Benefiting from crisis

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I love the man that can smile in trouble; that can gather strength from distress and grow brave by reflection. ‘Tis the business of little minds to shrink; but he whose heart is firm, and whose conscience approves his conduct, will pursue his principles unto death.” -- Thomas Paine, from his pamphlet “The Crisis” published in 1776

This is as brutal a time in trucking as anyone’s ever seen in a long, long while – but that doesn’t mean there aren’t opportunities out there. And a down market can also be a good time to both retrench and prepare for better days – making your trucking operation (be it just one truck or 100) leaner and meaner in the process.

Though fully aware of the economic crisis surrounding us, the business gurus I listen to frequently – guys like Professor Jerry Osteryoung with the college of business at Florida State University and Tim Brady, former owner-operator turned author and business consultant – tend to see the glass as half full rather than half empty. One theme they touch on a lot these days is how to benefit from the ongoing economic meltdown; using the crisis at hand to make your company better and stronger, rather than just giving in to the negativity.

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“An economist, Paul Romer, once said ‘a crisis is a terrible thing to waste.’ To me, this is such an important statement as we navigate the economic recession that we are in,” Osteryoung noted in a recent missive. “Rather than saying, ‘We just have to survive this recession,’ we need to say, ‘What can we do to make our company better to exist and grow in the future?’ Because going through a deep recession allows us to make the necessary changes in our business that we could not have done before.”

Osteryoung believes there are many areas of any business that can be reviewed and overhauled now in order to ensure that the company as a whole – no matter how large or small – is set for the future.

“You should also use times of crisis to evaluate if your business is pursuing enough innovation or new product offerings. Most of your competition is going to be cutting back, so now is the perfect time to increase market share and penetrate a much larger market as well,” he stressed.

“Another critical area to look into is your use of technology. This is a perfect time to bring new, but proven, technology into the workplace,” Osteryoung said. “Not only is it economically prudent, but staff is just not going to give you much grief about these changes. You need to ask yourself, ‘How can I use these tough economic times to improve my business in all elements of my operation?’ and then go on to make sure nothing is excluded from review.”

Brady takes a similar view from a more “pure” trucking perspective, recommending that 2009 is the year truckers – especially smaller carriers and owner-operators – need to engage in a more ”revolutionary approach” to how they conduct their trucking businesses.

“As an owner-operator or small trucking company owner, you are required to wear many different hats in order to conduct your business: driver, safety director, dispatcher, chief financial officer, CEO, even the person sweeping the floor. To keep your business rolling, you have to do it all,” Brady believes. “To improve your operation and increase profits requires revolutionary changes in how you wear each hat.”

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To his mind, truckers need to answer five critical questions in order to begin their “revolution” and make it a success:

What are ALL of your costs of doing business? Not knowing your costs is like preparing to go to battle without having any ammunition. You need to separate your costs into three areas: Fixed Costs—Costs that occur day in, day out; week after week, that don’t require the truck to roll; Operational Costs—Any consistent cost which occurs once the truck is rolling; and Load Specific Costs—Costs that occur either on a specific load or have extreme fluctuations from load to load.

What’s your break-even point for each revenue-producing piece of equipment you have? Without this information, you’re going to war without any idea of the assets required for success. Your break-even point is the information that tells you exactly where costs are covered and creating a profit begins. The difficult part of understanding what your break-even point is and how it affects your hauling rates, is that it changes every time your costs change. You need to know what your fuel is going to cost based on the price per gallon on the day of loading, how many miles from your previous destination to the destination of this load, and how much time is required to complete the load.

Who are your customers, and what do they need and want? To succeed you need to know who your allies are. First, establish who your customers are: Are they shippers you work with directly? Are they brokers or other third parties from whom you receive tonnage? Or a trucking company who assigns your loads to you? Know your customers, know their needs and wants, and you’re on your way to becoming a more integral part of THEIR daily business needs.

Who’s your competition? To know your enemy is the first piece of critical “intelligence” required to move toward success. The second comes from knowing the services and the quality they’re providing your customers and potential customers. It’s not a question of how well you beat your competition in hauling rates. It’s the VALUE you beat them with; the quality your services provides to the customer.

Who’s driving your trucks? Know the troops under your command. Be sure you understand each of their strengths and weaknesses. Know their wants and needs, and above all, don’t ask them to do something you wouldn’t do yourself for the same rate you’re paying them.

“When you’ve established the answers to these five questions, the time has come for all good truckers to come to the service of their company,” Brady said. “This is accomplished through putting together your ‘revolutionary’ plan: creating a strategic plan for the entire year. You will be setting goals to reach each quarter and establishing targets to shoot at on a daily, weekly and monthly basis.”

What are some of the business “targets” Brady recommends? His suggestions follow:

Use your break-even point to aim at developing a profitable hauling rate schedule. It may take some time to attain the highest rate you need to be receiving, but by establishing a target you can see, it becomes a lot easier to hit.

Look at your current list of customers and determine new ways to meet both their wants and needs. Establish a customer service policy that’ll help you to exceed your customers’ expectations. Create a customer service follow-up program to be sure you’re meeting your improved service standards, and hitting that bull’s eye.

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Put together a plan to develop new customers, particularly direct shipping customers. Select target geographic areas that your trucks currently frequent. Set a goal to have outbound loads to haul in both directions by developing shipping customers where you are currently delivering.

Look at your current team of drivers (even if the team consists of one -- namely, you) and determine what your drivers need and want. From that, develop the necessary programs to meet these requirements and wishes. Keep in mind how you treat your drivers, how you take care of their needs and wants, affects how well your customer service goals are met. The higher the quality of service your customers receive, the greater your trucking company’s value becomes, the higher your value to your customers, the easier it is to increase rates when necessary. Remember, it all begins with your soldiers in the trenches and how their needs and wants are met.

To some people, Brady readily admits, these ideas and suggestions won’t seem very “revolutionary” at all – largely because they’re most likely successful truckers already. But to those that find these thoughts new and different, it should serve as encouragement to move away from the old trucking bromide, “If everyone else is doing it this way, it must be correct.”

“Remember, revolutions are caused by a desire for change, and we Americans are the result of a revolution for change,” Brady stressed. “If your trucking business isn’t what you envisioned it would be, maybe it’s high time for engage in your own personal revolution.”

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