In an era when running a trucking company is becoming more expensive, more complex and more regulated and smaller fleets are getting snapped up in mergers and acquisitions, some wonder if for-hire carriers that measure their fleet size in double digits will survive, let alone thrive. We spoke with the top executives of several successful fleets of between 50 and 100 vehicles to learn how they do it.
Excel in a niche
“We are solely focused on one thing, and that’s ground expedite,” says Bob Poulos, CEO of V3 Transportation in Cleveland, Ohio. He and President/COO John Sliter previously worked together at Panther Expedited Services. They had moved on to other things, but came together after the recession when they saw a growing need for another expedited fleet in the marketplace. V3, founded in January 2013, has about 70 trucks leased on, mostly straight trucks but also some tractor-trailers and a handful of Sprinter vans.
“A lot of our competitors have diversified into other services,” Poulos says. “Because we’re not doing multiple different things, it allows us to focus on quality, on process, on delivering a very cost-effective product at a very high level.”
Or, as Sliter says, “If you’re really good at making pizzas, why would you open a car wash?”
For Watkins Trucking Co., a third-generation fleet of about 90 trucks (about a third owner-operators) in Birmingham, Ala., the niche is flatbed, especially over-length loads, such as steel beams and pipe. They don’t haul a lot of steel coils. “Everyone hauls those, the rates are low,” says President and co-owner Wayne Watkins.
At R.B. Humphreys, a 54-year-old regional refrigerated food hauler based in Rome, N.Y., the niche is geographic. The 70-tractor fleet operates in the Northeast. Many of its competitors did not survive the recession, so it has seen great demand in recent years. In the past two years, Humphreys’ fleet size has more than doubled.
“Most of the large carriers, such as Prime, C.R. England and KLLM, have reefer divisions, and we see their trucks in our region quite often,” explains President Marvin VanSlyke. “They’re in our region, but they’re coming in with long-haul loads and not necessarily interested in sticking around. Short-haul regional Northeast food hauling is some of the hardest trucking there is in the country. And not everyone is successful at it.” Humphreys’ average length of haul is 525 miles, and that involves a lot of “opening the doors,” as VanSlyke calls the multiple pickups and deliveries.
“Some people search for a niche and work to capitalize on that niche,” he says. “I think the niche has found us.”
Customers, customers, customers
Smaller fleets also often build a reputation for excelling at customer service, with more flexible operations that can allow them to respond quickly to customer needs.
When Rich Terpening Jr. and Craig Terpening took the wheel of their family’s fourth-generation business in 2009, Syracuse, N.Y.-based Terpening Trucking had 32 trucks, delivering fuel to gas stations.
“We saw an opportunity for growth because of the constant calls from customers looking for service and having issues with other carriers,” Rich explains. Today the company has 70 trucks and its goal is to grow to about 100, serving New York State and New England. “The growth of the company has been on service, and being detail oriented and communicating with the customers.”
Small fleets sometimes depends on a single customer for a large chunk of business, but that can be dangerous if that customer goes out of business or decides to change its carrier of choice.
“The key to success is not being reliant on any one customer or any one vertical,” says V3’s Poulous. “We’ve really built a very healthy sales pipeline — 480 different customers across seven industry verticals.”
Get and keep the best talent
Successful companies of all sizes recognize the importance of the right people, but smaller fleets may be more cognizant of it than most. That’s because their leaders are more likely to actually know each face in the organization.
“Craig and I could be the two greatest guys in the world, but it’s the team of people we have surrounding us” that drives Terpening’s success, Rich says. “Drivers, dispatch, mechanics, service managers, the safety department, the guy that sweeps the floors and keeps the place clean.”
For V3, the recession drained a lot of talent from their traditional expedite competition, Poulos explains. “John and I believe this is a people business, and the talent was available in the marketplace to start something. We’ve built our business on tenured expedited employees that have a skillset in our niche.”
That holds true for drivers as well as executives and other personnel. V3, like the rest of the expedite industry, uses owner-operators. “We believe it takes a lot to recruit a guy, but if you retain these guys you won’t have as much cost involved,” Sliter says. “What we try to do is reward people for service. The longer they’re with us, they may make more per mile [and] we may reduce their deductions, so they have reason to stay with us.”
“A lot of people don’t see the need to add a lot of people to the recruiting department in the startup phase, but right out of the gate we put three people in charge of recruiting owner-operators,” Sliter says. “Today, we have four people that are in charge of recruiting and retaining owner-operators.”
