DALLAS, Texas -- As shippers continue to commoditize trucking, it behooves carriers to do everything they can to squeeze more productivity out of their equipment.
That was the message from Tom Kretsinger Jr., president and COO of American Central Transport (ACT), when speaking at the Commercial Vehicle Outlook Conference Aug. 23.
“This year, we’ve had very little ability to increase our prices,” Kretsinger said. “If costs are going up but the prices that you can charge are not going up, then what is your solution? The only solution is to find ways to increase productivity. To increase your costs without increasing productivity an equal amount or more isn’t rational.”
For ACT, that has meant taking a sophisticated approach to spec’ing new equipment and adopting traditionally unorthodox spec’s such as 6x2 drive configurations. ACT bought 50 trucks with so-called ‘dead axles’ last year and gained four-tenths of a mile per gallon while also adding payload.
“The residuals on it are unknown, but the thing that’s surprising is, we’ve had some of these available through our lease-purchase program and we’ve had some operators specifically ask for them,” Kretsinger said. “They understand how much money they can save on fuel.”
He noted some driver training is required to prevent excessive tire wear when slippage occurs.
When spec’ing new equipment, ACT forms a committee with representation from the finance and maintenance departments. They look at: reliability; dealer support and footprint; reputation; driver acceptance; and resale values, among other variables. Top of mind, however, is total cost of ownership.
“We don’t look so much at the price of a new truck itself,” Kretsinger explained. “We would like the lowest price we can get, but really the price is what it’s going to cost to operate that piece of equipment over its life, which for us is normally about five years.”
Moving to tag axles and wide-base tires has seen some ACT drivers improve their fuel mileage by as much as 1 mpg. Kretsinger said the company recently hosted a Kansas City barbecue for drivers who could reach 8 mpg and 14 drivers were invited. Twelve of the 14 were owner/operators, he hastened to add.
When shopping for new equipment, ACT develops a master spec’ with comparable components across the various truck brands. It also relies on past experience, surveys such as JD Power & Associates and networking to determine which vehicles are the most reliable and well liked by drivers. Residual value often gets overlooked, but Kretsinger said it’s an important consideration.
“It’s a very important part of the life-cycle cost,” he explained. “We do spec’ our trucks for the residual market unless it’s something like a dead axle where we think we can make it up ahead of time.”
The company mostly orders mid-level interiors, which are appreciated by drivers, potentially lowering driver turnover and are also easier to sell later. Kretsinger said it’s important to work closely with the OEM when spec’ing new equipment.
“The OEM people we deal with are good folks,” he said. “They’re pretty straight shooters and we don’t see much in the way of fluff. There are times when they want to sell trucks more than others, and you’ll see that in the price. Then, the other thing we do is we try to do multi-year purchases at once, but that also becomes difficult. Everyone in the industry is trying to figure out what’s going to happen in two years - how do you do a three-year deal?”
With the cost of fuel and equipment rising, Kretsinger said the obvious place to look for improved efficiencies is fuel consumption.
“There’s no expense to running a truck that’s bigger than fuel,” he said, noting that going from 6 mpg to 7 mpg yields annual fuel savings of about US$3,000 per truck. With shippers looking to drive down transportation costs and in many cases staffing traffic departments with purchasing managers instead of transportation experts, Kretsinger said improving productivity is the only answer.
“Our customers, at least now, will not pay for (the extra costs of trucking),” he said. “If we don’t get it back somewhere, we’re just shrinking our margins and that’s not sustainable over time.”