Some 4,000 to 5,000 trucking companies did not make it through the "hard times" brought on by the economic downturn. The ones that did will find it a challenge this year to grow revenues back to pre-r...
Some 4,000 to 5,000 trucking companies did not make it through the “hard times” brought on by the economic downturn. The ones that did will find it a challenge this year to grow revenues back to pre-recession norms.
For many transportation companies, the “freight recession” has actually been in effect since 2006, and led to some hard lessons learned, pointed out transportation consultant Dan Goodwill of Dan Goodwill and Associates.
Goodwill, in coordination with Motortruck Fleet Executive, led a day-long seminar designed to help motor carriers rebuild their post-recession operations.
“You only find out who is swimming naked when the tide goes out,” said Goodwill. “It’s not just a revenue erosion issue.”
The defencelessness of carriers against the willingness of shippers to switch carriers to save a few dollars was a case in point. With so much rate cutting going on, it really came down to how much the shipper valued what a carrier had to offer, Goodwill said.
“Survival and prosperity in this business are directly related to having a detailed understanding of the economics of the business. Aggressive rate-cutting to secure business volumes backfired for some companies,” said Goodwill.
For many companies, their value proposition was not strong enough to maintain shipper loyalty.
“Shippers had a mandate to reduce costs and could not pass up the low rates. Many RFPs went out. As a result, carriers have to take a good look at what they may have done wrong or right during the recession. Most shippers seem to divide carriers into three buckets: the must-have key players, other carriers where they don’t have a strong feeling one way or another, and a third group of carriers that they would be willing to change at the drop of the hat. You want to be in the number one bucket -perceived as a must-have carrier,” he said.
The typical approach for many companies over the past year has been to focus on cost reduction to stay in business, noted Goodwill.
But the 2010 economic recovery is expected to be bumpy and slow, and the Canadian dollar expected to reach par with the US and go higher. Fuel prices are expected to rise, and a degree of market rationalization will take place in each sector of the transportation industry.
“Some lenders are not likely to extend credit forever. From a sales point of view, you need to determine your company’s real strengths,” said Goodwill.
The starting point should be a clear value proposition. “What does your company or what can your company do better than someone else? Why not put your time, energy and resources into the thing you really do well and make money at. You also have to have a good idea of your margins, profit, et cetera,” said Goodwill.
He suggested aligning value propositions with profits. Be able to match back hauls with head hauls to create sustainable business segments with growth potential. Determine where the pure freight revenue comes from, such as the costs of fuel, and costs related to each segment of the business. Put the tools in place to track costs and revenue. If you skip this step, you put your entire business at risk, he said.
“Streamline your work flow to make sure operations and sales processes are effective and efficient. Make sure customers know what you do for them, and be ready to secure business from the weaker players. Add more value where there is a profit potential, i.e. in terms of more lanes, more services, and better benefits. Make it difficult for shippers to switch,” he said.
You’ll want to migrate away from non-performing businesses or customers. Methodically grow your business by selecting opportunities that best fit the business. But your key decisions must be fact based: what businesses should I be in and at what rate levels?
“You’ve got to start with hiring good people, train them properly and continuously, and pay for performance. Establish an ‘all hands on deck’ sales culture. You want to be able to weed out those who can perform from those who can’t. In a collaborative environment, you have to work as a team, with drivers being aware of the sales you’re going after,” said Goodwill.
Manage the results, such as revenue, profit and customer growth, but not the activities. Track all the effective sales indicators, such as prospecting appointments, proposals, verbal or written commitments and revenue growth.
There are four “keys” to keep in mind:
• The best way to get business is from existing customers.
• Focus on supply chain solutions rather than shipping lanes.