TransAm Finishes New Terminal Shippers Demand Growth; TransAm Trucking Complies

Nobody expected this - certainly not John Jacobson Jr. TransAm Trucking was founded in 1987 as a small truckload carrier and was intended to remain a small family business with a maximum of 150 independent contractors.

Today, TransAm is in its third home and its second in Olathe, Kansas, since it began business in rented space in one of the underground warehouses that honeycomb the Kansas City area. The company operates a fleet of 700 tractors and 1,400 trailers. Of the trailers, 1,050 are refrigerated. In fact, the entirety of the original plan has been superseded. Only three independent contractors remain in the fleet.

"We really did intend to remain a small company where everybody knew everybody else and where managers would have an easy time following the flow of business and controlling activity," Jacobson, TransAm founder and president, says. "That was on purpose. We had just left a moderately unpleasant situation resulting from the sale of National Beef in Liberal, Kansas, to an investment group back East. National Beef is a packing operation founded by my father. I had been in charge of National Carriers, also in Liberal. At the time, it was the third-largest refrigerated carrier in the country. So in reality, I had had all the life in a large corporate structure that I could handle back then. We had a simple idea about business and about trucking. We didn't start out to be the biggest. We set out to be the best at what we did."

Simple Rules, Fair Treatment TransAm Trucking still is not the biggest, and claimants to the title "Best" abound, but the company has not changed from its founding vision. "When my wife, Trudy, and I started TransAm, we envisioned a place where each person would have the opportunity to be successful, to be respected, and to be appreciated," Jacobson says. "We knew that we would operate by just a few rules: Treat people fairly; keep the lines of communication open; and maintain consistency in handling every situation from dispatching loads to meeting the personal needs of people in the company. We've been able to hold to those ideas. Situations are all handled the same for everybody. Drivers are treated the same whether they have been here 10 years or 10 days. Maintaining a level field for everybody helps us avoid favoritism and prevent internal political disputes.

"We know that this works because, at 76%, we have one of the best driver turnover rates among refrigerated carriers. More than half our drivers have been here two years, and the average tenure is 3 11/42 years. We are absolutely obsessed with driver retention. We try to hold an exit interview with every employee who quits, and we talk to the individual fleet manager about every driver we lose. We want to know why they quit so we can keep that situation from coming up again."

Working so hard to find and retain drivers is new to TransAm. Five years ago, the company spent almost nothing for recruiting. That has changed. The budget for driver recruiting is now in excess of $600,000 a year. Results from this have been positive. Less than 3% of the fleet is idle for lack of drivers. "The worst we have seen recently is 18 tractors parked because we didn't have enough drivers," says Russ McElliott, TransAm vice-president and general manager.

Shippers Demand Capacity The shippers sought by TransAm, meat packers primarily, quickly changed the Jacobsons' minds about holding growth to a minimum. "We may have wanted a 150-truck fleet," he says, "but our customers certainly didn't want to work with such a small carrier. Many of them said plainly that they could not consider using a fleet smaller than 450 trucks. The original idea may have been for a small company, but successful business just doesn't like and will hardly tolerate smallness. So early in our history, we pushed for growth, sometimes reaching 30% to 40% a year. In recent years, we have consciously cut back from that, trying for only 10% to 12% a year. For 2000, our fleet growth will be around 5%. Revenue for 1999 was $87.6 million with an operating ratio of 95. We would like that profit margin to be a little wider."

With the company at a size that satisfies its customer base, it now can focus more on improving profits. Shippers care most about having equipment available for their freight; they are not too concerned about motor carrier profit unless a carrier goes out of business, Jacobson says.

TransAm Trucking is primarily a meat carrier, running from the Rocky Mountains to the East Coast - Denver east all the way to Maine and south to Florida. In addition to meat, the company handles a large variety of dry freight, including one steady haul that moves dry vans from Florida to Puerto Rico by ocean-going barge. In fact, the product mix is about 50/50 between perishables and dry.

"We use reefers for meat and other perishables and for selected dry freight and vans on lanes for dry freight only," says McElliott. "If the rate for dry freight is high enough, we can haul it in a refrigerated trailer and still make money. The decision about which trailer to use is made before a single load of freight moves on a lane. We look at the proposal and decide whether a traffic lane requires vans, reefers, or both. Strict internal controls on how freight is sought keeps us from having the wrong trailer in place for a load."

Trailer Costs Van freight nets more profit, Jacobson says, because the equipment doesn't carry the higher incremental costs associated with refrigerated trailers. Only part of those incremental costs come into play when hauling dry freight in a reefer. A refrigerated trailer costs more than a dry van, and a significant cost is associated with the refrigeration unit. Those two cost factors are inescapable when moving van freight in a reefer. However, dry freight does not require fuel or maintenance for the unit; so operating cost is lower for dry freight than for refrigerated freight.

"The obvious question is why we stay in the refrigerated business," Jacobson says. "The reasons are fairly simple. The ability to handle refrigerated loads still provides us a competitive niche that many shippers need filled. It also shows shippers of time-sensitive freight that we have the service levels to meet their needs.

