Drafting Through Disruption

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The only thing certain in trucking is disruption. The massive shift in supply and demand caused by mandated electronic logging devices (ELDs) is a prime example of how one piece of legislation can wreak havoc on an entire sector.

Unpredictability in trucking is not going away, and the ELD mandate proved that disruption does not have to be negative. For many carriers the last six months has been like winning the lottery. For others it has helped dig graves a little deeper.

Here’s what differentiates the winners and losers.

Embrace disruption

Disruptions happen whether you like them or not, so accept them and use them to your advantage, like the way Richard Petty drafts on a racetrack.

Truckers love motor car racing and understand the concept of drafting. Pulling right up into the slipstream of disruption makes it easier to ride out. You expend a lot less energy than your competitors, so you can put the pedal down and blow on by when the time is right.

Predict disruption

When I ran MSM Transportation I did two things to help predict uncontrolled disruptions.

On a macro basis I prided myself on being connected to the industry. Being active in business groups and associations helped me get educated and stay ahead of the curve. The “buddy network” let me surround myself in a social context and talk to other industry experts.

On a micro basis I relied on my trusted KPI (key performance indicator) dashboard — a quantitative measurement I used to evaluate every key area of the operation. By tracking our performance on a daily basis, I was able to spot trends that helped to predict disruptive change.

Love ’em to death

Great trucking companies entrench themselves into every level of their customers’ organization. Great salespeople become vested in the lives of their customers.

At MSM, we partnered with customers and hosted an annual golf tourney that raised loads of cash for local charity. We formed a hockey team and arranged for pick-up games with customers that included post-game wings and pints. We had fishing derbies, ladies’ nights out, and NFL pools.

When times are tough, people turn to those they know and trust: their friends. Learn to love your customers and they’ll be there for you when you need each other most.

Remember cash is king

When the unpredictable happens, cash — or access to it — is king. At MSM, the only thing that saved us during the wild meltdown in 2008 was our strong cash position and lack of debt.

Many fleets miss opportunities to improve their cash positron at little or no cost to them. That six-inch stack of unbilled loads sitting on your desk is actually a pile of cash. If your annual sales are $12 million and it’s taking you 15 days to invoice after delivery, it’s actually a half-million-dollar stack of cash. Bill customers the day the shipment is delivered.

Meanwhile, watch for suppliers that are factoring. Use your cash to add a couple points of margin by offering a better deal than the margin-gouging factoring companies.

Volatile markets create opportunities. If you’re hammered by chaos, so are your competitors. Cash allows carriers to take advantage of bargain-basement acquisition prospects that only come around during disruptions.

Take advantage of cheap money. Truckers are real-estate rich. In fact, dirt has become a lucrative part of the trucking wealth equation. Leverage that equity to take advantage of the money that lenders are begging to give away to eliminate costly debt.

What’s the next disruption? Maybe it’s weed, which will be legal in Canada soon after this column hits your desk. Whatever it is, ride its bumper and use it to your advantage.

Mike McCarron is the president of Left Lane Associates, a firm that specializes in growth strategies, both organic and through mergers and acquisitions. A 33-year industry veteran, Mike founded MSM Transportation, which he sold in 2012. He can be reached at mike@leftlaneassociates.ca, 1-844-311-7335, or @AceMcC on Twitter.

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Mike McCarron is president of Rite Route Supply Chain Solutions and a partner in Left Lane Associates. You can reach Mike at mike@riteroute.ca

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