In our last blog, Nicky was heading out to bring a piece of equipment back to his customer while B.A. Rhoades and his wife did a business cost analysis per Nicky’s instructions. Their goal: to keep B.A.’s competitor from stealing their freight customers. The next steps in the plan:
1. Make sure B.A.’s freight rates are as low as possible while providing needed revenue and profit.
2. Put pressure on the competitor so he has to keep his rates too low to make a profit.
3. Find alternative customers and loads so B.A.’s carrier has the needed revenue to wait out the competitor’s eventual failure.
I pulled into Rhoades Trucking, noting a very clean and organized facility. Three tractor-trailers were lined up to the right of a single bay shop, with the shop’s door open and a mechanic working on a trailer. About 50 yards from the shop, a two-story prefab metal office building’s sign proclaimed ‘Rhoades Trucking.’
The mechanic stepped from the shop and waved me over. I pulled up alongside rolled down my window. “Nicky Hammerlane, I presume?” yelled the mechanic over the idling diesel. “Been expecting you. Please back in over there next to the office. Mr. Rhoades apologizes; he’s on a parts run for an air bag and four brake shoe sets. He should be back in about 15 minutes. I’m to take you to the office and introduce you to our boss, his wife, Millie.”
“No problem. I know you’ve got to keep the trucks and trailers rolling,” I said. I pulled around, backed into the spot she’d indicated, set the parking brake, grabbed my messenger bag and climbed out.
“This way, Mr. Hammerlane,” the pony-tailed mechanic said, as she opened the door in the center of the two-story office building.
I followed her thorough the door and was immediately greeted by a large-boned, very attractive woman as tall as B.A., who looked like she could take on a pro wrestler if needed. She reached out and gave me a very firm business handshake, “Good morning. I’m Millie Rhoades.”
“Nicky Hammerlane, ma’am, very pleased to meet you.”
“Pleased to meet you, Mr. Hammerlane. Barnabas Argus should be back shortly - he’s on a parts run for Barbara Jo. How about a mug of coffee? We’ll go on upstairs to the conference room where I have the cost analysis laid out. Mr. Hammerlane, this weekend has turned out to be a real eye-opener for Barnabas and myself. Learned a lot about our company we didn’t know. That analysis technique is amazing,” Millie said in one breath, as she poured two steaming mugs of coffee.
“Mrs. Rhoades, feel free to call me Nicky or Hammerlane. Mr. Hammerlane has always been my father and it’s just never felt right for me to take that honor from him. I’m pleased the analysis worked. What kind of things did you discover?”
“Nicky it is. And I’m Millie. Know you’re in business with your son and grandson. We’re a close-knit family too – Barbara Jo is my niece and a great mechanic.” She turned to Barbara Jo. “Your uncle should be returning momentarily. That trailer’s scheduled to pick up a load in the morning, so we need to stay on top of getting it repaired and road-tested today.”
Barbara Jo smiled and said, “I’m on it, Aunt Millie, nice meeting you Mr. … I mean, Nicky.”
“Thanks for the help, Barbara Jo,” I said, and took my mug of coffee from Millie.
We hadn’t been in the conference room for more than six or seven minutes when B.A. came bounding up the stairs. “I apologize, Nicky, but we needed those parts and rather than have Barbara Jo take an hour to go get them, I figured it was quicker and more efficient for me to do it.”
“Been there, done that,” I replied, “and honestly, that’s exactly what we were just talking about – efficiency, being pragmatic about costs, and then how that relates to providing top-notch service to your customers. Millie had just started showing me the results of the analysis.”
We all spent the next hour poring over their results. The conclusion: with a bit of cutting, they could adjust their rates lower by 10 to 15 cents per mile. Obviously this wouldn’t be enough to compete with the 70 cent reduction by the competitor.
But they still had a good, workable plan: getting a fuel discount program offered by a small carrier trucking organization, increasing the deductible on the trucks’ collision and comprehensive insurance, and little things like turning off lights, computers, compressors and other appliances that didn’t need to be on overnight when no one was in the office or shop.
Now B.A. and Millie both turned to me and said in stereo, “How do we put pressure on this scum so he has to keep his rates too low to make a profit? And how do we come up with alternative customers, so we have the revenue we need to wait this freight thief out?”
“One hard question at a time, folks; although they’re combined in a way. Let’s start with putting the pressure on,” I began.
“We’re all ears.”
I continued, “The first step in putting the pressure on is to call your customers - the ones he’s already hauling for and the others he hasn’t contacted - and ask one question: What are three things your current carriers, including us, aren’t doing that you really need us to do? By asking this, you’ll get a list of needs and wants from each shipper, some of which you may not have been aware of, that now you can start to address. The carrier that can fulfill these will become the primary trucking company for that shipper.”
