a strategic level,” Sullivan says. “The value of IT is to see all the connection points. I’m a big proponent that my strategy has to be a business strategy. I have to be an innovator of those strategies.”
In 2004, for example, Sullivan and the BSG completed development of a business intelligence (BI) tool. The tool provides a common, easy way to report and analyze data at many different levels within the company. Sullivan says the data used by the BI tool originates from a separate database that contains the company’s activity-based costing model from a third party, Transportation Costing Group.
Sullivan describes the look and feel of the BI tool as a “spreadsheet on steroids.” To ensure the BI tool was not just an IT initiative, Sullivan collaborated with Johnson to develop its capabilities for financial and sales analysis. The company created separate “cubes” and defined them by business function. Sales, for example, has its own cube designed to analyze sales volume by customer, by lane, or by customer manager and sales rep. The system’s flexibility allows users to define as many dimensions as they want. Indeed, the company is so high on the product, which it calls Cube-IT, that it has taken steps to market it. (See “Marketing the tools of success,” page 60.)
Using the BI tools to analyze customers from many different angles helped the motor carrier eliminate $40 million in unprofitable business in three years, Johnson says. Pitt Ohio, which generates more than $225 million in revenue annually, also improved its operating ratio by 3 points while growing its business significantly in the same period.
“We can stand each customer on their own merits and see the value we provide to them and the value they provide to us,” Hammel says. “We never had that precision visibility before. Now we do.”
Information to – and from – the people
Hammel and other key executives understand that the value of competitive tools is limited if few people use them, and the culture at Pitt Ohio Express is one of empowering the entire organization by “democratizing” information. “We want to be analytic at the front lines, not just in a select group,” Johnson says. The question was: How could Pitt Ohio teach its people to be analytically oriented?
As with the Futures Committee, Russo played a key role. She recalled a management book that discussed medieval times where builders, stonemasons and other workers formed associations called guilds to self-certify themselves, and to share and learn across their organization. The same concept could apply to business analysis, Russo believed.
Johnson agreed and in May 2006, Pitt Ohio’s analysts guild was born. The guild is based on the notion that people in the trenches could apply analytic tools more effectively within their departments than could a centralized group of analysts organized within a single department. A pricing analyst, for example, understands pricing and the data underneath it. What a pricing analyst knows is very different from what a financial analyst knows.
“People in functional areas truly understand what is going on,” Johnson says. “They see things that people outside their area wouldn’t see. You need to train people in functional areas, rather than just create a cadre of super analysts.”
Through monthly meetings, the analysts guild – comprised of about 24 members from various departments – shares experiences to help each other become more analytically oriented through increasing their knowledge base and analytical skill sets, Russo says.
“Some don’t believe they are analysts,” Russo says. “They say ‘I just write reports.’ They need to understand data, and what it is telling them.”
For example, an analyst at a terminal might write a report that compares the number of bills versus drivers for a certain date range. Could this data be used to predict how many drivers are needed the next day? Furthermore, noticing a trend for bill count versus drivers is just the tip of the iceberg, Russo says. What did Pitt Ohio do to reach the peak of that trend, how did it operate while it was there, and what will it take to sustain that peak performance?
“We are trying to develop an information democracy by getting better information to the front lines,” Johnson says.
Russo’s role within Pitt Ohio is to provide the tools the company’s analysts need. She is manager of the Business Intelligence Competency Center (BICC), a cross-functional team that works closely with the IT department to find more efficient and innovative ways to unlock the company’s information and to get “one version of the truth.” For example, the BICC works closely with IT on new methods for cleansing and maintaining its data.
The analysts guild is the forum for rolling out the tools developed by the BICC, Russo says. One of the goals of the BICC is to help understand what information is key to Pitt Ohio and to develop a reference system for all of its data. If someone asks for information from multiple places, therefore, he or she won’t get multiple answers.
Says Russo, “I will succeed when data is available for other people to mine it.”
Research in operation
Once Hammel saw the impact business intelligence had made in increasing sales, he asked Johnson to build an engineering staff to replicate this success in operations. Johnson, an engineer himself and an expert in data analysis, was the natural choice to lead this initiative, having joined Pitt Ohio in 1998 after a 30-year career in the aerospace and defense industry.
In early 2005, Pitt Ohio formed an operations research group. Johnson recruited Michelle Bickel, a mathematician from Intuit, and Jen Kreke, who has a doctorate in industrial engineering, to join the newly created operations research team. Their role is to use research tools such as advanced statistical analysis, linear programming, optimization and simulation to find cost savings in operations.
The group models current operational processes and tests the impact of potential changes – basically “what-if” scenarios. Projects that have involved simulation include territory boundaries and terminal locations. For example, the group played an essential role in Pitt Ohio’s recent expansion of new terminals in Indiana and Michigan.
“The locations we selected were based on operations research,” Johnson says. The group has helped determine the number of staff, drivers and equipment to use based on expected workload – using key indicators such as inbound bill count – for its linehaul and pickup and delivery operations. The group also has helped in planning equipment purchases to obtain the right mix, and the number of drivers it needs for next year based on the expected business levels.
