Freight Execs’ Focus Shifts from Survival to Growth

This story appears in the May 24 print edition of Transport Topics.

Carrier and shipper executives are changing their focus from surviving the recession to managing their changing relationships with customers and labor as the economic recovery continues, according to sessions at the annual Transplace Inc. Shipper Symposium.

Managers from a major trucking company and third-party logistics providers said higher freight rates for truckload contracts are coming soon — to accompany the higher spot market rates. A larger group of executives said at the May 11-13 event in Glendale, Ariz., that the “strategic” labor market for managerial talent will become an issue, although widespread general hiring soon is unlikely.

“We had been worried about the fire, but it’s not the fire. The new question is, ‘How are the firemen?’ ” said Tom Escott, president of Hudson Logistics, offering a metaphor on the recession and the labor market.

“It will be a challenge to retain top talent. Recruiters and headhunters are out there working,” Escott said.

Richard Stocking, chief operating officer of truckload carrier Swift Transportation Co., said he has to work on matters of trust with his customers and employees.

“It’s important to speak with clarity and let employees know our moneymaking plan, and we have to attract the right people and make sure we place them in the right positions,” Stocking said.

Alan Gladstone, CEO of retailer Anna’s Linens, said he is offering stock options to regular employees who helped the company survive through the recession by sacrificing compensation. He also said he now is focusing on store managers.

“The store manager really makes the difference between store No. 1 and No. 255. Our chain is only as good as our worst store manager,” said Gladstone, who also is the founder of Anna’s, a 255-store chain.

“It’s a great time to add strategically to your company, if you can find someone who can make a profound contribution,” said Tom Sanderson, chairman and CEO of Transplace, Frisco, Texas. “But if you’ve redesigned everything to operate leaner and more efficiently, you still cannot add broadly to your employee base.”

Moving from labor to pricing, Swift’s Stocking told shippers and logistics providers that higher contract rates are coming.

“Rates will have to go up. We’ll be paying drivers more and trucks with 2010 engines will be more expensive. But we’ll also have to produce results for customers and give them options,” Stocking said.

Sanderson said that he has not yet seen a jump in truckload rates for contract customers to match with rising spot market rates (click here for previous story). The timing of those increases is half of the issue, he said, and the other part is that most shippers should probably anticipate being treated by carriers in 2011 the way they treated carriers in 2009.

“For the most part, shippers did the right thing and stuck with one-year contracts — but not all of them. A number of them re-bid their freight after six months. That really irritated carriers — and rightly so,” Sanderson said in an interview after his participation on a panel.

“I think most carriers will honor their commitments to shippers on rates, but for shippers who reneged during the recession, carriers will remember that,” Sanderson said.

Truckload contracts negotiated by Transplace in April generally did not show year-over-year increases, Sanderson said. The housing and automotive industries are showing some improvement, but they are still producing output at low levels, so there is still a lot of slack in the economy, he said.

“Truckload capacity will get tight, but when? Some say immediately and others say it won’t really be an issue until 2011,” Sanderson said.

Executives also talked about the recession’s effects on produc-tion, with pain leading to greater efficiency.

“Swift was never really that disciplined in the past and now we are much more so. We are focused intensely on the wildly important and on leading indicators for that rather than on lagging measures,” Stocking said.

Del Monte Foods, for example, improved its packaging, said David Allen, an executive vice president for the company.

“We’re using less steel in our cans by making the walls thinner. That saves 30,000 tons of steel per year,” Allen said, adding that Del Monte has found ways to use less resin in its fruit cups and less cardboard in packaging.

The food company also has worked on limiting its use of water, pesticides and fertilizers, Allen said, as well as cutting its output of greenhouse gases and waste for landfills. In addition, Del Monte is trying to fill its trailers in tighter cubes.

“We’ve taken 30 million miles a year out of our supply chain,” Allen said, “that’s 5 million fewer gallons of fuel.”

Swift’s Stocking said many products are smaller than before and packaged more efficiently. Combining the two changes “has taken thousands of loads off the road.”