Millie replied, “Makes a lot of sense; I never would’ve thought of asking it quite that way.”
B.A. had brought the coffee pot up with him, so I held out my mug. “Next step,” I went on, “is to contact each of the customers your competitor took from you and ask them if they have any freight that needs to be covered. Follow that up with a polite inquiry as to how the new carrier is working out for them. Never, and I mean never, put down the other trucking company. Always show your interest is only in that they’re getting the service they need. Finally, on each call, always tell them if they get in a bind, you’ll be ready and available. Don’t discuss your rates or the rates of the other carrier. If the customer is smart, they’ll know his rates are way too low - therefore unsustainable - and they’ll realize they can take advantage of his foolishness for only as long as it doesn’t create a problem.”
B.A. chimed in, “I see! Keep communications open; show you’re truly interested in their well-being and success by being available to cover their freight if and when the other trucking company stumbles. I like this approach.”
“Now here’s something you need to investigate. Are either of your former top customers having financial, supply, labor or other problems so serious they had to cut shipping costs to survive? If so, what’s the level of the crisis? If it’s serious enough, it might not be worth your time to reestablish a hauling relationship. In other words, is this a blessing in disguise?”
Millie exclaimed, “Striped skunks!” and slapped me on the back. “We never even thought of that. What a loblolly that would be - we focus on getting them back, spend time, money and resources only to find they’re nothing but a fools’ gold account. Worthless. I like this approach too. What’s next?”
After I got my breath back, I said, “B.A. you mentioned when we talked at the truckstop that your competitor’s CSA score is in the tank, correct?”
“When I looked them up on the FMCSA site they had nearly all their BASICs scores above 60 and many were above 75. I think one was even in the 90’s,” B.A. answered.
“That’s nearly always an indication of a trucking company in financial trouble. This means opportunity for you. Do you have any idea who their customers are?”
“I have a list of five or six of them,” Millie answered.
“Are they customers worth pursuing? “ I asked.
“At least three of them would fit into our current lanes,” B.A. said, and looked at Millie, who nodded.
“Well, from previous experience, my gut is telling me your competitor’s trucking company is struggling to survive. Nobody hauls freight at 70 cents per mile below everyone else unless they’re grasping at straws. Think about it - if you knew how to reduce your Break-even Point by that much, why would you haul freight at that low a price? You might drop it 15 or maybe 20 cents and take the other 50 cents to put towards profit. Not go to customers and give them an unrealistic break. There’s something going on here. I suspect with the CSA scores and the tremendous below-market rate, this guy’s in big trouble. He’s either taking a huge loss in hopes of raising rates later or he’s doing something illegal, neither of which are sustainable. So you need to put yourself in a position to take over his customers as they begin to realize the same thing. Again, I wouldn’t point this out to them as you have no definitive proof, but all the signs point in this direction.”
“So, Nicky,” B.A. began, “How do we do that? I mean, be in position to take over his customers?”
“The same way as working towards getting yours back,” I answered. “Open communications so they know who you are. Start first by calling and asking them What are three things your current trucking companies aren’t doing that you really need your carriers to do?”
“Makes a lot of sense to me,” Millie held two mugs in one hand and poured coffee for herself and B.A. with the other. “More coffee, Nicky?”
“Uh – no thanks, Millie.” I continued, “Then, create solutions to those needs and wants and contact them each Monday morning. Or, better yet, ask them to place your carrier on their preferred carrier list so you’ll begin receiving loads to bid on. But never let them know you know who this renegade is. Just focus on what the customers need and want, and work towards providing it.”
Millie had taken notes the entire time. “Nicky, please go over my notes and make sure I didn’t miss anything? You’ve really helped us, to see this more as an opportunity than as something that was going to destroy us.”
I looked over her notes. She was one of the people in school who you always wanted to borrow notes from before the big exam, I thought. She didn’t miss a word. Amazing.
So The Case of the Rate War was solved.
The story you just read is true; names, locations and numbers have been changed to protect the identities of the parties involved.
Postscript: B.A. and Millie followed Nicky’s instructions. It took about six months for everything to fall into place. One of the top customers they’d lost to the competitor ended up being in financial trouble; the other was just taking advantage of the low rates. In the end, Rhoades Trucking got back their biggest customer, and garnered three of the competitors’ old customers. When the competitor’s equipment went up for auction, they purchased five trailers at a sizable discount. They’ve expanded to 17 trucks and drivers, and things are looking pretty good. St. Christopher’s got a nice check. And Barbara Jo also invited me to her wedding. Guess I’d better go. It wouldn’t do to make Millie mad at me.