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Roemer Report – September 2006

WIRED AND GREEN: America’s private truck fleets are increasingly turning to “telematics”—the blending of computers and wireless telecommunications technologies—to lower the costs of doing business, according to a new survey commissioned by PHH FirstFleet. They’re also adopting “green” policies that favor recycling and reducing emissions. Here’s a look. (1) Telematics. Telematics refers to a variety of devices used in vehicles, most of which include a combination of global positioning system and telecommunications technologies. Trucking companies use the data to understand fuel consumption, driver behavior, and the effects of new engine emissions standards. In fact, 60 percent of fleet managers surveyed said they use telematics to track equipment status and driver activities; 42 percent said their main goal was to track delivery times; 39 percent said they wanted to optimize routes and fuel management; and 38 percent hoped drivers would perform better if they knew they were being monitored. (2) Going green. Sixty-five percent of fleet managers surveyed reported implementing some sort of environmentally conscious initiative. Most managers said they use outside contractors to handle recycling programs and waste products, but the investments for such programs remain small and low key, according to 59 percent of managers polled. Still, expect to see more green initiatives in the future, as 67 percent of managers said they planned to make additional investments geared toward protecting the environment.

SMALL CARRIERS FILL GAPS: Small carriers don’t have to—and shouldn’t try to—compete with the industry giants, says Steve Patton, president and CEO of a small truckload carrier in Milton, Pennsylvania. “I don’t want to compete head-on against Heartland Express or Schneider National,” he says. “If I try that, I won’t win.” Instead, Patton says he goes after the business the big carriers aren’t interested in. That usually means hauling loads for many smaller shippers, rather than one big one. “We’ll go to 20 smaller shippers during the course of a week and get a load from each—and we’ll often get a better rate than the big carrier,” says Patton. Smaller carriers also offer better service. One shipper says the smaller companies “knock the socks off the big guys” when it comes to service, because the “the big carriers are so concerned about doing all the right things for Wall Street they can take their eye off the customer.” Federal statistics show there were 564,699 interstate trucking companies in the country last year—and more than 95 percent of them operated 20 or fewer trucks. To succeed, these companies pay special attention to the needs of their customers, an advantage they have over the bigger, more impersonal companies. When a shipper calls Patton’s company with a problem, chances are they talk directly to him. That strengthens the bond, builds trust, and creates positive word of mouth. “If you take on a new project for a shipper and do it right, the business just comes,” says Patton.

TRUCKING STRONG FIRST HALF OF YEAR: For the most part, trucking operations have done well during the first half of 2006. Old Dominion Freight Line, for example, reported that its second quarter profits jumped 55 percent, compared to last year’s second quarter. The carrier’s operating ratio improved to 88.3 percent from 90.4 percent. PAM Transportation Services Inc. said its earnings increased 42 percent. “Good utilization and steady demand combined with favorable pricing produced record results for the company,” said Robert W. Weaver, president of PAM, who acknowledged he still has concerns for this year. “Fuel volatility coupled with the cost of hiring, compensating, and retaining safe, qualified drivers are currently our most challenging concerns pertaining to operating costs.” According to the American Trucking Associations, the economy has slowed from the first quarter of the year. “However,” said Bob Costello, ATA chief economist, “there continues to be a favorable supply-demand market. Also, considering the growth in manufacturing production, especially in durable goods products, we expect to see a strong fall freight season.”

IF AN AUDITOR VISITS: What are your chances of having an auditor from the Federal Motor Carrier Administration knock on your door? It’s 100 percent if you’re a start-up company or have a truck involved in a fatality. And if you don’t fall into either of those categories, it’s still wise to be prepared. David Owen, president of the National Association of Small Trucking Companies, tells carriers there’s only one way to pass an audit: Play by the rules. One consultant urges carriers to pay attention to these areas in particular: (1) Insurance. Be sure you have an updated MCS90, a standard form showing that you have the minimum level of insurance. Not having a readily available form is an immediate red flag. (2) Driver qualification. Make sure you have employee records, drug and alcohol testing procedures, and paperwork on background checks readily available. (3) Accident registry. Be sure all reportable truck accidents are recorded in the company register. You should also have a post-accident counseling program for affected drivers. (4) Maintenance records. Be meticulous in keeping records of truck maintenance histories. Make sure drivers do pre-trip and post-trip inspections and that you get monthly or even weekly maintenance records from owner-operators. (5) Health records. Be sure CDL health exams and drug and alcohol tests are in order and up to date. (6) Log books. Log books must comply with hours-of-service regulations.

