The good news is that we appear to be in an economic recovery; the bad news is that business growth is so modest that it is almost imperceptible. The challenges this year for truckers are twofold: replace revenues lost in 2009 and improve the yield or margin on their freight.

In 2009 shippers had the upper hand. With declining volumes, shippers took advantage of the situation to issue and reissue RFP’s. Rate decreases were easy to achieve. Year / year revenues at North American trucking companies declined by 6, 16, 22, 28, 30 or as high as 48 percent. Carriers responded by shuttering terminals, cutting staff, freezing pay, all in an effort to maintain margins on the reduced revenue. This helped to offset some of the damage but many companies saw their profits take a precipitous drop in 2009.

What should truckers be doing in 2010? Should carriers play a “wait and see” game in anticipation of an economic recovery or are there some strategies that should be initiated immediately to improve their fortunes? How can carriers break out of this paradigm of reducing costs in line with declining volumes and margins? There are several options that carriers need to pursue and they should all be implemented in parallel.

1. Increase Business from Existing Profitable Accounts

Many trucking companies have longstanding profitable accounts that have shown some level of loyalty. Yes, the rates on some of these accounts may have gone down in 2009 due to competitive pressure. But the chances are these customers have freight on lanes that you do not move today. They are the most likely customers to give you additional profitable business. Targeting these accounts makes much more productive use of your salespeople’s time than focusing on new prospects that play your rates off against those of the incumbents.

Go back and take a second or third look at whether or not your company can handle these new lanes. What are the barriers to securing this business (e.g. no/limited back haul, don’t want to go to these markets etc.). This is probably your best opportunity to secure new, profitable business. Rethink what your company needs to do to make this happen.

Can you move the freight through a brokerage operation? How difficult is it to establish such an operation? Could you work with a partner or competitor to use their headhaul freight as your backhaul? Could you migrate some of this brokerage business to your asset based business over time, when you have enough head haul and back haul freight to make money?

2. Change the Rules of the Game

There are too many companies playing the rate reduction game. If all your sales and pricing people are doing is shuttling back and forth to shippers’ offices with ever declining rates, you are playing a losing game. Change the game by finding out more about your customers’ supply chains. Look at what your company, possibly in conjunction with partners can do to improve the efficiency of their operations. This, in essence, is what logistics companies are doing.

They receive a mandate from a senior executive at a shipper to do a “deep dive” into their processes and procedures. They change logistics processes that allow them to perform the same tasks more efficiently, with fewer people and better systems. They lower the baseline cost, add a mark-up for themselves and then price the business so that the overall cost is less than it is today.

This is the game that more carriers have to learn how to play. While this cannot be done overnight, you have to start somewhere. This can as basic as teaching your employees how to look for and capitalize on these opportunities, hiring staff with this type of background, and/or specializing in a certain market segment where your company can be a leader. This can serve as a stepping stone to future logistics and trucking business.

3. Save Your Customers Money without Hurting Your Bottom Line

This may sound impossible but it isn’t. During my consulting work with shippers over the past six years, I am amazed at how many cost savings opportunities present themselves, even at companies with very experienced logistics personnel. These opportunities surface in a variety of forms.

Some shippers are using the wrong mode of transport (e.g. LTL versus consolidated milk runs versus over the road truckload versus intermodal). They may be shipping in inefficient ways. This can include poor order management procedures, poor scheduling processes, ineffective collaboration between Sales, Production and Logistics or inadequate dock management processes. Another lost cost savings opportunity for many shippers is poor packaging and loading. You only have to look at Wal-Mart’s success to see what can be achieved by reducing packaging costs.

Have your customers looked at their pallet dimensions? When you double stack the pallets, how much air is there at the top of the trailer or container? Is this space causing unnecessary damages? Can the pallets be reconfigured to improve cube utilization?

If you collaborate with your clients and help them take costs out of their transportation budget, this may help your company load better cubed trailers and allow both of you to make more money.

The Road Ahead

Demand will eventually increase in line with the current capacity. This will serve to elevate margins. You can play the “wait and see” game. Alternatively, your company can take a proactive approach by adopting a more expansive business development strategy, by becoming more supply chain versus trucking company focused and by becoming part of the solution rather than the problem by helping your customers remove costs from their transportation expenditures. The choice is yours.