"Somedays won't end ever and somedays pass on by,
I'll be working here forever, at least until I die.
Dammed if you do, dammed if you don't
I'm supposed to get a raise this week, you know damn well I won't.
Workin' for a livin' (workin')
Workin' for a livin' (workin')
Workin' for a livin', livin' and workin'
I'm taking what they giving 'cause I'm working for a livin'.

Huey Lewis and the News.

The Chaotic Nature of Trucking

The Senate Committee on Interstate and Foreign Commerce in 1935 stated: “The competition has been carried to such an extreme which tends to undermine the financial stability of the carriers and jeopardizes the maintenance of transportation facilities and service appropriate to the needs of commerce and required in the public interest. The present chaotic transportation conditions are not satisfactory to investors, laborers, or the carriers themselves.

When the trucking industry was deregulated in 1980 proponents argued that deregulation would result in better prices for the consumer, increased competition, efficiency and fuel conservation. They were right. Opponents feared that change in the regulatory structure would result in the destructive conditions which prevailed in the 1930’s when cut throat competition and predatory pricing were rampant. They were also right.

Deregulated trucking historically has been irrational when it comes to charging a price which will provide a reasonable profit and return on capital and risk. So how does the industry navigate in an environment of non-compensatory rates?

The Commodity known as Trucking

Some think the word; “profit” is a bad word. Target rates on mega bids prove the case. Some have forgotten that profit is the reason investors put money in a business and take risks. Rates submitted by carriers’ evidence the memory lapse. Trucking has become a commodity dependent on the laws of supply and demand and, as the current recession demonstrates, sometimes the pendulum swings hard. Warren Buffet once said, “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.” How can we then turn the market fluctuations of trucking from folly to profit?

Change your Mindset

Trucking is a business that exists to make a profit. Everything we do, we should do for a profit. Have you ever heard a customer say in an accusatory manner, “You are making money on your fuel surcharge!” Carriers do not make money on a fuel surcharge, but shouldn’t we? The working capital is extended, credit is extended and most rational businesses look at profit as selling a product for more than it cost. Most customer contracts don’t allow for interest on past due receivables. Doesn’t your bank charge you interest? Many shipper contracts provide for unlimited defense and indemnification for anything that happens without limit. Does your insurance company write unlimited policies for you? How many construction companies allow expensive equipment to sit around on a jobsite without charge? The list goes on.

Increase your Sales Effort

Another mindset that keeps rates non-compensatory is the fear of losing business. Dale Carnegie once said, “Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.” In this industry, we have always placed a lot of resources into driver recruiting, but have we placed the same emphasis on sales? Sales and recruiting are the two primary inputs into our systems. If your sales team is producing ample freight, then they also produce choices. If you have choices, you can choose the more profitable, productive freight. Start by producing choices and replace your worst paying freight with better freight. By doing this, you will, in time raise your average rates and profitability. It is amazing how having options increases confidence

Don't Let Fear Run your Business

Fear produces lag. One can’t move too fast in bringing rates to reasonable levels, but one can’t move too slow either. Timing is everything. I had many friends in the industry who struggled through the 2001/2002 recession. They survived that but are no longer in business because, after the last recession, they were afraid of their customers and didn’t take advantage of freight and rate opportunities during the good times. The current downturn is the longest and most brutal recession most trucking executives have witnessed in their careers. It started with a 20 to 25% reduction in volume, followed by a 10% reduction in rates. If you lose 10% during a recession, don’t you need to recover that 10% and then raise rates in the recovery? Those who do not take advantage of market fluctuations in an upturn will not survive the next inevitable downturn. Time is coming soon to get the hay in the barn.