Three keys to winning big

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Illinois Tollway will add new mixed-use I-PASS-only lanes at five toll plazas on the central Tri-State Tollway so that motor carriers, which were hit by a toll increase Jan. 1, can minimize delays. The extra lanes on the Tri-State Tollway, or Interstate 294, result from ongoing coordination with the Illinois Trucking Association, tollway authorities said.

Ferry service between Toronto and Rochester, N.Y. is set to resume in May after the upstate New York city purchased the ferry for $32 million. The ferry service – which could transport a capacity of 750 people, 220 passenger cars and 10 tractor-trailer trucks from downtown Toronto to the mouth of the Genesee River in Rochester – shut down after running up $1.7 million in debt.

Pitt Ohio Express has acquired a partnership interest in ECM Transport, a 450-tractor truckload carrier based in New Kensington, Pa. Pitt Ohio said customers of both companies will be able to access truckload and LTL services through one channel, and the companies will share capacity and sales resources.

CF Holding Company, parent company of furniture carriers Caldwell Freight Lines and Foothills Trucking Company, has purchased a majority interest in Prime Time Delivery and Transport, based in Phoenix.

USF Logistics Services, a subsidiary of USF Corp., has sold its reverse logistics operation, USF Processors, to Carolina Logistics Services.

When I attended the Truckload Carriers Association’s annual convention in Las Vegas three years ago, the industry was reeling from the Sept. 11, 2001 attacks and from a raging insurance crisis. This year, TCA was back in Las Vegas for its convention, and the mood was downright giddy.

The fact that TCA keeps coming back to Vegas speaks volumes. Truckload executives want to win big. In the coming years, those that do win big all will be doing three things that separate them from the rest of the pack.

Embrace the driver shortage
A tight market for drivers has been one of the best things to happen to the trucking industry, as it has put a lid on capacity. For a small carrier, there is nothing better than a chronic driver shortage. A carrier with 30 percent turnover will have dramatically lower costs than one with 130 percent turnover. At most major carriers, turnover above 100 percent is a way of life, but small carriers typically do better. In fact, I submit that a small carrier with good retention will enjoy lower costs than a megacarrier with high turnover despite the large carrier’s huge advantages in purchasing.

At the same time, the megacarriers set the rates in today’s marketplace, and most of them are raising prices. So unlike in the past, today’s small carriers aren’t as threatened by megacarriers swiping key lanes through rate undercutting. Times should be great for a well-run small carrier. And yet, most owners of small trucking companies will bemoan the driver shortage. Instead, they should treat the tight labor supply as a gift from heaven and hope it continues. Then they should choose not to participate in the churn.

I covered key recruiting and retention techniques in a book I wrote for Commercial Carrier University (www.commercialcarrieruniversity.com). That information was based on my experience running a 500-tractor operation, where I cut turnover in half to less than 25 percent. Every time I visit with a carrier with remarkably low turnover, I recognize that they live by concepts similar to those I described.

Choose your customers
I believe that most carriers landed the customers they have through happenstance rather than according to a well-crafted strategy. But attention to who your customer is and what it is doing is key. Hauling for customers that are stable financially is central to the carrier’s own business success. Small carriers whose major customers go bankrupt risk doing so themselves.

In this era of the driver shortage, carriers have a once-in-a-generation opportunity to change their customer base. Yet many carriers continue to haul for the same group of customers, believing this loyalty will be reciprocated in the future. Loyalty is fine, but make sure you choose to be loyal to customers who still will be around years from now to reciprocate.

Try to develop customers in high-margin businesses where freight is a small percentage of the customer’s total costs. Usually in these industries, service is more important than transportation costs. So if you do a good job, these businesses will be reluctant to cut rates whenever a buyer’s market emerges.

Managing overhead costs
Once the good times arrive, most companies tend to loosen up the purse strings. You want to reward people who have stuck with you during the lean times by giving them salary increases, improving their office space, enhancing benefits or hiring more people to help out with the workload.

Good office staff, including dispatchers, is as hard to find as good drivers – perhaps harder to find. Certainly you want them to be happy. But one day, things will be bad once again. Don’t let costs climb so high that you can’t weather some storms. Budget your costs so you will make money even if revenues decline by 15 percent. It’s a balancing act, but the key to achieving retention and morale on one hand and curtailing overhead on the other is to set high standards for personnel and reward your staff for meeting those standards.

Don’t just ride the wave of boom and bust. Use the cushion of good economic times to address the keys to long-term success – superior driver retention, stable and loyal customers and manageable overhead.