If your trucking company hasn’t been purchased or doesn’t get purchased by TransForce, will it be in business in five years? That is the question that came up in a recent discussion with a long time industry colleague. The response I received was that he didn’t think his company would survive. I was a bit surprised by the response and asked him for an explanation. This led to an interesting discussion on what it is going to take to make it in the trucking industry in 2014 and beyond.
We both agreed that while the trucking industry has changed in some ways over the past decade (e.g. more use of technology, better cost controls after the Great Recession, LNG vehicles, greater use of 3PLs as customers), the industry is not that much different from ten years ago. The slow economic turnaround since 2008 has created a challenging environment and there is little reason to expect a major improvement in the short term. Rate increases are hard to come by, even with a tight driver situation. Even more of a concern is the lack of innovation in the industry and the threat that such changes could wreak on so many complacent companies.
The warning signs are there. As a Canadian, you don’t have to look much further than Nortel and Blackberry to see what can happen to industry leaders that were not able to keep up with changing consumer needs and quality competitors. At the same time, one can observe what companies such as Amazon and Apple have been able to do to change the paradigm of some long established industries.
Some of the large trucking industry players are making investments in technology and people. They are integrating back offices and focusing on achieving economies of scale. They are thoughtfully expanding their service portfolios and geographic footprints.
Some of the small players are offering solutions that are very tailored to certain industry verticals and geographic areas. Companies that are focused on same day delivery, refrigerated intermodal service, pooled LTL service, energy distribution and other emerging capabilities are creating a space for themselves in the industry.
The companies that have the most to worry about are the large, slow-moving carriers that are being eclipsed by those that offer better service, more innovation and greater flexibility. They are the medium sized carriers that do not have a truly differentiated service portfolio and can be overtaken by companies with broader coverage, better service and more value added. In other words, they are the “man in the middle” companies. Unfortunately, there are many that fall into this category. What are the telltale signs?
Weaker carriers tend to compete more on price. They don’t have a clear vision of where they are going and do not offer any differentiation in the minds of their customers. With weaker operating ratios, they tend to be slower at recapitalizing their fleets and adopting the latest technology. They have leadership teams that have not changed in years and still hold on to old practices that are no longer efficient and effective. While they hear about and see some of their problems, they tend to be “tone deaf”. Through inertia, conflicting priorities and weak leaders, they get stuck and don’t do what is necessary to advance their businesses.
There is still a feeling among many carriers that the worst is behind them. They survived the Great recession. They should now be able to stay in business in the years ahead. My response is where are CP Transport, Inter City Truck Lines, Motorways, Alltrans Express, Consolidated Freightways, Carolina Freight Carriers, Ryder PIE and many others too numerous to mention? They are in trucking company heaven. Many more will find their resting place there if they are not able to adapt and change.
Blackberry once had the greatest smartphone in the world. They were the pride of Canada and are now hanging on by a thread. A look back at the history of business shows that many companies have a strong run for a period of years and then through a combination of complacency, poor leadership and an inability to adjust their business model to changes in their marketplace, they run out of gas. Even some of the greatest companies of all time have suffered this fate.
Will your trucking company be around in five years? Do you have the leadership team, the vision, the plan, the people, the technology and the determination to adjust your business model to the realities of the global economy and constantly changing business environment? Perhaps it is time to take off the blinkers and obtain an independent audit of your company, your industry and the needs of your customers. It may help save your business.
Dan Goodwill & Associates provides independent audits of trucking company and logistics company operations. Check us out at www.dantranscon.com or on Facebook at https://www.facebook.com/DanGoodwillAssociates.
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