Going against the grain

It is no secret that I am a bull (optimistic) on the trucking industry. More specifically the opportunities for O/O’s (independents and percentage leases with the right company) and small carriers.

Over the past several years I have had many O/O’s with decades of experience tell me that I just don’t understand this business. I respect their point of view and understand their position. And I certainly don’t discount their knowledge and experience. Actually, in most of those conversations I asked most of the questions and absorbed as much knowledge as I could.

The difference is that rather than look at this industry from a pure historical prospective I look at historical data, compare that to what is happening today and listen to the major players on what they are looking at in the future.

When I look at all the information this is an exciting time to be in this industry. Many don’t realize that this is like being on the ground floor of a dot com company years ago.

So here we are, going through a transformation that would benefit the safe, compliant O/O and small carrier. We are at the beginning of a prolonged growth stage for our industry and the O/O’s that are positioned to capitalize on the spot market and partner with large carriers and brokers for strategic freight will see huge profits.

Nothing will change the basic fundamentals of business (we all remember the Dot Com era where that little thing called profit seemed to be missing from business plans). But what has changed since 2006 (the high water mark for our industry) is that public carriers can’t justify the capital required to expand capacity. They are focusing on brokerage and partnering with small carriers.

They are focusing on brokering and partnering with small carriers. (This was worth repeating)

More freight will be on the spot market. This is good. But the partnering is where the opportunities really lie.

As independent O/O’s and small carriers we offer flexibility and a focus on service that a large carrier can’t get from its fleet. This is what the large fleet lacks. It is those of us that understand that this is our strength and value that we bring to the table that will win in this game. So in order for a large carrier to grow they will need good partners.

This is your wake-up call. It is not about the same old grind out a good rate from a broker. Now every call to a broker needs to be made with the intent of learning something strategic about that broker. Will it happen most of the time? Nope. But it will never happen if you are not asking questions beyond rate, weight and appointment times.

Look harder than ever at those direct freight bids. Can you really afford that account in this market? What is the opportunity cost of having to get back for that dedicated freight? Better have those answers going into it.

For over 3-months now in most markets capacity has been at record lows. Contract freight rates have risen but spot market has been better. A new high water mark has been set and public companies across the board have been issuing guidance to the markets to expect significant increases in shipping costs.

Now, in 2006, data like we are seeing today was coupled with record new truck orders. But that is not the case these days. Truck orders are for replacement and not increasing capacity. Who doesn’t love to hear that?

The new world order for trucking has already begun. How are you preparing to capitalize on it?

 

Interesting - you can find as many bull economists as bears but you focus on the bears. Why is that?

Just yanking your chain.

But fast forward 5-years with steady growth and expansion and the same people that are all doom and gloom today will be doom and gloom then. And don't forget, it is economic down turns that make people money.

 

Sure, I take a 15% cut off the top.

 

Not sure what you are looking at.

Housing starts are up over 10% (still way down). But at current levels, a 10% increase in housing starts relates to 4,000 flatbeds running for a year. That works out to a good size carrier.

The auto industry beat expectations in April. And while some had negative year over year numbers, April had 2 fewer selling days so when that was taken into account it was a good month. Plus, the average age of the auto on US highways is 10.6 years old. Another historic number. And auto industry is starting to loosen credit standards.

It is a good thing people can't you cash from homes. That created a false prosperity in this country. The slow steady growth that we are on is what we need. So many with zero knowledge about economics or have a political agenda want to point to a slow recover as a negative thing.

And why even a dip doesn't scare me is because inventories are very low. So a slow down will be felt in our industry but more like a typical cycle compared to 2009.

Glad to see some optimism from you. But many are seeing great results. My drivers are a great example. We have had over 3-months of stupid rates and still strong going into June. That is amazing.