Mike's Book Club: JB Hunt The Long Haul to Success

Hi guys, sorry for the lapse I've not forgotten about this thread. I'll have an update late tonight/tomorrow maybe.

 

Deregulation and the trucking industry Part 1.

In the late 1970s and early 1980s the Interstate Commerce Commission was on the way out and trucking deregulation was on the way.

In the days of regulation freight, lanes and routes were all regulated so say bills trucking and this is just an example. Has authority to haul furniture, out of North Carolina to New York State, that means if you are a furniture manufacturer in North Carolina and ship to New York State you have to kind of only use the people who are regulated to run in those lanes and the rates were regulated and you had to pay whatever rate there was and so be it.

Now the truck company that shipped furniture when ever they got to where they were going they would have to have authority to haul whatever back haul it was back and if you didn't have authority to haul whatever it was back then you just had to dead head back it's kind of how it went.

Now companies liked regulation to a point because it kept out new competition and protected business and rates.

Well late 1970s early 1980s deregulation kicked in and it was a free for-all.

LTL business which has a way high entry level barrier was very hard to get into because of communication and terminal networks. So the big LTL Companies at the time like CF and Roadway (remember them!) Were able to weather the storm and do all right.

Where smaller LTL companies went straight down the toilet.

On the other side of the coin though truck load haulers have a very low entry barrier any one with means to $150,000 worth of credit, could go and buy a couple used Freight Shakers for $12,000 a piece buy a couple used Wabash's 48 or 53 foot trailers
For $5-7Grand perfect:

There it is the trade'n times special a 10 year old Great Dane for $8 grand buy 2-3 of those babies and your all set! Rock n Roll!

You can rent space at a dirt lot anywhere (see picture trailer parked at dirt yard) to park these things when there in town or when a driver quits and the operation it's self can be run out of a basement at a house.

Anyhow the flood gates were wide open and thousands of fools rushed in with bad equipment and underbidding and the shippers had a field day with cheap rates and cheap service and it was a total race to the bottom and eventually all the fly by night places provide them selves unreliable and shippers demanded higher quality service and more tailored service and found they had better control going with one company then 500 different companies, so bigger shippers decided to go with bigger companies who could provide them with all the transport power they would need all the time and the companies that could do that were the usual suspects:






These were the companies that had company shops and "hub" terminals around the country with in a days travel or so of major shipping customers and could pool 1000 trailers and tractors and drivers in and out of every terminal every day in order to keep equipment and drivers on hand to keep major customers shipments moving.

Plus these companies were more financially stable and weren't going to fly the coop.

The problem with the open flood gates was bad carriers, bad equipment and huge up swing in truck accidents which resulted in lost shipments and revenues for shippers and customers.

With the bigger companies like JB Hunt maintenance isn't as big of an issue they have the capital and resources to control things like that. If the terminal and shop are a day away from a major shipping customer where the company has 500 trailers spotted at, at any given time and everyday a mass of trailers is coming in and out, it's not a huge deal to manage, JB Hunt can send the break down crew out to that customer and work on the fleet of trailers from the field:



So when it came to service and dependability the companies who had the means for reliability were usually the winners.

What happened was with deregulation you did have bigger companies investing in technology to provide better quality service.

Big shippers and medium shippers do not have the means to provide computer tracking of shipments and also the means to set up a national fleet with the infrastructure network to maintain said national fleet I.E. shops, shop trucks, adequate space for pooling equipment before major shipping events like Christmas, all that kind of stuff.

In the early 1990s shippers demanded more small dedicated fleet service, like I said computer tracking and drivers and equipment dedicated to them. With that demand did come a rate increase and bigger shippers were willing to take the increase they had no choice, Bill Bob's trucking couldn't provide them all the infrastructure they wanted, but JB Hunt could, so they had no real choice they had to take the rate increase.

 

Trucking Industry Deregulation Part 2


When you talk about truck rate increases and costs from 1989-1990 there were 3 factors:

1. Drivers
2. State Regulations
3. Driver Retention

LTL Companies most did not really change with the times when it came to deregulation and that's why most of them went under. According to the book.

Lets start with number one. In the 1980s 1990s owner operators for dry van freight were on the way out. High Quality mass transport service was on the way in and control was needed. This pushed the tide away from owner operators and put it in the hands of companies like JB Hunt who could afford to have massive fleets of power and trailer equipment and recruit drivers because they offered, health insurance, 401K retirement, some time off and paid vacation and your regular pay.

