Contracting value - or trouble

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Quality in a service or product is not what you put into it. It is what the client or customer gets out of it.” -Peter Drucker


One of the reasons I like to share the observations of Professor Jerry Osteryoung from the college of business at Florida State University in this space is that he uses many of his real-life experiences - ones we can all relate to, trucker and non-trucker alike - to illustrate what I think are the critical fundamentals in any line of work.


Today, he‘s got a line on an issue that resonates broadly in trucking - independent contractors. Now, it‘s a negative example that involves dishwashers, so it‘s not about truckers, but the point he makes is unmistakable - contractors HUGELY impact the company that hires them, both in terms of reputation and future business volume.


Let‘s face it - carriers are trying to sign up more and more owner-operators out there as contractors because it takes a lot of risk and capital investment off their books and places it on the owner-operator‘s shoulders. Many carriers view it as an inexpensive way to add capacity and (one would hope) experienced professionals to their fleet.


Yet many carriers don‘t treat that contractor like a valued partner - oft times, they are viewed as being even more disposable than company drivers (a shame in and of itself) as the carrier invests so little to gain that truck and driver.


Yet the impact of the independent contractor is huge - they become an extension of the carrier, and how they interact with shippers, receivers, the public, and law enforcement will directly impact that carrier‘s reputation and record. In my view, the owner-operator can be a HUGE asset to a carrier as an independent contractor, one that brings a lot more value to the table in terms of their over-the road experience, attention to detail, and care of equipment (as, obviously, it‘s their own).


That brings us back to Professor Osteryoung‘s example - and his dishwasher dilemma:


“By far, I receive the most comments on my weekly articles when I share some of my customer service experiences. I think these stories hit a cord with so many consumers as they are able to put themselves in my shoes (pretty scary, I think). The real reason I tend to focus on customer service, however, is because it is such a common problem for businesses and one that is so easily fixed.


Our dishwasher of ten years recently decided to stop working - a situation that did not make my wife happy at all. I checked out Consumer Reports and went off shopping for a new dishwasher.


I went to a very large national firm and had a great sales experience with a very knowledgeable salesperson. She said that they had to order the dishwasher from Jacksonville, FL, and that when it came in, the installer would give us a call - and that independent contractors representing their firm would handle the installation.


I was over in Jacksonville having a routine medical test done when the installation attempt occurred. Needless to say, the experience went from bad to worse. It started out with the installers constantly swearing about everything - with my wife right there. They also had clearly never installed a dishwasher like this, because they said our space was not high enough. Of course, they had just taken out the standard model that fit perfectly.


When they had finished the installation, they had left an uneven crack of one inch down one side of the dishwasher. In addition, they had not installed it flush with the counter, and they had removed most of the insulation that keeps the machine quiet. They repeatedly asked my wife to okay the installation, but each time, she refused because the job was not right - not even anywhere near right. They finally took our old dishwasher and just left.


When I got back into town and saw the terrible job they had done, I tried to call the national firm for help. At first, I could not get through the telephone tree to the installation manager. When I finally got through, they told me that they were not aware of any problem, but that they would get back with me. Of course, they never did. I then called the store manager. He also said that he would get back with me and never did.


I am still unsure of how this is all going to turn out, but it has clearly shown me that when a business uses contractual services, it must diligently monitor the quality of work. This is vital since they have less control over the contractors.


Additionally, while contractual services may make some financial sense, the use of them clearly may not always make good business sense. For in this situation, my last impression of this firm was not the good sales experience, but the disastrous installation!”


Now, in trucking, contractual services can BOTH be beneficial to the bottom line and to the business as a whole - if carriers work together in the right way with their independent contractors. How truckload carrier Schneider National does that provides a worthy example.


“Owner-operators have been instrumental in providing needed capacity to customers since the company‘s inception in 1935,” said Mike Bethea, Schneider‘s director of operations for owner-operators, recently. “In return, we feel compelled to support our valued owner-operators in this challenging fuel environment. Not only are we offering the miles and freight they need in this tough economy, but we have a fuel protection program that is second to none.”


That program allowed Schneider owner-operators to pay only $1.085 a gallon for fuel back when diesel hit $4.502 per gallon during the week of August 7, for example. The carrier launched its Fuel Protection Program back in 2001, after fuel prices soared in the wake of the Sept. 11 attacks.


“A high number of our owner-operators are driving for efficiencies and improving their miles per gallon,” Bethea continued. “These smart driving techniques enable them to take full advantage of our program and receive relief from high fuel prices. Every one of our owner-operators has the opportunity to realize a great cost savings with it.”


Based on a mathematical model, Schneider‘s program works like this: Assuming that an owner-operator averages 6.8 mpg and is purchasing fuel at $4.502 a gallon, he or she is compensated an additional 50.25 cents per mile--the figure Schneider has determined to correlate with fuel costs ranging between $4.500 and $4.549 per gallon--over and above the regular mileage rate. The owner-operator is now receiving $3.417 toward the cost of each gallon of fuel (6.8 mpg multiplied by 50.25 cents). As a result, the owner-operator‘s net fuel cost is a mere $1.085 per gallon ($4.502 per gallon minus $3.417 per gallon).


That gives owner-operators the financial support they need to remain successful, with the protection increases the higher fuel prices go, so they can focus on what Schneider needs most from them, their contractors - safe, on-time, professional freight delivery service.

What's Trucks at Work?

Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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