That doesn’t mean it’s easy. In fact, Sliter describes finding experienced talent as the company’s number one challenge as it looks to grow.
When the American Trucking Associations releases its quarterly fleet turnover numbers, it’s typical for smaller fleets to have lower turnover than their larger cousins. It’s easier for smaller carriers to provide an atmosphere where drivers are known by name at the highest levels of the company and treated as part of the team.
Rich and Craig Terpening both have their CDLs and have been known to get behind the wheel when needed.
“I actually started as a driver for the company back in 1986,” Craig says. “And Rich did some driving in the early days as well. Both of us also cut our teeth in dispatch, so we know and understand drivers very well.” That mentality, coupled with the small family atmosphere, has led to a rate of less than 1% driver turnover.
At Watkins, drivers are paid a percentage, “so if we get a raise in rates, they do,” says Watkins, noting the company has one of the better percentage rates in the business. Per-mile pay, in contrast, he says, “makes drivers agnostic as to who they drive for.”
Be safe and compliant
Look at the fleets put out of service by the Federal Motor Carrier Safety Administration and you’ll see most of them were small operations, who apparently didn’t know or didn’t care to know that they were subject to the same regulations as large fleets for things like driver drug testing and maintenance programs.
"Staying on top of regulations “is one of the big reasons we’re members of the Alabama Trucking Association,” explains Wayne Watkins, who chaired the association for the 2014-2015 term. “Our safety manager is certified; she goes to the state safety meetings.” CSA is not hard to understand he says, but “it is frustrating.”
Bo Watkins, who works in operations at the company, chimes in that this is a big challenge for the smallest fleets, with five to 10 trucks or so. “They have a hard time already wearing so many hats. We have a safety department and all those things in place.”
On the other hand, Wayne points out, there are companies small fleets can use to outsource tasks such as drug testing, qualifying drivers and keeping up with the required driver files.
At R.B. Humphreys, Van Slyke notes, “We have some very smart people in our company for a reason, and that is to help us comply with all of these new regulations, with the hours of service problems. I fully expect to be able to ride out almost any storm that comes our way in the form of regulations. Now if you ask me my opinion of some of these regulations, that’s a different conversation.”
While compliance and safety are not always the same thing, running a safe fleet today is more important than ever, no matter what your size. Shippers increasingly look at CSA scores, safety records affect insurance costs — and the threat of lawsuits in the wake of a crash is very real.
“We have all the latest and most advanced safety technology,” says Rich Terpening, including disc brakes, anti-rollover technology on trailers, stability control, traction control, electronic logs, driver cameras, etc. The company has won numerous safety awards.
Stay on top of costs
It’s vital to understand your revenue and costs, says Andy Ahern. A transportation industry consultant specializing in mergers and acquisitions, he sees a lot of what companies are doing right or wrong when valuating them for potential sale.
“You need to treat each truck and each driver as a profit center,” he says. “Until you know what your actual cost is for each dispatch, you’re not going to be able to determine what you can do to adjust to maximize profits.” If you only get financial statements yearly, or even monthly, you’re not adjusting quickly enough, he says.
Once you understand your costs, you can do a better job of minimizing them.
Many smaller carriers take advantage of buying programs such as TruckersB2B or discounts through association membership. It might be more general like a state trucking association, or the National Association of Small Trucking Companies, or it might be specific to the type of trucking you do. For instance, V3 finds discounts on fuel, equipment, supplies and more through membership in TEANA, The Expedite Association of North America.
You may find you don’t have to be as big as you think to buy in bulk and negotiate discounts. Once Terpening grew to more than 60 trucks in size, there was a big difference from when the fleet was less than half that.
We “negotiate everything,” Craig Terpening says. “From tires and rims to mechanical work on the trucks and the overall equipment cost is always rising, so we consistently negotiate the best bargains.” As the fleet has gotten larger, that has given the Terpenings more clout in those negotiations.
Keeping a close eye on maintenance costs is another factor.
“As a smaller company, you can manage things like your tire program more effectively,” says Bo Watkins. On weekends, Wayne walks the yard and does hands-on checks of tires. Bo keeps track of what tires he puts on and when and says he can largely predict performance based on his records.
Another of those small cost-saving details can be seen in a nondescript box full of fuses on a shop bench. Wayne explains that they scavenge the fuses from junkyards because if you have to take the truck to the dealer for fuse problems, these days you have to buy the entire assembly — and it’s not cheap.
