Advice for Carrier Executives

[ATeam]

Excerpt from my blog today:

I spent a good part of today reading articles and blog posts by various trucking company consultants and executives. These pieces read like a broken record. As with transportation company annual reports, so too with the literature. Everyone is talking about the same thing and suggesting the same strategies. They all are cutting costs, reviewing customer relationships, developing in-house brokerage operations, improving driver productivity and positioning themselves to capitalize on the expected recovery.

In other words, today's trucking company executives remain captive to the business school educations they received. They are focused on the things that got them good grades and teacher praise in the classroom.

Common in these pieces is the notion of an expected recovery and the assumption that better economic times lie ahead. I'm not looking for better times ahead. I'm looking to succeed as a one-truck owner-operator because others are going to go broke before Diane and me, leaving us with profitable freight to haul.

At present, two items of consequence to Diane and me are going down; the supply of available freight and the number of trucks to haul it. In recent years and at present, the supply of freight has declined faster than the supply of trucks, perpetuating an excess of trucks. While thousands of carriers and individual owner-operators have been forced out of the business, it has not been enough to reach a sustainable balance between trucks and freight. While an increase in the amount of available freight would certainly help create a sustainable balance, will it happen? I don't think so, at least not anytime soon.

Remember the experts who said last year that a recovery will begin in mid 2009? Well, here we are in mid 2009 and the presumed recovery is nowhere in sight. Wall Street professionals are giddy these days, not because a recovery has begun but because they see signs that the rate of economic decline is slowing. These are the same blind fools that failed to see the crash of 2008 coming and remain today blind to the fact that trends have inertia and the current trend is down.

While the rate of decline may have slowed, there is no good reason on earth to believe that the slower rate of decline means a recovery is at hand. A slow decline can continue for a decade. A slow decline can re-accelerate. A slow decline can level off to zero growth and stay that way for a very long time. The assumption that a recovery will quickly follow a decline is as groundless and hazardous to believe as the assumption that the economy was in good shape in 2007.

The trucking company executives that are relying on these experts to predict the recovery are relying on people who clearly don't know better than anyone else when a recovery will happen, if one happens at all, and how strong it will be.

I am as eager for an economic recovery as anyone else. But I am also mindful of the "lost decade" Japan experienced after a major crash, and the profound negative economic impacts our recent and massive pain-avoidance bailouts will push far into the future.

Pretending that a recovery is likely to begin in the near future is a form of denial and the easy way out. If a recovery is assumed, a recession is nothing more than an inconvenient interruption of the way business "should" be and the way things "should" work. Pretending that a recovery will bail you out shields you from having to question long-held assumptions about what works in business and what your goals should be. Pretending that a recovery is the answer shields you from the unpleasant task of staring facts in the face, including the fact that the economy continues to decline and it may be decades before freight volumes rise to pre-crash levels.

I don't believe trucking company executives should be positioning their companies for future growth. I believe they should be positioning their companies for smaller operations and sustainable profitability. Those who make decisions today based on a desire to have market share in the future do so at great peril to their companies and careers.

I fear that today's trucking company executives, having seen people very close to them lose their jobs, are afraid of losing their own. Consequently, they are acting like sheep, taking cues from each other and reverting to answers that made them feel good and look good in business school.

This truck driver's advice to trucking company executives is: Hauling more freight is not the answer. Hauling profitable freight is. Focus not on gaining market share tomorrow. Focus on making profits today. Market share will take care of itself as your competitors go broke and leave the remaining freight to you. As many before you have already learned, if you don't make profits today, you won't be around to make them tomorrow.

 

[cheri1122]

That was very well put, and I totally agree.

 

[Lawrence]

100% Spot on.

 

[aileron]

....
I don't believe trucking company executives should be positioning their companies for future growth. I believe they should be positioning their companies for smaller operations and sustainable profitability. Those who make decisions today based on a desire to have market share in the future do so at great peril to their companies and careers.

I fear that today's freight transportation industry executives, having seen people very close to them lose their jobs, are afraid of losing their own. Consequently, they are acting like sheep, taking cues from each other and reverting to answers that made them feel good and look good in business school.

