Whether or not the US and Canadian economies are technically in recession has been the subject of much debate amongst economists. However, nobody that runs a trucking company needs an economist to tel...
Whether or not the US and Canadian economies are technically in recession has been the subject of much debate amongst economists. However, nobody that runs a trucking company needs an economist to tell them the transportation industry is coping with recessionary conditions.
Kriska president Mark Seymour summed up the industry’s challenges at a recent Driving For Profit seminar (the third installment of a four-part series hosted by KRTS Transportation Specialists and NAL Insurance and sponsored by SelecTrucks).
The deflated US dollar has hurt cross-border carriers that are paid in US funds; the cost of fuel has reached record highs and for the first time has surpassed wages as a fleet’s top operating expense; a shortage of qualified drivers remains an issue; unbalanced freight movements have created pricing challenges; and credit has become harder to obtain.
“All by themselves, these issues are big enough. But put them on top of one another and we have very difficult times,” Seymour said.
Carrier bankruptcies south of the border have reached epic heights, with a truck population the size of B. C.’s wiped from the map in the first quarter alone and double the carnage by the second quarter. Here in Canada, recognizable names such as Al’s Cartage have fallen victim in recent months and many other carriers continue to struggle for survival. However, Kriska’s Seymour said there are steps fleets can take to not only survive, but prosper in a tough operating environment. It all starts with a plan.
Every year, Kriska develops a simple strategic plan. This year’s plan is not unlike the ones devised in better times. It consists of an inverted triangle that features ‘Service Excellence’ at the top.
Seymour said it’s important to ask customers what it is they want from your company and then to be sure to deliver it.
“We diligently follow a process of making sure we clearly know what our customers want, by asking them,” he said. “If we assume we know what they want, we’re putting that relationship and that business at risk.”
By ensuring your company is living up to customer expectations, you protect yourself from some of the risks that are ever-present during tough times, especially rate-cutting.
“If your relationship with customers is based on price, it’s a very fragile relationship,” Seymour said. “It’s only going to last until the next guy comes along and undercuts your rates.”
Instead, Seymour said to focus on “value” when in discussions with customers.
“If you can stay away from the price conversation and talk about value proposition, you get away from comparing two numbers,” he explained. “You don’t want to get into a numbers war -it’s too risky. In an unsophisticated environment that’s deregulated, with so many entrepreneurial wildcats out there, it’s a war that you’re potentially not going to win.”
Second on Kriska’s strategic plan is business development. That remains a priority for Kriska, even when most fleets are simply trying to survive, often downsizing in the process.
“In this type of environment and economy, if you don’t plan to grow, you better plan to shrink,” said Seymour. “Volume will be lost through attrition, customers will be lost through failure.”
Downsizing is achieved through cost-cutting, which Seymour said creates an unhealthy environment. Instead, Kriska has positioned itself to grow during the current downturn, but that doesn’t necessarily mean putting more trucks on the road.
“Our plan is not to grow in terms of adding trucks or adding trailers,” explained Seymour. “Our plan is to grow by improving our asset utilization, improving revenue-per- mile and improving profitability.”
The third item on Kriska’s strategic plan is to establish priority projects. One of these involved making salespeople more accountable for retaining or developing new business.
“We know who’s looking after what now,” Seymour said. Under the new structure, Kriska’s Paul Dean is responsible for retaining current customers while Seymour himself is charged with bringing in new business.
Meanwhile, Kriska also rolled out a new recruiting and retention strategy. Every em-surviving ployee must go on at least one run per year with a driver; drivers now have a driver service rep they can go to with problems; and exit interviews are now conducted with departing drivers.
Seymour said Kriska has also developed a hiring pipeline, so new drivers are constantly being developed, much like a farm system in a pro sports league.
“If you wait until your truck is unseated before you go looking for someone, you’re reacting to the situation,” Seymour said, adding it was much simpler back in the days when his father could just go down to the pool hall when he needed a driver. “It can be six weeks to six months before you turn somebody loose, so you better have a pipeline.”
The current economic climate has necessitated other changes at Kriska as well, none greater than the need to reduce fuel consumption.
In Kriska’s case, that meant implementing strict speed and idle control initiatives.
“We have far more influence on consumption than we do cost (of fuel),” reasoned Seymour. “Fuel’s our biggest cost. If we can reduce fuel by 2%, it’s different than reducing toiler paper by 2%.”
Kriska limits the speed of its company-owned trucks and is equipping the fleet with auxiliary power units (APUs) to reduce idling.
Since implementing these measures, Kriska has improved its fleet fuel mileage to 7.71 mpg while decreasing its idle-time from 40% to just 8%. Seymour said the company lays out its fuel economy expectations and requires its drivers to comply.
“We don’t reward for it, it’s a condition of employment,” he said.
On the operations side, fleets must continue to pass increased fuel costs on to the shipper, Seymour noted.
“If you have a bad fuel surcharge, it’s your own fault,” he said, without much sympathy. “You brought it on with undisciplined decisions along the way. You can’t blame your competitor. The reality is, it’s your problem. The person you blame for causing it is not going to be there to help you fix it.”
When you’ve priced with discipline, you stand a better chance of making customers accept any necessary rate adjustments down the road, Seymour said. He pointed out southbound rates from Ontario/Quebec to Pennsylvania have dropped from $2.85/mile in January 2007 to $2.35/mile in March 2008.
“We gave back 50 cents to the market,” he said. “You have got to go back to your customers and you gotta get it back.” The only way to do that is to support your position with accurate data and charts, which clearly show a customer why a rate adjustment is required, Seymour explained.
“If you show them a picture that they trust, then it’s worth 1,000 words:’You need to give me a rate increase and this is why.'”
Empower your people
Kriska has also turned to technology to find ways of empowering its employees to make real-time decisions that help the fleet become more efficient. It has a dashboard of sorts, called ‘Results Now,’ which displays in real-time key figures such as: revenue-per-mile; miles-per-unit; empty mile percentage; truck revenue-per-day; and about a dozen other items.
Beside each item is the company’s target number as well as the real-time figure for each unit. Dispatchers and other employees in operations are urged to monitor those numbers, and make adjustments as required to bring the number back on target.
According to Seymour, it’s much more effective than having upper management react to data that’s weeks -or even months – old before it even hits their desk.
“Generally speaking, people care,” he said. “If you give them the tools, the goals, the information -there’s a really good chance it’s going to motivate them to make better decisions because they really do care.”
While Kriska isn’t immune to the current economic downturn, the company is able to weather the storm better than most, by developing, communicating and executing a simple strategic plan, Seymour surmised.