While keeping costs down, don’t neglect rates. Rich Terpening says “smaller businesses need to stay on top of their costs and raise their rates right along with increasing costs of equipment and health insurance and driver pay.”
Take advantage of technology
Smaller fleets today can access many of the same types of tools and software needed to analyze costs and trends that used to be an option only for their largest competitors.
“The costs of mobile technology and business software capability have come down so much in recent years, notably with the rise of SaaS or cloud-based services, that small fleets can deploy very sophisticated technology very quickly and affordably, so long as they can make use of standardized systems and aren’t looking to customize capability for particular needs,” says David Wangler, president of software provider TMW Systems.
Today’s software can do everything from helping you keep track of your costs to getting more business from customers, he says.
“Fleets can also project a much larger image to their own direct customers by leveraging the capacity of partner carriers or other fleets through load boards,” Wangler says. “The key to success on both ends is the speedy availability of information. Decisions by shippers aren’t made a day or a week in advance; the person on the phone wants to know immediately if you have a truck available and what it will cost them. Only information technology and connected systems can provide smaller carriers with the same response time to that inquiry as the very largest fleet.”
V3 says its first truck had the latest-generation Omnitracs system on board.
“A lot of small fleets don’t invest in technology like the Omnitracs products,” Sliter says. “We are planning not just for today, but for two to three days down the road.”
At Terpening, in addition to safety technology, the company also uses an off-the-shelf electronic dispatching system designed specifically for the petroleum industry — technology some of its competitors don’t have, and a Vnomics coaching tool to help with fuel economy as well as safety.
Invest in quality equipment
The fleets we spoke with emphasized quality equipment to attract quality drivers, to present a good impression to customers and to maximize uptime.
At R.B. Humphreys, says Van Slyke, the company has bought $8 million in new equipment over the past two years, mostly Freightliner Cascadias with automated transmissions and “as many amenities as we can put in there for them.”
Rich Terpening says new, clean equipment is vital to the company’s image, and it’s been buying Kenworth and Western Star trucks. “Our whole image of quality and service really is reflected by the equipment that’s pulling in and out of the customers’ parking lots,” he says.
It also helps with driver recruiting and retention.
“It is a bigger, larger cost up front but it’s very appealing to the drivers, especially good drivers,” Terpening says. The company also specs LBT tank trailers for driver ease of use in loading and unloading, which makes drivers happier as well as more efficient.
Watkins buys mostly new but some late-model used trucks — premium equipment such as Peterbilt and Kenworth with owner-operator-type extras such as dual stacks and extra chrome to appeal to drivers. “So when they pull into the truckstop, they get noticed,” Wayne says.
“Driver retention is a big one, and on the back end, you’re going to get a premium in the secondary market,” Bo adds.
Watkins has also turned over its entire trailer fleet since 2011. The new trailers have automatic tire pressure inflation systems and fold-down steps.
V3 started out with nothing in January 2013 and by last fall had 70 trucks.
“We have a set plan, and for every seven trucks we hire one customer service person to manage those trucks,” says V3’s Sliter. “So it starts with customers adding the business, then we add capacity to support the business, then we add employees to handle the operational piece of it.”
R.B. Humphreys is on the growth fast-track, as well. “Two and a half years ago we [realized we] needed to go to the next level in order to provide the kind of service to the kind of customers we wanted to provide service to,” Van Slyke says. “We went from 25 trucks to 50 in a year’s time and now we’re at 70.”
The main thing limiting the company’s growth, he says, is quality driver availability. “If a high-quality driver walks through the door and is willing to dedicate himself to Humphreys, we will add a truck to the fleet to make sure he has a seat.”
Watkins has been growing at a more cautious pace, adding about 10 trucks last year.
“We’re a little more nimble as a smaller fleet,” Bo says, making sure they can scale back if needed as they had to during the recession in 2008.
“As long as the demand is there for our services, we’ll continue to grow slowly,” says Wayne Watkins.
How big is too big? The answer varies.
At V3, Sliter says, “We’re not looking at ourselves as a small fleet. We focus a lot on truck driving and driver recruiting. We’re looking at ourselves in four years as a 400-truck fleet.” That would make it one of the top three carriers in its niche, Poulos says. “It’s critical mass and brand recognition to be more successful bringing on customers and bringing on drivers.”
At Terpening, on the other hand, they believe they will be happy with about 100 trucks.
“We think 100 trucks would be manageable and we’d still be able to keep our quality of customer service,” Rich says.
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