No Red, No Blue, Just Service Acklie Combines Maintenance for Four Carriers
Combining separate operations for efficiency while retaining the benefits of individual company identities offers challenges as well as benefits. Changes underway at the Acklie Companies provide a good illustration.
On January 1, 1999, the group of truckload carriers based in Lincoln, Nebraska, opened a new division, Acklie Maintenance System, to serve all its operating companies. The Acklie Companies are four truckload carriers: Crete Carrier Corporation, a dry van and a dedicated refrigerated fleet based in Lincoln, Nebraska; Sunflower Carriers, a refrigerated fleet in York, Nebraska; HTL Truck Line, a dry van operation in Council Bluffs, Iowa; and Shaffer Trucking, a refrigerated carrier in New Kingstown, Pennsylvania. In addition, the Acklie Companies operate Crete Intermodal, a Plan III dry van rail intermodal carrier in Lincoln. Duane Acklie, chairman, began this collection of carriers with the acquisition of Crete Carriers in the 1960s. Sunflower and Shaffer were purchased in the early 1970s. This was followed by the acquisition of HTL and the formation of Acklie Intermodal.
In total, the Acklie Companies operate 5,200 tractors and 12,000 trailers. Roughly 2,500 of the trailers are refrigerated. With a fleet of this size, about 1,600 new tractors per year are required for replacement. The fleet standard is a C120 Freightliner conventional with a 435 horsepower Detroit Diesel engine, a 10-speed Meritor overdrive transmission, and a Meritor tandem drive axle. Cutting Duplication
Initially, all carriers operated autonomously, each with its own maintenance, marketing, operations, and risk management departments. As the intense competition following deregulation continued to drive down rates for truckload carriers, Acklie and his staff began looking for ways to use the size and expertise of the companies in a way to benefit the entire organization. This led to a search for duplicate operations in the total system.
Risk management was the first effort at consolidating services at the corporate staff level for all the operating companies, says Tonn Ostergard, president and chief executive officer of Crete Carrier. Success with a single insurance program led to other efforts to use the buying power of the Acklie Companies for the benefit of all carriers. The next step following corporate-wide insurance purchasing was central purchasing of tractors, trailers, and other equipment.
Managers at the Acklie Companies use the term "consolidation" with great care, preferring other terms such as "combine" or "centralize." "For many in business, 'consolidation' carries the connotation of downsizing and job losses," Ostergard says. "That is not the case at the Acklie Companies. We have made changes to use our personnel and resources more effectively. We are already short of maintenance technicians, so we certainly have not reduced our staff. In a tight labor market, drivers and technicians are two of the most difficult groups of workers to find."
Combined Information Systems About 312 years ago, the Acklie Companies switched from company-level computer departments to a central management information system. "Prior to our switch to a centralized computer system, each of these companies had a stand-alone information department with its own dedicated AS400 computer," Ostergard says.
Maintenance was the next logical target. The operating companies have 21 terminals spread primarily throughout the Eastern US; there is one terminal in Salt Lake City. Seventeen of these terminals have shops and offer maintenance services to all Acklie carriers. Prior to Jan 1, 1999, the first day of official business for the Acklie Maintenance System, each of these shops belonged to, was managed by, and budgeted to one of the operating companies.
Terminal location is based on customer service requirements and driver availability. "We built these terminals for their proximity to customers and to large pools of drivers," Ostergard says. "Driver availability around the terminals is probably the most important factor. With widespread sources for drivers, we can get them home on a consistent basis, which would not be possible if they all lived around Lincoln, Nebraska, or New Kingstown, Pennsylvania."
Running a complete maintenance department at each operating company actually required a certain amount of duplication, says Karel Znamenacek, executive vice-president. For instance, each company had a director of maintenance who reported to the company president. Each company maintained its own parts inventory, and each company was responsible for its own warranty filings and collection.
"We believed that forming Acklie Maintenance System for the entire company would take away the duplications," Znamenacek says. "It also would streamline management. We have relieved the company presidents of the maintenance burden. Now the shop supervisors report to Pat Donohue, director of Acklie Maintenance System. Pat, in turn, reports to me.
"The company presidents still get the same information about operations, but they rely on AMS to handle fleet maintenance just as they rely on any other vendor. We have taken the operating carriers out of the maintenance management business and put them in the position of purchasing maintenance services from an internal company vendor."
