ORLANDO – Trucking may be facing a level of “disruption” not seen since trucking deregulation in 1980, said four “trucking legends” who went through it – but basic business concepts such as focusing on a niche, financial management, and treating drivers right that will likely help trucking companies survive, according to a panel discussion at the American Trucking Associations’ annual Management Conference & Exhibition.
The rise of e-commerce and final mile delivery, autonomous vehicle technologies, even freight delivered by pneumatic tube are among the “disruptors” we hear about that will change trucking.
But it’s not the first time this industry has faced major disruption.
John Smith, chairman of CRST International, offered an overview of deregulation, which dismantled a complex system of operating authorities and rates controlled by the Interstate Commerce Commission.
“I thought we were prepared, but we weren’t,” he said of the Cedar Rapids, Iowa-based company, founded in 1955 as a steel hauling operation. “When 1980 hit, everything changed; there was no part of our organization remained the same.” It went from unionized to mostly non-union, took out many layers of management, and had to become much smarter on cutting costs and offering competitive prices in order to survive.
Before deregulation, he explained, “We were an inward-looking company. Once you start putting emphasis on regulations and not customers, that’s where things start to go wrong. So [pre-deregulation] we were VERY good at working with the Interstate Commerce Commission. We had to change to be customer- and market-oriented.”
For 14 years, he said, CRST’s rates went down. “When you take inflation into account, they came down 25% before they started moving up. If I had known in 1980 that I would have had to take rates down 25% to be competitive, I would have left the industry.”
In order to be profitable, he said, CRST realized “we can’t be everything to everybody.” So the company went after niche markets, starting with the flatbed market it had started in, and split the company up into divisions to allow each one to focus on its niche. Cross-country team operations today are under CRST Expedited, where customers are willing to pay more to get it there faster. It bought into the blood plasma hauling business and now it’s the largest blood plasma hauler in the United States.
Another “legend” who succeeded by focusing on a niche was Charles “Shorty” Whittington, who late last year stepped down as CEO of the company he founded, Indiana-based Grammer Industries. Whittington used his farming background growing up to create a small fertilizer and grain trucking firm. He grew it into a hazardous materials specialist with more than 200 trucks, hauling anhydrous ammonia, liquefied petroleum gases, carbon dioxide, nitric acid and other bulk products for industrial and agricultural customers.
“I wanted to be the best brain surgeon in the ammonia hauling business,” he quipped. He had a smaller customer base, “but I knew every one of those guys by first name. I could show them reports about heir inventories they didn’t know. So we become the specialist.”
Dan England, chairman of C.R. England, pointed out that disruption can also create opportunities, just as deregulation did for many truckload companies such as C.R. England. “It was somewhat difficult in those first few years, we had to lower our costs as well, but great opportunities opened up as other carriers who couldn’t get their costs in line failed and we were able to grow,” he said.
And while adopting technology such as computers in the early ‘80s and in-cab safety technology have helped make the company more efficient and safer, “at the end of the day you’ve got to be able to manage your company in an efficient way,” England said. Managing people is important, as is accountability. “Goals are set, scorecards are kept, people are given their responsibilities and held accountable for it,” he said. “The fundamentals have still got to be in place for us to succeed.”
For Clarence "C.L." Werner, one of those fundamentals was not overextending the company financially. "I never had any operating capital that I didn’t own," said Werner, who founded Werner Enterprises in 1956 with a single truck and today is executive chairman of the Nebraska-based truckload and logistics giant. "And to this day we don't. We never leverage real estate, and I never had to depend on banks. That's something I've seen that didn’t work for a lot of people and I still see it happening."
Panelists agreed that one key to success is the driver. And with a driver shortage worse than it’s every been, “drivers are finally getting what they need,” Werner said, saying his company has raised driver pay more than 10% this year.
“Not only do you need to pay them well, you need to treat them right,” England said. That very morning, he said, he had gotten an email from a driver in Laredo who was supposed to be loaded and on his way hours ago. “It comes back to these fundamentals that you’ve got to treat them like we would want to be treated.” And that goes for making sure shippers and receivers treat them right, as well.
Whittington renewed a call he made a decade ago when he was ATA chairman, and that’s to consider hourly pay for drivers. When shippers say they can’t pay the kind of rates needed for that type of move, he said, “I say what kind of a truck driver do you want? Someone who works at McDonald’s, or the server at a 5 star restaurant? You want the server at the 5-star restaurant, this is what it’s going to cost you.”
Smith, who is chairing a new ATA Workforce Development Subcommittee, said one area he’ll be working on is getting younger drivers into the industry. “I’ve tried to get 18-year-olds for year so we could hire them out of high school,” he said.
Werner pointed out that our company the average age of drivers coming into its driver training schools is about 30 years old. “They’ve already had a couple of careers.”
And despite the current administration’s anti-immigration stance, Smith said, that’s another potential source for additional drivers.
Changes in the industry have led some to predict that the owner-operator and small carrier will suffer. But the panel believed that there would still be plenty of opportunities for the small entrepreneur.
“I think there’s going to be a lot of opportunities for small carriers,” said Werner. “The logistics business is booming,” he said, including Werner’s logistics business. “A small career that hauls for us can make a lot of money hauling for a logistics company,” he said, because of the ability to operate with fewer operational staff. “I'm guessing half of our truckload freight is hauled by the logistics company.” In a time of driver shortage, he said, these small fleets have an advantage because they truly understand drivers. “We have some of them up to 30 trucks already. I think carriers like us, we’re not going to grow as fast as we used to unless we’re in the logistics business.”
England agreed. “The guys with one to five trucks, we kind of envy them in some ways. They know their costs, at least if they’ve got common sense; they can offer great service, they can keep those drivers, there’s as much of an opportunity as there’s always been.”