This truck driver's advice to freight transportation industry executives is: Hauling more freight is not the answer. Hauling profitable freight is. Focus not on gaining market share tomorrow. Focus on making profits today. Market share will take care of itself as your competitors go broke and leave the remaining freight to you. As many before you have already learned, if you don't make profits today, you won't be around to make them tomorrow.

ATeam,

I agree with you 100%. And unfortunately this is what I heard in the conference call yesterday with our dear company. Such a waste of time those 30 min were.

 

[sdelliott31]

Well said. There is a time when you can put the blinders on and there is a time to speak in cold facts. Now is the time to focus on finding ways to keep your base happy, not necessarily growth. Great Post

 

[xiggi]

Great read, the one place I see a challenge to trucking execs with your thoughts is for the public companies. They are beholding to their shareholders and without yearly growth at some point stock prices will decline for those companies. That can place a public company on the chopping block.

I do not disagree with your thoughts at all personally. It is just the most shareholders and the companies that trade the stock for them that presents a huge challenge for that type of trucking compy.

 

[greg334]

I think Phil is right to a point, as many will expect me to trash him, my post is not about trashing him but throwing in some random thoughts that may be augment his position.

For the past 12 months I have been talking to people who make their living studying economics and the political scene at U of M. It has been enlightening to talk to these people and get a different point of view. It is the reason I have been working hard to help others prepare for the worst and telling them to pray for the best.

Phil makes a good point to tell the execs about the problem he sees but this is a problem not just with the execs, it is a problem with everyone in the chain – from the shippers to the sales people to the drivers. We have become overly emotional about a lot of this stuff, many of the things we can help prevent on our level but there are things that are out of everyone’s hands.

As a country we have been on a spending spree but that will soon end. In the near future, we have a lot of commercial debt coming due and there is no one to refinance them around to take a chance. We are told that China, are largest debt holder is looking to turn our debt over to the IMF in exchange of Gold because we have allowed our selves to let the dollar slip even farther.

The dollar has more of an effect on our work than the stock market.

Here is the thing, maybe Phil won’t agree with this but it is closer to the truth - there are no experts with this economy and never was, everything is speculation on what will happen next and everyone is hoping that their guessing id the right guess, from the president down to the exec at mom and pop trucking.

Recovery?

Maybe but not as one would expect because it hasn’t been really defined because the old definition has been thrown out, with the old school of thought on how to fix the economy. I think that we can’t see a recovery because we don’t know what to look for or how it would feel.

I keep saying it will get worst for us before it get better, it has to but it is not the guy at the top struggling to get his company through this that is to blame, no one seems to understand that. Phil’s premise is that these guys need to listen is right, without a doubt but I think they are listening to anyone who wants to tell them something because they too are trying to figure it out.

Will there be equilibrium in the industry?

I think so, I am seeing serious signs of it right now with the glut of drivers in the trucking industry only last year had a big shortage of drivers but before most of you look for that, you must look at one other factor, the differences in the companies and what markets they serve. Phil may be right generally speaking but many of us are serving a small market and are unlike Schneider or Hunt, we deal with different customers and their needs differently. The big difference is that we are on the front lines, an expendable part of the industry, a place where a shipper may need it tomorrow morning but only if it is now in budget or can be justified.

Do the big carriers, have an effect on us?

I only think to a point, which maybe Phil is saying. I look at my work as a filler for these big guys, I have taken freight from both mentioned companies, a lot of freight from a real trucking company that I work for and all at a good rate but they only have an effect on my work when they step into my market, which is filling the gaps – make sense? I remain positive because of that simple fact, I see where flexibility pays off for a carrier and the driver/owners need to understand that.

The problem with that is most of you don’t work for the same company, your carrier markets the services differently than my carrier and you see rates drop off and see 3PL stuff is being offered to keep operating. This is where the equilibrium in this niche market hasn’t happened yet to the extent we have seen in generalized trucking.

3PL is the problem for most and this is where market share matters for carriers who have customers. Because if we are to assume that an exec needs to worry about high profitable freight, the market may evaporate in front of them, they may be chasing a non-existent golden goose while others are marketing their services to gain market share in their place for a reasonable price. Don’t let some of these customers fool you, there is no loyalty when it comes down to being within budgets.

Good work Phil

----- if anyone wants to know what that was all about, read The General Theory of Employment, Interest and Money by Keynes