“The good-old-boy network in sales in this business is gone,” Jim O’Neal told trucking executives during a panel discussion at this week’s 2nd annual Randall-Reilly Trucking Fall Symposium in Phoenix. The three-member panel, discussing the carrier-shipper relationship in today’s market, said that customers must understand how capacity and detention issues driven by hours-of-service mandates play a role in how much fleets bill for their services.
“The customer needs to understand it’s all about dollars per day,” said O’Neal, president and chief executive officer of O&S Trucking, based in Springfield, Mo. “We don’t have any free hours, and if the driver’s not making any money, he’s not happy.” O’Neal said fleets need to weed out any unprofitable customers.
Strong freight volumes and tight capacity both played critical roles in making 2004 “the strongest we may have experienced, ever,” said panelist Joyce Jordan, chief operating officer of Dart Transit’s operating center in Dallas.
Tom Kretsinger Jr., president of Springfield-based American Central Transport, said his company presently is viewing freight from several viewpoints — seasonal, lane strategy, customer base — and that those factors all affect his company’s choice of shipments and lanes. “If we could have all the drivers we want, we couldn’t change our customer base if we wanted,” Kretsinger said. “We’d all be too competitive,” which would affect shipping prices negatively, he said.
Dart Transit uses a “fairly sophisticated yield formula” to determine profitability of lanes, Jordan said, with “the margin of the account” being the primary focus. O’Neal echoed the philosophy of careful selection of customer lanes: He said that up until a few years ago, his company’s operations statement was “We’ll haul your crap all over the map,” but now O&S Trucking places capacity where “we’ll get the most return on our investment.” Diversification of accounts also is critical, O’Neal said. “No account holds more than 12 percent” or our capacity investment, he said.
As far as driver detention goes, “We try to respond rapidly to any problems,” Kretsinger said. “Any kind of repetitive thing, we want to address that.” Charging for dwell time usually helps, panelists agreed: “It corrects itself to show the freight that isn’t working in your system,” Jordan said, adding that Dart Transit has been able to eliminate an average 16 minutes of waiting time.
Many customers don’t understand how hours of service works or how it impacts billing, panelists agreed. “In my world, the shippers are now struggling internally with wondering why they’re not meeting their budgets,” Jordan said. Scheduling drivers into shifts has forced shippers to pay more attention to detention and rate packages, Kretsinger said. “It puts a lot of pressure on their sales staff,” he said. “We need to educate these people so that they can take that information back to their bosses.”
Looking ahead over the next five years, O’Neal predicted “some innovative changes in how we price capacity,” with educated shippers requesting more dedicated freight. Jordan agreed: “It’s going to continue to be a supply-and-demand market,” she said. “We’re going to work to get our drivers more pay.” Kretsinger forecasted rising driver wages because carriers all will be competing for the best workers from the same labor pool, and that shipping prices will rise as a result.
“One thing I know about trucking,” Kretsinger said, “is that you can bet it’s going to change.”