NASHVILLE- Expert speakers at this week’s at TMW System’s 2009 TransForum user conference here recommended that carriers undergo a strategic makeover so they can survive and prosper in today’s brutal freight market.
"I see a lot of doom and gloom out there, but that also means there is a need to reach out and see if there are opportunities as well," said Duff Swain, president of consulting firm Trincon Group.
"This means the big carriers are going to get bigger and fewer, while the smaller carriers need to get smarter and more niche-driven," Swain explained. "The dynamic forces affecting this [trucking] market must be accepted – they are things we cannot change. So carriers must find a way to live with them or take advantage of them."
He said that costs are only going to go up for the trucking industry across a range of critical areas: equipment, especially due to expensive emission control systems; fuel; technology; and for financing. Combating these rising costs will boil down to operating fewer yet more productive and profitable trucks, and that will require changes in the modus operandi of most carriers.
"We’ve had a ‘one truck-one driver’ mentality in this industry forever," Swain said. "That doesn’t occur in either the railroad or airline industry. When is the last time you saw a pilot take a plane home empty because he was out of hours? The answer is, you haven’t – they bring in a new crew to keep that asset moving and making money."
He also believes truckers only adopted technology such as tracking and tracing systems in the past because shippers demanded it. "Now carriers need to look forward and use technology to manage their own businesses better, to live on the Internet and like it," he said. "Because the ability to share information up and down the supply chain is crucial to retaining and winning business – and it’s only going to get more expensive to do it."
Mark Winkler, vp of strategic planning & business for Bridgestone Bandag, echoed the same message, relating trucking’s ongoing experience with many of these none-too-positive trends to what’s been occurring in the tire business over the last decade.
"We did a strategic analysis of the tire industry and found that while costs to make a tire, were going up 6.5% a year, industry revenues were only going up 3% a year," he explained. "It doesn’t take a mathematician to figure out where that trend will lead you."
Winkler noted that both tires and trucking services are in danger of becoming commodities – that at the end of the day, price is the determining factor of which tire or transportation service is purchased. The reason is simple in trucking’s case, for everyone meets the same basic set of standards: tracking and tracing freight, meeting on-time delivery metrics, etc.
The key going forward, he stressed, is how to bring unique offerings to the commodity that is trucking. This approach calls for a "zone of segment focus" instead of the more typical "zone of customer focus" used by the industry today.
"A ‘zone of customer focus’ is a generic strategy, if you will-- you develop products and services to meet the common needs of your entire customer base," Winkler explained. "With a ‘zone of segment focus,’ however, you are meeting needs of specific segments with products and services that may be incompatible and irrelevant across the segments. Developing specific solutions this way can help carriers, especially smaller ones, build more profit."