In this era of bad news, at least we've got a bit of sunlight at the end of the tunnel with the newest prediction by the government that fuel prices will drop in 2009. Other good news? Trucking historically comes out of a recession earlier than most other industries. So while we were the first to start feeling this downturn — as early as November 2006 — the small motor carrier can be at the front of the line when the upswing begins. But it isn't going to just happen; it requires precise planning to take advantage of the opportunities that will become available. Many of these opportunities will be there one day and gone the next, so positioning your company to be in the right place at the right time is crucial.
Taking advantage of opportunities that present themselves in the coming year requires vigilance. Experts predict additional trucking companies will be hanging up their hats through the first half of the year. Each time a motor carrier closes, its shippers will be searching for other companies to haul their freight. It will be very important to monitor what's happening with your competitors and their customers.
If the primary customer of a motor carrier has to downsize because of economic conditions, that can mean disaster for the trucking company, especially if that shipper represents the majority of the hauler's loads and revenue. A manufacturer that reduces production by 25% (not an unthinkable percentage today) causes a reduction in loads to a single primary carrier by a significantly high number. This isn't good if your company is the one losing the freight. But if the primary hauler goes out of business, the manufacturer is still going to need his product shipped, and there's an opportunity.
The sad fact is many small carriers will put all their eggs in one shipping basket, and when that shipper drastically reduces the number of available loads, it will cause the hauler's failure. A good rule of thumb is not to allow any shipper to represent more than 25 to 30% of your total revenue, so if you have a decline in freight from that customer, you have a smaller percentage to replace.
It's just as important to know the signs of a potential opportunity. Among them is a sudden increase in available tonnage from a shipper for which you occasionally haul, possibly indicating trouble with the account's primary hauler. You might see an article in the local paper about a production decline for a manufacturer, which could mean fewer loads for its primary carrier, or you may hear of a shipper changing its focus from the area it serves to a region in which you currently haul. Another indication is news that a manufacturer is switching from just-in-time shipping to warehousing finished product in order to ship more items at a time to save shipping costs.
Fleet-reduction equipment sales by your competition indicate a company that is in need of cash or a sudden increase of your competition's drivers and owner-operators asking about openings with your company are also good signs for which to watch. The idea is to always keep your ear to the ground and listen to what's going on with your competition and the customers for which you both haul.
Other opportunities will become known by watching the signs of the times. With all this concern about our dependence on foreign oil, almost anything that promotes conservation or use of alternative fuels will interest many shippers. Be on the lookout for “green” opportunities that can help you accomplish a task. Fuel-efficient trucks, APUs and alternative fuels like liquefied petroleum gas to the less obvious, such as better routing between pickup and delivery points and better driving techniques are a few examples. It could also include creating a carbon footprint reduction hauling rate system, such as the Fuel Cost Adjustment Program (FCAP), where the fuel cost is separated from the hauling rate and the shipper charged based on actual fuel consumption.
Traditionally, fuel surcharges look back at what fuel cost in the past, and then attempts to adjust it so it equals a lower amount per gallon. A better way is to calculate a FCAP, thereby separating your fuel cost from the rest of your hauling rate. Determine your break-even point with your fixed and constant variables, add in your capitalization point to figure your base hauling rate, then add in the actual amount the fuel costs on the load, based on the truck's real fuel consumption. It's the same way a mechanic separates labor (line haul) and parts (fuel).
Additional opportunities could come from the changing habits of consumers and how businesses respond. People are going to be shopping closer to home and spending more time at home. Look around at your family and neighbors; most likely what they're doing is what the rest of the country will be doing and that may provide opportunities for you. For example, does your area include a large number of localvores. Localvores are dedicated to purchasing locally farmed food and locally manufactured products to help reduce the amount of fuel necessary to bring those products to their doors. Maybe, as families start cocooning, an opportunity will present itself. These families will buy and sell products like crafts, gardening supplies, movies, games, and other means of home entertainment.
Finally, be creative. Some of the best ideas and inventions come from our darkest times. Don't think that just because it's dark in the tunnel, the first light you see is a freight train. With the right research, focus on the details and being aware of what's happening around you, that light you see coming at you is the glow of opportunity as we all emerge into the sunshine at the other end.
Contact Timothy D. Brady at [email protected]
