Opinion: To Survive a Tough Economy — Focus
By Michael Hardman
Founder and President
Hardman Group
This Opinion piece appears in the May 4 print edition of Transport Topics. Click here to subscribe today.
A shroud of insecurity continues to linger on the U.S. economy, with many trucking and logistics providers tending to the wounds of 2008 and preparing for the uncertainty still looming over the rest of 2009.
Freight volumes continue to decline faster than truck capacity. In a preliminary report on April 27, American Trucking Associations said March tonnage fell 12.2% relative to the same month in 2008.
Demand and confidence are diminishing in tandem with shipment size and frequency, posing new challenges for carriers unable to reduce driver wages or fuel consumption.
Newly lean operational parameters have fleet managers scrambling to cut costs and generate new business while protecting operating ratios.
In meeting rooms across the country, questions are flying from all directions: What’s on the horizon for the economy? How do we increase revenues? Where do we make cuts? Which departments can we continue to operate without?
One answer to these questions can be simplified into a single word: “Focus.”
By reorganizing expenditures to become financially stable and outfitting their organizations for the tough times ahead, companies hope to come out of the economic crisis as close to unscathed as possible. It is inevitable that companies will make cuts, but strategic insight into restructuring their core value proposition — the basic reason a customer wants to work with them and not a competitor — can make all the difference in how they weather the storm.
The following are five retrenchment tools that can help your company make its way through that storm and get a glimpse of the sunshine up ahead.
1. Focus on the customer. Focusing your attention on your customers makes it possible to build better relationships and generate new business within your current client portfolio. It is important to dig deep and uncover insights about their needs. What do they want — just-in-time delivery, more reporting, greater shipment visibility?
These are not casual requests but a new set of guidelines for what customers expect from carriers today. The ability to find ways to meet these new criteria, such as investing in technology to reduce labor costs and cost per mile, can keep customers satisfied, loyal and confident in your ability to keep them competitive.
2. Differentiate yourself from the competition. Terminal closures and carrier consolidations are inevitable as capacity adjusts to meet demand. However, with these reductions, competition becomes more fierce in what is still a large industry. ATA reports that there were 579,759 private and for-hire carriers in the United States, as of June 2008. With such a staggering number of fleets vying for freight, it is important to stand out in a crowd.
3. Maintain market spending. This isn’t just advertising; it’s maintaining your presence in the industry. In tough times, one easy strategy to get you through is to rely on your current customer base. However, it is important to look for new business and to keep your current clientele happy.
Relying on a handful of large clients can have its pitfalls, because your competitors have the potential to penetrate the account and begin transporting freight that you once enjoyed. Instead, use your sales force as a tool to continue to fortify relationships with current customers and build fresh relationships with new business prospects, large or small.
4. Review your products. It is important to reevaluate your product portfolio when times are tough. Which lines of business are most profitable? Where can you find opportunities for growth? Look at complementary services that could add value to your core strengths. Don’t look for business in markets where you don’t have knowledge.
Leverage your strengths. Now is the time to add new services that do not take a tremendous infusion of capital to get off the ground. For a small investment, fleets can begin to provide brokerage services or contract linehaul transportation for new sources of revenue as a way to meet the needs of customers that asset-based businesses cannot fulfill.
5. Increase market share. To generate volumes for their freight networks, carriers are actively competing on price. Some have announced they will not take a general rate increase this year, while others have indicated they are seeking a rate increase.
How you handle price in a competitive market will influence your success. For example, one large carrier recently launched a new tiered-pricing schedule based on time-specific customer needs. Can you creatively price your service to protect your operating ratio, serve your customer and maintain or increase your share of the market? Making a few strategic moves can help build momentum that can carry you through tough times.
In the months ahead, the trends of the past year and more will continue. Fleets will carry on with chasing a shrinking volume of freight while trying to stay afloat. By evaluating your organizational environment and making a few tweaks to the internal machinery that powers your company, you can begin to draft the blueprints that can help your company survive and rebound more quickly than the competition.
H.G. Wells said it best: “Adapt or perish . . .”
The Hardman Group, based in Akron, Ohio, is a full-service integrated marketing communications firm serving transportation, information technology and specialty chemical companies.