Planning for AMS began early in 1998, following discussions about streamlining maintenance that had been ongoing for at least two years, Ostergard says. One of the first goals of the proposed system was to capture all the costs inherent in fleet maintenance and allocate those costs to the appropriate place. Other goals were to take advantage of volume purchasing and to improve parts inventory management.
Probably the biggest benefit of AMS has been its ability to provide a clear picture of total maintenance costs. "Before we started AMS, maintenance in these companies was covered with a blizzard of paperwork," says Pat Donohue. "Any fleet could use any shop, but since the shops were owned and operated by different operating companies, keeping track of responsibility for costs was a nightmare.
"For instance, a Crete Carrier tractor might get an inspection in a Shaffer shop with the result that a component covered by warranty was replaced. The labor cost had to be calculated and billed correctly from Shaffer to Crete. Usually that would result in labor accrued to a Shaffer tractor in a Crete shop being used to offset the Crete charge in the Shaffer shop. In addition, the warranty claim had to be filed and credited to the proper operating carrier. With four operating carriers, trying to track costs was like following a ghost."
New Operating Division The January 1, 1999, officially opening date was chosen to coincide with the parent company's tax year. As of that date, all personnel in all maintenance operations were moved into the new division. The payroll at AMS now covers 342 people, including a small support staff in Lincoln and personnel at the 17 shops. The Lincoln staff provides overall supervision, warranty management, road breakdown assistance, and parts inventory management.
The most immediate result from formation of AMS has been a 20% drop in parts inventory, a reduction that is valued at more than $1 million, Donohue says. AMS is totally responsible for managing parts inventory in the Acklie Companies. Although parts support service is available from some vendors, AMS does not include equipment dealers in its parts management. "Vendors are a part of the total equation," he says. "Our shops stock only the fastest moving parts. We prepare a monthly report on those items to make sure that each shop maintains an appropriate inventory level. For slower moving parts, we rely on our dealers to have them available when needed. We do not keep any large component spares unless a vendor makes one available as a promotional effort or as part of a test. The parts stocked in each shop inventory reflect the usage experience at that location. The history we build within AMS will give us a better picture of how to maintain our inventory levels."
In addition, the change from four separate maintenance companies to a single system helped ensure consistent use of the Fleet Assistant maintenance tracking software supplied to the Acklie Companies by Freightliner Corporation. Information gathered with this maintenance software will help Acklie Companies fine tune operations and equipment specifications, Donohue says. It also can help document warranty claims. "This software and a central processing system give us the information vendors need to correct problems," he says. "When vendors have good information about problems, they will make corrections, but they need hard data, not just a bunch of unrelated stories from drivers and mechanics."
Central Warranty Filing Warranty filing and collection has improved as well. "With the advent of AMS, we have a single warranty department," Donohue says. "Now, instead of paying claims to the operating carriers, vendors make their payments to AMS. We are probably collecting more from warranty claims than ever before; at least, we are more accurate with our claims."
Handling warranty claims through a single office extends to road service as well. A driver who needs a warranty repair while on the road must check in with AMS road service. A member of the road service team then follows up with the dealer that performs the work. "We have a general discussion about the condition of the tractor as well as logging the specific reason for the repair," Donohue says. "Maintaining these dealer contacts and the thorough records that go with them helps us keep track of our vehicle specification performance."
AMS handles warranty claims in two ways. In the larger shops, vendors assign their own personnel to perform repairs covered by their warranties. For instance, Freightliner technicians handle many tractor repairs. These jobs begin with an AMS work order that in turn generates a dealer work order. These technicians work from dealer parts inventory. If an AMS technician performs a repair under warranty, the parts are taken from the AMS inventory and a claim for the parts and labor is filed with the appropriate vendor. In general, most work performed by AMS is covered by warranty. Tractors at Acklie are on a three-year trade cycle and are covered by extended warranties for that entire period. Tires, belts, and hoses are about the only items not replaced under warranty, Donohue says.
Simple PM Program With heavy repairs covered by extended warranties, AMS spends most of its time on preventive maintenance. This simple program calls for a monthly inspection coupled with a conversation with the assigned driver. This inspection usually takes place between 10,000 and 12,000 miles and requires about 30 minutes of shop time. The next step in the PM program is an oil and filter change every 25,000 miles. That interval is under review and probably will be extended to 30,000 miles in the near future. An oil and filter change coupled with an inspection takes about two hours. "We run Detroit Diesel engines with Exxon lubricants," Donohue says. "Our decision to extend the change interval is based on oil analysis in a dedicated fleet that we see every two weeks. Samples are pulled every 3,000 miles. Based on the results of that analysis, we could extend the oil change interval all the way to 40,000 miles by the end of the next year. Extending the change interval saves shop time as well as oil and filters; however, we don't want to go too far, because an extended interval keeps trucks out of the shop and takes away an opportunity for inspections."
