April 1987 The Roemer Report

Trucking and the Automotive Future

This month we target in closely on profound changes that are underway in the global automotive sector and their implications for the trucking industry. (1) The laboratory of change for domestic automobile manufacturing is the joint GM/Toyota NUMMI operation in Fremont, California. What has happened here is nothing short of stunning. GM went into the venture with the "GM mentality", believing they had much to teach the Japanese. What they found out has shaken them to their very foundation. The Japanese have re-invented how to build a car in ways that are simple and cheap. (2) GM's emphasis on costly state-of-the-art technology and financial muscle turns out to be relatively useless.Toyota, the management partner in NUMMI, has shown that its basic people management skills are light years ahead of GM. Toyota is getting an extraordinary level of performance out of formerly hostile GM workers and a level of technology that is relatively pedestrian by global standards. (3) People management skills, not technology, are now the vital elements in the automotive productivity race. (4) Toyota is the world's best automobile company and its lead is widening. (5) The Japanese have created the playing field for the future. It revolves around systems selling and customer obsessive behavior. You’ll have to be customer obsessive yourself to get their shipping business. (6) Major changes in exchange rates, particularly the relationship of the yen to the dollar, will be enormously important. The value of the yen to the dollar has dropped from over 200 to 1 to a current level of 149 to 1. It is expected to drop further, perhaps to 130 or below. The implications? Huge strains on the Japanese as these currency changes diminish their competitiveness and export potential. There is going to be a huge flow of Japanese facilities, both primarily assemblers and suppliers, into the U.S... hundreds of new plants and trucking prospects. (7) Japan is not out-producing us. They are frankly out-thinking us. We are getting smarter. There are destined to be more strategic linkages between our regional automotive firms and the Japanese. For many, it will be a functional necessity in the global marketplace. If you go after Japanese business, send your smartest people in.

A SURPRISING NEW MARKET FOR TRUCKLOADS: Shippers are using truckloads very creatively these days to cut costs. Some carriers are boosting their profits by joining the move to truckloads. It's surprising because of former predictions that "just-in-time" demands would boost the LTL market. Analyst William Legg now calls the truckload industry "the growth end of the business." Legg also believes capital investments in truckloads have more profit opportunities than LTL operations.Here are ways the truckload market is working: (1) Hard-nosed Negotiation--a shipper combines several LTLs bound for a similar region into a truckload quantity. This qualifies for a truckload rate by paying it to the furthest point and accepting drop off charges. Even with extra charges, it beats paying for several LTLs. (2) Pooling with a Pal--this works by linking your LTLs with another shipper who consistently schedules LTLs to similar points. (It doesn't work, however, if either shipper can't consistently come up with the necessary LTL shipments.) (3) Warehousing and Pool Shipping--shippers get truckloads by combining a central warehouse with pooled shipments of LTL quantities. Truckload planning doesn't always work, and there are times when LTLs by common carrier make the most sense. The truckloads market is coming on strong, however, and shippers and carriers both can profit from it.

HOW STEEL COMPANIES ARE FIGHTING FOR SURVIVAL: The major players in the embattled American steel industry are getting tougher in their fight for survival. According to Industry Week's Donald B. Thompson, they're looking for deep cuts in labor costs. They are also using value­ added processing to get better prices for steel products in a world market of savage price cutting. Standing in their way at basic steel plants is the formidable United Steelworkers of America and an adversarial mindset hanging on from the past. Though they have wrung concessions from the USWA. steelmakersare now making end runs around the union.They are setting up nonunion processing facilities in newlocations away from the basic steel plants."We're going to do more of this," one USX executive said, adding that it can be done at half the cost it would be at the company's Gary (Indiana) works. These new nonunion plants are helping companies become competitive in quality, cost, and product consistency. Awim reality for steelmakers is that customers can pick from hundreds of steel suppliers worldwide. A grim reality for the USWA is that American steel employment has dropped to 154,300 from the historic 1953 high of 650,200. USX and the USWA recently engaged in a six-month strike over concessions and what management saw as its right to run the business. It is a rough new game for an industry and a union that traditionally had the nation's highest wages and benefits. It is a game of hardball now that long-term survival is atstake.

"HUSTLE" AS ATRUCKINGSTRATEGY: Here are some hard-nosed thoughts for trucking. executives who understand the value of rolling up their sleeves and getting the job done. "If all of your competitors really knew each other's strategic plans, would it make any difference?" It's a tantalizing question posed by Amar Bhide in a recent issue of the Harvard Business Review. Bhide argues that the traditional tenets of strategic planning often ignore the importance ofsheerhustle. He says proactivecompanies--those that really hustle--usually aren't obsessively preoccupied with analyzing rivalries.Rather, they concentrate on sound operating details and doing things well. "They move fast, and they get it right," he says. He also makes another contrarian point that might cause some to re-examine their critical assumptions. Today, the opportunity to realistically create sustainable competitive advantage based on size, technology, or distribution seems to be diminishing. We are living in a world where there are very few trade secrets and where innovations have a shortened shelf life. Hustle is a way of managing that deals with these realities. By concentrating on excellent tactics and execution to achieve total customer satisfaction, we can realize the ultimate competitive advantage. Consider all the "strategic plans" that trucking outfits have gathering dust on their shelves. Today you really move forward with an aggressive "hands on" presence in the shipping market...learning and innovating from ideas you get at no cost from yourcustomers.

SOME CEO DECISION GUIDELINES: Here are some additional guidelines for trucking executives who want to keep things "cooking" in their organizations. A recent sampling of sixteen CEO's by Industry Week, revealed that intuition or a sense of the "right feeling", is playing an increasingly important role in making decisions. Relying on historical data and present-day alternatives are less useful in a rapidly changing environment. Decisions that must synchronize today's choices with projections of tomorrow's opportunities are inherently speculative. Industry Week writer William H. Miller suggests these specific strategies to assist in the decision process. (1) Every decision must carry some element ofrisk. You'll never have enough facts to make a decision totally safe. (2) Develop an immunity to after-the­fact worrying.Revisit the decision to fine tune, execute and implement, but not to second guess. (3) There is a right time to make a decision.If it's extremely risky--it may be too early. If the decision seems very safe, it is probably too late. (4) If a decision can be made at a lower level, force it to be madethere.(5) When the collective wisdom of associates and staff is rejected--carefully explain the reasoning.Unbridled vetoes will create a lonely process for the future. Hence, get the facts, accept the risk, preserve the role of your staff, don't agonize over past decisions and don't discount your intuition.