October 1987 The Roemer Report

Trucking Industry Still Adjusting to Tax Reform

During the past five months crude oil prices have more than doubled from $11/bbl to $20.50/bbl. Those tracking the oil market do not see significant increases in oil prices thisyear.Here are a few factors behind this assessment: (1) Demand for oil products this year has increased slower than anticipated. Consumption of gasoline is below levels of one year ago. (2) OPEC seems to be demonstrating relative caution in both its supply and pricing policies. Changes in production levels--presuming OPEC would decide to sharply curtail production -- take six to eight weeks before they are reflected in oil prices. OPEC believes maintaining prices above $20/bbl would reduce demand and increase alternative supply sources. Hence, they have agreed to a benchmark price at $18/bbl. (3) Despite its aggressive rhetoric, Iran simply must keep the Strait of Hmmuz open. Without this oil exporting lifeline, the nation could soon plunge into economic chaos. Even during its revolution, the nation avoided a Persian Gulf confrontation with the U.S. There will continue to be considerable volatility in oil prices, perhaps a wide range from $4 to $25 per barrel. Still, the hefty level of oil supplies in non-OPEC nations and the west's growing technological efficiency seem to argue against major price increases.

PROSPECTS FORFURTHER DEREGULATION: Congress is flirting with legislation aimed at further deregulating the trucking industry. Chances for H.R. 2591 (Trucking Productivity Act of 1987) passing are slim to none. Here are some of the issues: (1) Sides for and against additional deregulation have been drawn. Many private truck-fleet operators are proponents of ending regulation.The less-than-truck load segment to the industry would like to keep competitive market forces right where they are. (2) A certain amount of panic and hysteria has been whipped up on Capitol Hill regarding deregulation. Several lobbyists are linking current safety and service concerns in the airline industry to potential trucking issues if further deregulation occurs. (3) The powerful American Trucking Assns. (ATA) is currently opposed to more deregulation. (4) General commodity carriers blame past deregulation for present price wars. The recent demise of thousands of carriers is also the accused result of past deregulation. (5) Annually the U.S. pays approximately $100 billion to move its freight. Industry analysts predict that by 1990, $28 billion could be saved annually from lifting regulations. However, in an election year (1988), most congressmen feel that the bipartisan bill on deregulation is destined to take a backseat priority.

THE CHANGING FACE OFTRUCKINGCUSTOMERS: America is no longer the home of the corporation; rather, it is the breeding ground of small- to medium-sized companies that are doing the work of the older mastodons. The change in economic thrust is staggering: in 1985, nearly 700,000 new companies were formed, more than triple from 20 years ago. Those that remain are getting leaner and meaner as competition gets more intense. The strength of the educational system has now become the most important factor in determining the economic future of these companies and the potential of a region.New companies are rushing to locate in the shadows of educational thought ware proving grounds. A good example of this phenomenon is the fact that The National Center for Manufacturing Services formally ended its search for a headquarters, and recently announced that it would locate in Ann Arbor, Michigan. Ann Arbor won a 14-state battle to host the new research center in part because of its proximity to the University of Michigan and Michigan State.

WHERE YOUR OUTFIT'S CREDIT AND MARKETING DEPARTMENTS MEET: Today there is often a structural tension built in-between a company's sales objectives and credit policies. Should your organization concentrate on maximizing sales or minimizing bad debts? Surprisingly an effective credit policy can often achieve both of these seemingly conflicting objectives. Senior management should formulate such a policy to assure that it remains consistent with company goals and objectives. It's essentially a three-step procedure: (1) Assess the present policy...There are various measuring "tools" that can be used, e.g., credit sales to total sales ratio, collection percentage, average age of receivables, delinquency rate and bad debt ratio. The big question can then be answered. Should credit be loosened to garner more sales, or is it time for a tighter rein? (2) Formulate a revised policy...A credit policy affects more than just sales volume. Fair and explicit policies promote good customer relations-- and good cashflow. However, explicit doesn't mean inflexible. Flexibility is necessary to allow for business fluctuations. Other factors that determine how "liberal" a credit policy should be are the corporate environment, the type of product or service being sold and the company's financial position. A general mission statement should be drafted, addressing credit terms, limits and discounts. (3) Set creditprocedures...The ball is now in the credit manager's court. He or she must set terms and decide who can approve credit within certain dollar ranges. To expedite order processing, customers are often given a numerical credit score based on several financial ratios. Customers are also classified as low risk, manageable, marginal, or high risk. Although few companies can afford to tum down marginal accounts, they must be carefully monitored. Danger signs include: slow or erratic payments, returned checks, delay tactics like constant questioning of work orders and invoices, and a high turnover in the customer's work force.

HOW TO LEVERAGE YOUR MANAGEMENT TIME: As a manager, how often have you asked yourself where your time goes? In Managing Management Time, author/consultant William Oncken, Jr. not only answers that question for you but also shows you how to master the time you have. He begins by explaining that all managers have three types of time at their disposal: (1) Boss-imposed time -- spent solving the boss's problems. (2) System-imposed time -- spent solving problems for peers and customers. (3) Self-imposed time -- spent on your own professional projects and problems. Oncken asserts that how you divide your time shows whether you're a management professional or merely an amateur. Professionals leverage self-imposed time through effective prioritization and delegation.When the heat is on, they step back, size up the situation, and decide what really needs to be done, by when and by whom. Amateurs, however, are quick to sacrifice self-imposed time. They respond to pressure by working longer and harder for the boss and the system. Oncken notes that amateurs collect other people's"monkeys" (problems) and carry them around on their own backs.To avoid that fate, define what Oncken calls your "management molecule." List the names of everyone who has the power to make or break you - your boss and key peers, customers and subordinates. Accept and delegate assignments within this circle only.

PERFORMANCE REVIEWS MADE PALATABLE: The latest psychological complaint to come out of the workplace is "evaluation anxiety." Symptoms are procrastination, nervousness and an obvious avoidance of the dreaded "Annual Review." The problem is so widespread that 70% of 4,000 employeesrecently surveyed reported that they had no clear idea of what was expected of them.If you're a manager suffering from this ailment, take the following advice: (1) Center the review on the employee's objectives,not on your own feelings. It's a lot easier to keep personalities out of it if you've negotiated job objectives first. (2) Consider the "periodic" review-- this takes some of the fear out of the year-end review and keeps employees motivated. (3) Plan for the review and schedule carefully...you schedule everything else, so put reviews in your appointment book and stick to it. (4) Listen more, talk less. A review isn't a lecture. Keep your ears open for employee insights. (5) Focus on the future...no one wants to hear a recitation of their past mistakes. Use phrases like, "How can we do an even better job next year?" (6) Ask supportive questions-- "What can I do to help?" or, more important, "What am I doing now that may behind your performance?"(7)Buildself-esteem...employees should leave the review session ready to take on theworld.