IN THE current erratic economy, tank truck carriers should analyze the business environment in which they operate, and then create a plan that will enable them to gain competitive strength, said Philip Kuehl of Westat Inc, Potomac MD.
Speaking at the National Tank Truck Carriers (NTTC) annual conference May 19-21 in San Francisco California, Kuehl warned carriers to beware of complacency when the situation requires change, and to be honest, scrape off non-core activities, and reallocate resources. “We must understand cause and effect,” he said, adding, “We've got to be good diagnosticians. How companies manage change will drive success or failure.”
Tank truck companies are coping with dynamic changes occurring in the industry. There has been economic slowdown, exacerbated by the terrorist attacks on the United States, market influences from company consolidations and acquisitions, and continuing toughness from shippers demanding outstanding service while refusing to increase rates, he said.
Added to those complications are rising fuel and insurance costs, as well as difficulties with driver recruitment and retention. Probably one of the major problems lies in a lack of managers who know how to manage in an economic downturn, he noted.
“Things are constantly up in the air, and that's the situation we face today,” he said.
Typically, a company life cycle begins with innovation and develops into a viable business, often having tremendous growth. However, at some point stagnation sets in and a decline begins. If the company is to survive, its managers must alter the operational strategy. “When revenues aren't growing, profits are down, expenses are rising, the time has come to regenerate core strategies,” he said.
At this point, a cautious managerial style is often an excuse for complacency. Changing the downtrend calls for an analysis of the market and customers, using a deductive process. When the analysis is completed, a plan is developed with input from throughout the company. This is a time for the boss or company owner to listen rather than participate in the planning.
Effective managers must become leaders, while someone has to be tasked with the pain that will be required in order to generate change. The plan should focus on priority issues for the next one-to-three years, including positive and negative issues. After the priorities are established they can be analyzed for their impact on the company and customers. Objectives should be developed to address both positives and negatives. Eventually, the priorities can be used in negotiations with customers, particularly if they have similar problems.
The goal is to develop a competitive, sustainable edge so the company can outperform its competition. At the same time, Kuehl advised against accepting business that cannot be profitable. “Don't take a bad deal, no matter what,” he cautioned.
A business should be sized and fitted to its economic, industry, and market environments while maintaining a competitive advantage. “Identify opportunities for mergers or acquisitions and alliances to gain critical mass, expense reductions, and revenue-generating opportunities,” he said.
He also advised carriers to use the tank truck association to establish meaningful and positive governmental policies and regulations. Associations can address driver recruitment and training issues on an industry-wide basis, and can create benchmarking and performance data for development and communication of industry positions on issues such as insurance and fuel costs.