“This year, operations research has played strongly in our decisions rather than using rules of thumb,” Johnson says.
In a broader sense, Pitt Ohio’s methodical approach to almost everything it does helps it challenge conventional wisdom every hour of every day.
Sprinting ahead
Data analysis pays off in operational flexibility
Pitt Ohio Express might be methodical and heavily invested in research and analysis, but as in many enterprises, chance and happenstance play an important role. The company’s decision to incorporate light delivery vans into its equipment is a case in point. Pitt Ohio’s data analysis pointed the way, but without a chance conversation, the company might never have looked for the opportunity.
In 2004, a manager approached Chief Financial Officer Ray Johnson with a concern. Average shipment weight was stagnant, increasing only to 1,280 from 1,250 pounds. So Johnson analyzed the data and found something quite surprising. Although the average weight was 1,280 pounds, the mode – the most frequently occurring shipment weight – was just 400 pounds, and the median was 500 pounds. Many shipments weighed less than 200 pounds. Anecdotally, Pitt Ohio managers knew they had many small shipments, but not to that scale.
It was a “eureka” moment for Johnson and for Pitt Ohio. Years earlier, Chief Executive Officer Charles Hammel III had suggested that the company consider smaller equipment so it could hire drivers who didn’t need commercial driver’s licenses. “When we presented it to Chuck, he said, ‘See, I told you so,’ ” Johnson says.
Since 2005, Pitt Ohio has added Sprinter vans throughout its operation, allowing it to use non-CDL drivers with equipment that is more maneuverable in traffic than tractor-trailer combinations. Dock workers can move into driving positions, and non-CDL drivers potentially can be groomed to take over CDL positions. And the Sprinters give Pitt Ohio capabilities that some competitors can’t match, such as the ability to make deliveries where a tractor-trailer isn’t allowed or practical, says James Fields, vice president of operations.
“How are we going to keep costs low for customers?” Hammel asks. “Not by running 53-foot trailers around [for every shipment]. You might as well match the size of the equipment to the size of the shipment.” And besides providing lower costs for customers, the delivery vans have allowed Pitt Ohio “to go after a nontraditional work force,” Hammel says.
–Avery Vise
About the award
CCJ launched the Innovator of the Year award in 2004 to recognize carriers for trying new things and succeeding. By soliciting nominations and investigating leads, CCJ’s editors recognize innovators throughout the year and select one for special recognition as Innovator of the Year. Innovators considered for the current award were those recognized in the magazine in 2006.
Innovation in any aspect of the operation is eligible for recognition. To qualify, the carrier or private fleet must operate at least 10 power units in Classes 3-8 and maintain a satisfactory safety rating, if rated. Selection of innovators for recognition is at the sole discretion of CCJ’s editors.
This year’s award was announced and presented at the CCJ Innovators Summit, a networking event for previously recognized innovators that was held Jan. 31-Feb. 1 at the Hawk’s Cay Resort in the Florida Keys. Representatives of innovative trucking operations shared best practices and updated one another on the results of their initiatives.
CCJ’s Innovator of the Year program is sponsored by PeopleNet and Freightliner. For more information on the program, links to previously recognized innovators or a copy of the nomination form, visit www.ccjmagazine.com and click on the Innovators tab in the upper right corner. Or contact Avery Vise, editorial director, at 800-633-5953, [email protected].
MARKETING THE TOOLS OF SUCCE$$
If you need business intelligence software, risk management consulting or truck rentals, you can get them from Pitt Ohio Express.
More precisely, you can get these services from ThoughtDrivers LLC, a business development company owned by Pitt Ohio parent The Hammel Companies. ThoughtDrivers began as a department within Pitt Ohio with the goal of capitalizing in the marketplace on investments the company had made in technology and business practices. As the concept matured, Pitt Ohio Chief Executive Officer Charles Hammel III realized that trucking operations, including direct competitors, would be more comfortable doing business with Thought-Drivers’ business units if it were a separate company.
The impetus behind ThoughtDrivers was the trend toward consolidation in the LTL business and a desire to diversify and remain independent, says Hammel. “We wanted to become less of a pure-play LTL company and more of a transportation services provider.”
One ThoughtDriver venture, launched in November, is The TruckGuardian Group (www.truckguardian.com), a joint venture with The CEI Group to provide safety and risk management services to trucking companies. Pitt Ohio has won numerous awards for its safety management, and executives saw an opportunity. “There’s no competitive advantage to being safe,” Hammel says. “We want to push that out to the industry.”
ThoughtDrivers also launched BI3 Solutions (www.cubeitsolutions.com) to market Cube-IT, the business intelligence software the company has developed, and other similar systems. And the company is refurbishing used trucks and renting them to fleets.
Hammel and others continue to explore new opportunities. Several months ago, Chief Financial Officer Ray Johnson discovered that a local company, Suburban Energy, faced a shortage of propane drivers during winter months. So Pitt Ohio is supplying drivers to Suburban for the winter months and may get drivers from Suburban during the summer to help relieve its own drivers on vacation. Hammel now hopes to parlay the concept into a driver leasing program through ThoughtDrivers.
–Avery Vise
