Thinking through the recovery

The Five Ps, or “proper planning prevents poor performance,” is a fairly common saying in the military and business management. A Google search of that exact phrase returns 600 hits, while a variation, “prior planning prevents poor performance,” returns 576.

Whichever variation you choose, it’s hard to argue with the advice. But how often do you live by it? All executives, if asked, would say they plan strategically. To respond otherwise is to admit that you aren’t on the ball.

When business is slow, you may spend time thinking through your options for business development, diversification and restructuring. Not only do you have ample time, but you face some urgency to grow revenue. When freight is strong, however, it’s easy to put planning aside. You are busy trying to find trucks to handle all your loads and drivers to keep them rolling. Besides, the money is rolling in.

But prudent fleet executives know that while revenues may be up, so are costs. “Rates are not rising as fast as trucking companies’ cost are rising,” Michael Massengill, owner and president of Hickory Flat, Miss.-based Big M Transportation, told CCJ last month. “The rising cost of insurance, fuel and driver pay and benefits are making it very hard to make a profit. Why do I want to add trucks, when I would only be adding cost to my company?”

Massengill obviously is looking at the bigger picture. Assuming you have access to the necessary financing, it would be easy to give in to the temptation to keep adding trucks.

After all, the American Trucking Associations just reported that its Truck Tonnage Index hit another record high in March, rising for the sixth time in seven months. Rates are rising, but in the heat of a freight “bull market,” some carriers might not pay as much attention to the cost side of the ledger. Without the 5Ps, those carriers might just make themselves even more unprofitable through growth.

Most publicly held trucking companies reported strong profits in the first quarter despite any hiccups from the switchover to the new hours rules. You can bet the large, publicly traded carriers engage in formal business planning.

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But you don’t have to be big to take control of your business. Springfield, Mo.-based O&S Trucking concluded last July at the end of a business planning effort that it needed to acquire smaller carriers to take advantage of a coming capacity crunch, diversify into refrigerated hauling and bring on additional business to buffer it against the possible loss of a major account.

By planning and thinking strategically, O&S Trucking positioned itself to take advantage of opportunities that it otherwise might have missed. It acquired three local trucking companies in as many months and created a new refrigerated division. Time will tell whether O&S Trucking made the right move, but the point is, the carrier made its leap with its eyes wide open.

With new hours-of-service regulations, record high fuel prices, high insurance costs, security worries and rapidly changing technology, the industry remains in a challenging period. Strong freight volumes and the opportunity for better rates, however, might disguise the pitfalls awaiting carriers that act impetuously.

Today, schedule an off-site planning meeting with your managers and key employees. Pick a couple of days a few months from now, have a little fun and spend some time just debating your options and brainstorming opportunities.