Surviving the good times

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Truckload Carriers Association and the National Council of La Raza (NCLR) have launched the Careers in Trucking Pilot Project, which seeks to recruit qualified bilingual Latino drivers for jobs at truckload carriers. NCLR affiliate Congreso de Latinos Unidos of Philadelphia, Pa., kicked off the pilot project Jan. 15 with an event featuring truck driving simulators; representatives of Professional Truck Driver Institute-certified driver training schools All State Career, Lehigh Career and Technical Institute; and carrier D.M. Bowman. Funding for training will come from the Philadelphia Workforce Development Corp. If the Philadelphia effort is successful, it will be replicated throughout the country.

Electronic seal technology is maturing and may be applied to container security, according to a study released today by the Cargo Handling Cooperative Program (CHCP). E-seals have been proposed as a way to improve security and track cargo movements worldwide, but CHCP – a partnership between the Department of Transportation’s Maritime Administration and private industry – did not identify any one type of e-seal that would be suitable as a standard for use on intermodal freight containers.

Schneider National this month is opening a new operating center in Atlanta to support continued growth in the Southeast. The carrier last month was seeking to hire 400 drivers and owner-operators for the operation.

I read that trucking industry executives are quietly optimistic about the outlook for the coming year. When I play poker and get dealt four of a kind, I too am quietly optimistic.

For the next couple of years, carriers that survived the downturn are in for some good turns. Even so, many carriers still will exit the business or realize only mediocre profitability. Whenever the economy makes a major change of direction, the rules of the game change. Smart carriers adjust their game plans while others fail to capitalize on the potential. The following are some steps savvy carriers should take in the coming months to stay healthy and competitive.

Review employee compensation. Surviving the past few years probably meant holding the line on any salary increases in the office. Usually during a recession carriers can get by without any increase in salaries on the basis that things are tough all over. That is going to change. Not only will other carriers be looking to hire good people, particularly dispatchers, but other industries will also be recruiting. Don’t wait until two or three of your best people walk out the door to start making good on overdue increases in compensation.

Evaluate driver and owner-operator compensation. Competition for drivers and owner-operators is heating up, and carriers are already hiking pay to compensate for lost productivity due to new hours-of-service rules. The days of not paying a driver while he is on a dock are quickly coming to an end.

If you haven’t raised pay for more than two years, monitoring industry trends should be one of your highest priorities. While compensation isn’t the only answer to retention, if a big enough gap opens up between your pay package and that of other carriers, you will lose drivers quickly.

Revisit bad deals. I often recommend that carriers maintain a list of bad deals they made with a customer during the downturn. Of course, you would prefer to never sign a bad deal to begin with. But when you need revenue to keep the trucks rolling, you may begrudgingly accept a few unfavorable arrangements. When the good times return, you want to recognize immediately the deals you would like to discard or revamp. If you haven’t kept up with bad deals, conduct a customer profitability review.

As the bottom line improves, it is easy to become complacent about freight quality. The quickest way to add one positive point to your operating ratio is to take 10 percent of your least profitable freight and replace it with freight of average profitability. Poor freight gets embedded in a carrier’s operation. Rooting it out is tough work. But if you don’t do it during the good times, you will never get it done in the bad.

Increase rates on services your customers don’t use. Most carriers quote rates to shippers on more lanes than they haul for them. Sometimes these will be very competitive rates, but the shipper decides to use another carrier. Because the rates are part of a valid contract, that is what the shipper is going to pay if it starts using you.

It is always a good practice to resubmit rates 30 to 60 days after the initial quote to increase rates on lanes you didn’t receive. You are only going to get the traffic when the current carrier doesn’t have enough equipment, so why discount that lane? By taking major increases on the lanes the shipper isn’t using you for, the increase on lanes you are hauling will look smaller by comparison.

Increase accessorial rates. While you are cleaning up old rates, don’t forget to update your accessorial rate schedule and make sure to attach it to all contracts. Sometimes accessorial rate schedules don’t appear to be worth the paper they are written on as shippers in a slow freight market often refuse to pay. But the environment is changing, particularly on driver waiting time, which most carriers intend to enforce. If trailers get into short supply, we may also see trailer detention charges increasingly enforced.

Get in line for equipment. In the past few years, your operation probably held on to its equipment one or two years longer than usual. In the face of the downturn and concerns over the new engines, most other carriers were doing the same. That means that there is considerable pent up demand for new tractors. In addition, many carriers are increasing their trailer-to-tractor ratios as part of their response to lost productivity related to the hours rules. So there could be a real shortage of both tractors and trailers until manufacturers increase their output.

Whenever there is a potential shortage, it is usually better to act decisively early than sit on the fence too long and find yourself at the end of a long line. At a minimum, start getting orders in for the equipment you know needs to be replaced.

Yes, happy days are here again. But if you aren’t careful, you may see other carriers sporting bigger smiles than yours.