In the 1990s the trend shifted to non-union company relay and team drivers hence this era of the 53' dry van full condo sleeper cab truck was born:
They wanted high vehicle use with lower costs squeeze more work out of the truck it makes the company more money.



2. State Regulations:
License plates and registration. JB Hunt while located in Arkansas all there vehicles are registered in Oklahoma. Why? Oklahoma has cheaper fee's. Oklahoma according to JB Hunt CFO Bruce Jones at the time 1986-1991 said "One of the best in the nation."

Our old friend who we talked about in Never Stand Still even he made it into this book our old friend Dean Cannon was even quoted in this book.

Page 37 at the top Dean Cannon said "You can't afford the luxury of being registered in Arkansas."
"Because of low taxes, and an administrative willingness to work with new trucking firms."

Explaining why Cannon Express's trucks were registered in Arkansas. At the time this quote was taken it would have been circa 1990-1992 and Dean Cannon would have been in the hey-day of Cannon Express.

3. Driver Turnover

"Finally Advanced Truckload Carriers will make concerted effort to decrease the high rate of driver turnover."

To do this you had the birth of CDL driver mills owned and operated by the actual companies them selves. A practice that is still going on today.

Now other ways around this are national networks of hub terminals basically you can have a terminal in every major state where there's a lot of traffic like where I live in Ohio, mostly every major truck company has a terminal in Ohio most of the major OTR companies have there terminals in Columbus, Ohio. But in Cleveland, Ohio area where I live most major truck companies have major shippers. Nestle I don't know if you all know this or not, but Nestle has a huge presence in Cleveland, with major corporate offices and major manufacturing plants Nestle Minors and Stouffur's both having major manufacturing plants here we get a lot of traffic from Shaffer (Crete's refer company) up here because is Shaffer's biggest customers.

Also I don't know how many of you know this, but Sherwin-Williams paints pretty much tied for first place along PPG as far as paint manufacturing goes there corporate headquarters is in down town Cleveland, Ohio and they have manufacturing plants based all over, most of there major distribution comes out of Chicagoland, but they have manufacturing plants in Cleveland area, now Sherwin Williams likes to do things them selves they have a big private fleet and control everything from manufacturing all the way down to the retail stores and delivery to the end user customer. Sherwin Williams is very particular, but the point being big states like Ohio and Indiana that have major manufacturing and major population centers usually are going to have terminals for all the major trucking companies. The trucking companies have to have terminals where A. There are customers to service and B. Where the drivers live.

There's a reason why Prime Inc has it's headquarters in Mossurie right next door the the Kraft Foods "Cold Caves".

Some OTR companies have tried to get drivers away from LTL Companies with pay incentives however I think that was an early 1990s thing I don't think it caught on as much. I don't see to many LTL drivers running to work for OTR companies.

Some people who work for OTR companies are people like me who are single.

Most LTL and day cab people are married, have kids, have houses and more obligations/responsibilities if you will. There going to live in towns like Olmstead Fall's Ohio where 78% of the town is married.

Plus transport industry expansion in the early 1990s still caused trouble in recruiting drivers. You had a lot of companies that were in there hey day then companies that now a days are not nearly around as much as they used to be. Companies like Falcon Express from Youngstown, Ohio. Falcon was a big company and huge turnpike operation in Ohio in the 1990s, they were huge into hauling Auto Parts and Coiled Steel for GM. Now Falcon is still in business, but they are not even close to what they used to be, there hey-day is long gone:




This practice on the Ohio Turnpike has long since been abolished,probably the early 2000s like 2005ish was probably the last time I saw a set of Falcon Dry Van turnpike doubles.

Falcon I think they ended up going bankrupt and were bought out, there dry van trailers now are just solid white or just Xtra rental trailers there operation has been scaled back immensely.

Anyhow more choices to choose from, makes it hard to attract and keep drivers. So driver retention was always a problem for the big companies.

Anyhow that wraps up Chapter 2 of JB Hunt Long Haul to Success.

 

@Mike_77
Well how did I do what do you think did I hit the major nail on the head or was I off a bit

 

This is the overview idea of how major strategic terminal locations would be.

 

Don't anybody worry you don't see this anymore.