"We probably have one other reason as well. This family has always been involved in the meat business and probably always will be. Meat packers are extremely competitive and sometimes adversarial. They can be tough to handle, but we understand that. We've been in the packing business, and we understand what they are trying to accomplish. We know that the demands they make are not frivolous, that those demands are simply a response to the pressures imposed by their retail customers."

TransAm Trucking started work on a new terminal in July 1988 and moved into the new facility in May 1999. This is the company's second terminal in Olathe. It is the first that TransAm has owned. "We didn't move far, about half a mile from our previous terminal," says McElliott. "The old location has become a truck dealership since we moved. It wasn't a bad site. We had 10 acres with 9,000 sq ft of office space, but the buildings were fairly old, the shop had only eight bays, and the lot wasn't paved. We just ran out of space."

Concrete Costs The new terminal is on 45 acres and has two new, state-of-the-art buildings. Seventeen acres is paved with heavy duty, highway grade concrete that is nine inches thick to resist the freeze-and-thaw cycle that causes the ground to move, breaking up lower quality paving. Research done before the paving began showed an average of nine hard freezes a year in Kansas City. "Paving our lot cost as much as the two buildings combined," Jacobson says.

The new terminal cost roughly $7 million. The property cost $1 million; the buildings cost $3 million; and paving cost another $3 million. The result is a custom-designed headquarters building and a shop with 10 drive-through bays with two lifts and space for 20 tractors. "We can use these facilities for at least five years before any expansion is necessary," Jacobson says. "We used some of our experience from the meat packing industry in building the office. One wall is designed for removal. We can knock that wall down and extend the building almost as far as we want. The shop is certainly big enough to handle a larger fleet. In fact, it is bigger than we need, but a bright new, big shop makes hiring diesel technicians easier. Mechanics are just as hard to find as truck drivers."

Dedicated Driver Center The terminal is designed to meet all TransAm needs. It has a driver center with private showers and sleeping rooms, a laundry, and both non-smoking and smoking lounges as well as an area for computer use. "This is our only home," Jacobson says. "We believe strongly in operating from a single terminal with all the enhanced employee contact and control that one location provides. Whether we can stick to this concept is open to question. The proposed new hours of service rules could change everything."

In a way, the headquarters building was designed from the inside out. TransAm retained an interior design architect to organize work flow inside the building before retaining a building architect to design the structure. "We decided where to put everything and everybody before any of the physical design began," McElliott says. "We spent a tremendous amount of time with the interior design team explaining what each part of the company does, what equipment they need to do their jobs, and how they interact with other departments. The designers used a bubble concept for this planning, literally drawing circles around each work function and then putting people and equipment in the bubbles. When we were finished, we knew where every filing cabinet and every fax machine would be before construction started.

"We have 100 people in the headquarters. That size dictates a certain level of organizational discipline. With the help of the interior design architects, we located the staff so that work would flow smoothly and that people coming into the building could see those they needed to see without interrupting work in unrelated areas. Planning for a smooth work flow is all part of our belief in being a low cost operator."

The result is nontraditional in some ways. For instance, visitors first encounter what appears to be a large reception area with no receptionist. Personnel behind the counter are all busy making delivery appointments. The same area is used at night by dispatchers.

The new shop is designed for inspections and preventive maintenance. With a staff of 44 ASE-certified technicians, the maintenance department concentrates on keeping the fleet running, not on repairs. TransAm tracks maintenance and flags vehicles for inspections using Freightliner's proprietary Fleet Assistant software program. "We do inspections and the repairs indicated by those inspections," McElliott says. "We also handle a little of our own warranty work, but we try to send most of the major warranty problems back to the vendor."

To help speed inspections, the new shop is equipped with two 30,000-lb-capacity tractor lifts from Rotary Lift. Working under a tractor on a lift is quicker, easier, more comfortable, cleaner, and certainly safer than using an inspection pit, Jacobson says. This thinking extends to wheel alignment as well. Instead of installing an alignment system that requires a pit for the front of the vehicle, TransAm equipped its shop with two Beisbarth laser alignment machines that can be used with a tractor sitting on the shop floor.

Efficiency in the new shop has become more apparent the longer it has been open. "We started operations with the shop open 24 hours a day, seven days a week," Jacobson says. "After awhile, we dropped to two shifts per day, and now we are operating with only a single shift, seven days a week. The result has been just as much work for a full staff at a lower total cost."

New Equipment One reason that TransAm can concentrate so heavily on preventive maintenance is its relatively new fleet. Average age of its fleet of Freightliner FLD, Century, and Classic tractors is 18 months. All have high horsepower engines, either Detroit Diesel Series 60s rated at 430 hp or Cummins N14-460s. For purchases in 2000, the company has tried to make new tractors even more attractive to drivers. New equipment is Freightliner Classics powered by N14-460 engines driving through Eaton AutoShift transmissions.

Driver response to the automated mechanical transmissions has been great, Jacobson says. The new equipment has been assigned to those drivers who have at least three years of accident-free driving. "We bought AutoShift for safety reasons," Jacobson says, "thinking that eliminating the need to shift gears would encourage drivers to keep both hands on the wheel and allow them to concentrate more on the traffic around the truck. We think that is true, but drivers tell us they like the new trucks simply because they are easier and more comfortable to drive."