CLOSE CALL IN ALASKA: Last month the British energy giant BP announced it had begun shutting down 400,000 barrels of daily oil production at Prudhoe Bay in Alaska due to a leak in a corroded pipeline. The next day, oil prices jumped more than $2 per barrel, and many analysts predicted prices at the pump would go up anywhere from 2 to 10 cents per gallon in the next few weeks. Some commentators even feared this was the beginning of a recession, much like the energy crisis of the 1970s. However, now that the dust has settled, BP says the situation is not as dire as initially thought. As of this printing, Prudhoe Bay is producing about 140,000 barrels per day, and the price of oil is back to where it was before the scare. The fact remains, however, that the aging BP pipeline, built in the late 1970s, has not been thoroughly inspected since 1992. According to the Washington Post, a 2004 survey of BP employees and contractors “provided a warning to executives that the company was not adequately maintaining the pipeline” at Prudhoe Bay. But because the pipeline is “low-pressure,” it is exempt from federal upkeep rules and does not have to undergo the extensive integrity checks required of other tubes. If the federal government is serious about lowering fuel prices, protecting the environment, and holding large corporations accountable, it should require tough regulatory standards for low-pressure pipelines when the Pipeline Safety Act comes up for reapproval later this summer.

PROMOTING DRIVER HEALTH: Most truck drivers are not healthy. More than 73 percent are overweight, and more than half are obese. Millions of drivers are diabetic, 80 percent have unhealthy eating habits, and 44 percent suffer from high blood pressure. Poor lifestyles of drivers can add thousands of dollars per driver per year to a company’s overhead. Yet being on the road and away from family and friends and a routine schedule make it even harder for drivers to make healthy choices. Enter the Road Athlete System, an interactive, self-paced health program designed to eliminate the obstacles that prevent most commercial drivers from making healthy choices. The program covers 12 lifestyle lessons for drivers—nutrition, exercise, mental fitness, stress reduction, attitude and happiness, sleep, substance abuse, time management, motivation, disease prevention, weight, and relaxation. “Drivers can begin any place in the program,” says author Susan Shapiro. “They read one page a day and complete one goal. By the end of 20 days, they have completed a mini-program about what they need to do personally to develop a healthier lifestyle.” Drivers often work the program in teams for peer support. According to Occupational Athletics, the company that introduced the new program, the Road Athlete System includes a 12-month, interactive game book, two audio CDs, and a telephone follow-up. More information is available at occupationalathletics.com.

TIPS FOR TRAINING: Most managers are more used to “presenting” than “teaching.” Presenting involves imparting certain knowledge and experience to the listeners. Training, however, is usually more interactive and focuses on the participant’s ability to understand and apply. If you find yourself in the role of trainer, try to: (1) Keep them involved. Plan an interaction every 10 minutes. This may be an exercise or simply a question for the participants to respond to. Interactions help participants process the information. (2) Break them into small groups. Groups bring diverse thinking to a problem and help team members learn difficult skills. They also bring more energy and inspire creativity. (3) Measure your results. In the second half of your training session, provide an exercise that simulates the action you are teaching. This helps you assess whether participants understand what you are teaching. If they don’t get it, you have more time to get your point across. If they do get it, give them a pat on the back to inspire confidence and encourage them to apply this at work. (4) Attitude matters. People learn more from trainers they respect. Being positive and showing a genuine interest in their success will go a long way toward this end.

The best way out is always through.—Robert Frost