The third step in the AMS maintenance program is a detailed inspection at 150,000 miles. This includes an engine valve adjustment, a fuel injection system adjustment, battery inspection, alternator bearing inspection, and alternator function test. In addition, data from the engine electronic control module is extracted. "We mostly are looking for fuel economy information from the engine data," Donohue says. "The fleet averages between 6.2 and 6.4 miles per gallon. New tractors are performing slightly better than the older ones."
Trailers are inspected every 60 days. The automated pretrip routine for refrigeration units is run at this time. Refrigeration unit oil is changed an average of once a year.
AMS Shops Preferred "We try to do all preventive maintenance in one of the AMS shops," Donohue says. "That gives us a chance to lay hands on the equipment and talk to the drivers. Maintaining contact with our drivers may be the most important part of that equation."
The tractor trade cycle is driven by equipment residual value, Ostergard says. Used truck values have dropped slightly in the past year, leading to some discussion of a longer trade cycle. With average tractor utilization of 120,000 miles a year, the trade cycle could be stretched to four years without running tractors past the end of the warranties.
Trailer life is different. Dry vans have a longer service life than refrigerated trailers. In the recent past, trailer cycles have been determined more by the competition to have an all-53-ft fleet than by duty cycle. As the fleet replacement is finished, trailer cycles will become more stable. Reefers will be replaced more often than vans to ensure that insulation properties remain sufficient to protect freight properly.
In a series of meetings with maintenance personnel prior to the formation of AMS, corporate officers explained that the new company would provide an environment where all employees should consider all equipment in all fleets as their responsibility. Maintenance personnel would work for the entire organization, not a single operating carrier. "We explained that this would upgrade the level of service for all the companies," Znamenacek says. "We also wanted to end any feelings that drivers might have about getting priority service or delayed service depending on which operating company ran the shop. We explained that truck color no longer mattered. Red or blue trucks would get the same priority in every shop."
Red-Dry; Blue-Reefer That statement has to do with the color of tractors in the operating companies. The two refrigerated carriers, Shaffer and Sunflower, run blue tractors. Crete Carrier and HTL paint their tractors red. Equipment is identical at all four companies except for color.
"We also explained that the operating companies are in the trucking business, not the maintenance business," Znamenacek says. "In a sense, AMS is a contract maintenance service that sells maintenance to the fleets at a fixed rate. The difference between this and other contracts is that we purchase the service internally rather than from a third party."
The new system is designed for easier cost tracking and information management efficiency as well as improved fleet utilization, Donohue says. "The basic goal is a better understanding of the lines of authority for maintenance management and total adherence to standard maintenance procedures throughout the company," he says.
Reasons for Change Explained In addition to explaining what AMS was expected to accomplish, Crete officers explained why the change was made. Expenditures for parts led the list. The Acklie operating carriers were spending more for parts separately than projections said they would as a single organization. Operating as a single maintenance system would give corporate officers a clearer look at information if reports came from a single source rather than four sources.
"We also addressed the driver complaints, some legitimate and some not, that said service levels varied according to shop and highway equipment ownership-the truck color problem," Znamenacek says. "If we have only one maintenance source for all four carriers, the color of the trucks doesn't matter."
The biggest reason for the change was to generate a sense of urgency and singleness of purpose throughout the companies, Znamenacek says. "Attempts to accomplish our goals have not been as successful as we would like because whether we admit it or not, decisions still are made for the good of the individual operating carrier at times," he says. "These decisions can cost the entire Acklie group more money than necessary. By forming a single maintenance company, we send the message that all equipment is equally important to corporate results."
AMS is managed as a separate entity within Crete Carrier. It is not a profit center and not set up to make money and funnel revenue away from the operating carriers. The purpose of AMS is to lower overall maintenance costs for the entire corporation, Znamenacek says. "Running shops and taking care of trucks has been the easy part of setting up AMS," he says. "One of the biggest challenges has been building a baseline for costs so that we have accurate information for setting our shop rate. AMS is designed to break even, so we need an accurate rate that reflects the cost of services used by the operating carriers."
