July 1986 The Roemer Report

The Mid Year Trucking Outlook

First, the bad news. The economy has begun to weaken perceptibly in recent months. For example, a survey by the National Association of Purchasing Management indicates that the economy "dropped sharply" in June. Forecasters had originally ex­ pected the economy to perk up considerably during the second half of this year. Now, the good news. The Federal Reserve Board has just dropped its discount rate to 6%. That's the lowest it has been in nearly eight years. Economic growth is running in the area of a 2% annual growth rate. That's fairly tepid, not hot enough to juice up loan demand or pressures for higher rates. The upshot? What has been a fairly stable period of freight and revenue growth for trucking should pick up somewhat. Overall, W. F. Roemer sees the current fair weather in trucking prevailing through the balance of 1986. We would be remiss if we did not pass on the following piece of gallows humor. How do you tell a dead dog from a dead economist in a parking lot? Answer: There are skid marks in front of the dog.

BOB PACKWOOD'S NEXT CAUSE: Right now the Oregon Senator's (R) prime project involves applying the finishing touches to the nation's sweep­ing new tax bill. But, once this matter is nailed down, he will be championing a new trucking deregulation bill. This is a meas­ure that ATA can be expected to oppose. But, there is a sweetener in Packwood's planned trucking bill that may well split our in­dustry's assessment of the legislation. The measure would allow much greater use of the genuine kings of the road--longer combi­nation vehicles or LCVs. A shorthand description of these is two or more trailers attached to a tractor. Packwood's legisla­tion would provide for greater use of these tandem trucks on in­terstates in 17 western states. It's been called the "pinwheel" amendment since it would apply to states that are within a 750-mile radius of Salt Lake City. We could be looking at an obvious regional split in our industry's response to this legislation. Our seasoned industry readers know that such a measure is destined to generate powerful opposition from consumer and highway safety groups.

PRODUCTIVITY VERSUS SAFETY: The economic pressures at work in today's transportation market place an enormous premium on productivity. Thus, it's only normal that many truckers look at LCVs as a logical means for enhancing productivity. Today the laws relating to the use of these tractor-trailers can only be described as patchwork. We have no consistent policy. The longest truck used in all states is called the "Western double." It's normally about 65 feet long. The LCVs, however, are bigger. The "Rocky Mountain double" is a long and short trailer extending 90 feet. One step bigger is the "triple," three trailers of equal length behind a cab, running up to 105 feet. Then there's the motherlode, the "turnpike double," two 40 to 45-foot trailers pulled by a tractor. We can't begin to describe the hodge­ podge of state and federal regulations governing LCVs. But, here's the big picture. The "pinwheel" amendment would change all of this by allowing trucks in the 17-state area to surpass the 80,000-pound weight limit on interstates. Federal axle weight limits would still apply. So, to haul heavier loads while not violating these axle-weight regulations, truckers will obviously be motivated to use longer combination vehicles.

MAKING YOUR ELEPHANT TAP DANCE: That's a survival strategy for today's bigger outfits. Here, we mean the art of re-orienting the production-oriented thrust of many firms in the pre-deregulation days to a customer-driven company mandated by today's environment. Begin by asking yourself and your employees to re-define your outfit's "hard" and "soft" assets. Today, the hard assets aren’t your trucks, facilities or maintenance equipment. They are now the "soft" stuff. They can be replaced. No, the "hard" assets are hundreds of satisfied customers. They are the lifeblood of your organization and they are practically irreplaceable. Service management. It means the organization, operation and daily management of your company in a way that is totally driven by the service needs of your customers and prospects. For many, it may involve "reconceptualizing" the entire organization. In the end, it's the only viable survival strategy in the new transportation marketplace. Some specifics follow.

CREATING A SERVICE-MARKETING MIX: Since the early 196Os, the four Ps--Price, Product, Place and Promotion--have formed the cornerstones of most marketing plans. But the key to selling tangible goods may not turn the lock on selling services. A. J. Magrath, market researcher and author of Channel Management: Strategic Planning and Tactics, proposes that service industries add three more Ps to the classic marketing mix:

  1. Personnel. To the customer, the service staff is the "source" of the service. Thus, a service company's identity reflects its employees' appearance, attitude and ex­ pertise. (2) Physical assets. A consumer doesn't merely buy a service--he/she “expe­ riences" it. The success of the experience depends on both the visible setting (e.g., a pleasant office) and invisible supports (e.g., adequate production equipment).

(3) Process management. Since services cannot be inventoried or stored, they must be efficiently channeled. Balancing service demand with service supply--while also moni­ toring quality--demands exceptional market knowledge and managerial skill…Magrath reminds us that services are "credence" purchases: customers buy a company's promises. Your marketing, therefore, can be only as good as your credibility.

COMING TO GRIPS WITH DELEGATION: What's the strongest productivity tool available to management? In a word: delegation. After all, the real measure of a manager's value is his/her ability to get things done. Proper delegation ensures that problems are assigned to the "right" people--the ones at the lowest appropriate level--thereby free­ ing management for higher-level tasks. It lowers labor costs, motivates workers, and teaches new skills. Generally, delegation works best with routine tasks, minor or re­ current decisions and time-consuming details. If you can answer "yes" to the following three questions, then the project at hand should not be done by you: (1) Does it in­ volve operational detail--as opposed to planning or organization? (2) Does one of your subordinates have the necessary skills and motivation? (3) Will an adequate--rather than a perfect--performance suffice?...Managers should rarely if ever delegate per­ formance reviews, counseling, motivation or discipline…or any task involving confi­ dential information. Whenever possible, delegate the entire job to one person. This minimizes confusion, simplifies coordination and boosts employee incentive.

THERE'S NO FREE LUNCH FOR CEOs: Although it's no paltry sum, the base pay of many CEOs is taking a back seat to other forms of compensation. In a move to tie pay directly to performance, companies are offering large bonuses to executives who score high in "return on assets" and "earnings per share." Among companies with $1 to $2 billion in sales, salary has dropped from 60% to 50% of a CEO's pay in the past decade. Those in search of excellence are also searching for the ideal plan that will motivate an execu­ tive to make long-term (3-5 year) gains a priority...to "look beyond next quarter. 11 Stock options, long the favorite perk of American business, may be an endangered species. The reason: a proposal by the Financial Accounting Standards Board that could make options a lot more costly to issue…The public often censures the "ex­ orbitant" compensation paid to some of America's top execs. In reality, however, most payment policies place the shareholder foremost in the executive's mind. Corporations believe bonuses are worth their cost if they attract and retain first-class management.