The Roemer Report January 1987
- Leased Operator Semi Truck Insurance Quotes
- Bobtail Semi Truck Insurance Quotes
- Occupational Accident (Occ Acc) Semi Truck Insurance Quotes
- Cargo Semi Truck Insurance Quote Form
- Commercial Auto Liability Quotes
- Physical Damage Semi Truck Insurance Quotes
- Owner Operator New Authority Semi Truck Insurance Quotes
- Non-Trucking Liability Semi Truck Insurance Quotes
- Contingent Liability / Contingent Cargo
- Motor Carrier Liability
- Primary Auto Liability
The 1987 Trucking Outlook
This year is shaping up as an excellent period for both the economy and the trucking sector. It will not be without its bumps, but the road ahead seems to be paved by the presence of economic growth and a buoyant national mood. Consider the stock market. A surge so early in the new year is an exceedingly positive sign. We don't see interest rates registering any significant increases. Indeed, they could even dip further by perhaps the second quarter. The recent upward movement in global oil prices will clearly dictate upward movements in the cost of diesel fuel. But, don't look for this to get out of control. Incredibly, even the federal deficit seems tobe cooperating. It is expected to decline from $221 billion in fiscal 1986 to about $185 billion in the current 1987 fiscal year. The current consensus growth projection of 50 forecasters compiled by Eggert Economic Enterprisers projects growth of 2.5% for 1987. That's not a boom, but it is steady progress. Given the durability of the current recovery and its probable cruise right through 1987, truckers have genuine reasons for optimism.
NOW TO THEFINESTROKES: The above is, of course,anindustryoverview.Here are some specific points for our readers concerned aboutspecificsectors or commodity categories. (1) Autos and trucks.... Thisyear shapesupas another strong one for domestic manufacturers of cars and trucks.Lastyear'srecord level of 16 million cars and trucks sold may not be reachedbutwecouldcomeclose. Ford and Chryslerarecooking. GeneralMotorshassome problems and will losemarketshare.The big story hereistheimporters, particularlytheKoreans. If you're interested innewbusiness, keep an eye on the so-called "immigrant" plants. Toyota, Honda,Nissan and Volkswagen--they will be giving new business to a tonofsupplieroutfits...good candidates foryourservices. (2)Retailing. Consumerspending should remain strong this year. But, overall it will notbethedominant factor it was last year. (3)Steel. Most experts see a carryover supply of steel. Hence, steel consumption is expected to fall byabout3%this year to 85 million tons.This comes on top of a 6 million tondroplast year. Thus the trend line here should be fairly clear. (4) Chemicals.... Ifyou'rein this sector, you could hit the lottery this year. Record salesrevenuesandprofits for the industry appear probable. Indeed, with operating ratesexpectedtoreach 85% this year, shortages could be a problem. (5) Constructionproducts.... This is a schizophrenic outlook. The commercial sector faces a big oversupply of office buildings and a new tax code that hits this sector like a sledge hammer. The residential sector should continue performing verysolidly.
DEREGULATION FOSTERING INDUSTRYCONCENTRATION:
Prices are stable. Services have improved. Competition is humming. Looks like federalmandatestoderegulatethetruckingindustryareworking,right?Well,the jury's still out. True, a record number of new faces have appeared on the less than-truckload (LTL) scene. Over 17,000 start-ups (among interstate truckers)have been created since 1978 with only about 40% eventually failing.As in the airlines and railroad industries, however, the major firms are winning out. How? By beating the new kids at their own game.... Established LTLs, inspired by brash upstarts, have rediscovered market niches: door-to-door delivery. Once idle carriers now capitalize on short runs...more traffic equals higher profits. Discounters can be handled: People Express is a most recent example of how such service is undermined by well-heeled competitors. In some cases, older firms have answered with their own trump card: merger or forced buy-outs. Industry observers today report just 10 LTLtruckers continue to rake in 90% ofall profits and 60% of all business.Deregulation in trucking has brought a spat of competition. How long that party lasts is still notknown.
STRATEGIC MARKETING: Now, here are a few business development ideas for those of you who aren't yet in a dominant marketing position. Competitive marketing strategies commonly fall into three categories--niching, low-cost and differentiation. But, contrary to popular belief, these three strategies are not mutually exclusive. Aggressive firms often pursue two or even all three approaches simultaneously. Consider how such past or present market leaders as General Motors, Federal Express or Bic Corporation have combined the following basic strategies: (1) Niching. Most marketers read "niching" and "market domination" as synonymous terms. A company takes the lead by answering a previously unfilled need in one or several markets. (2) Low-Cost. Typically associated with high volume, the low-cost strategy tends to work best for companies with large market share. (3) Differentiation. This approach is built on a two-pronged theory--that a market is made up of smaller, more homogenous market segments, and that it is desirable to "customize" products for these segments.... General Motors tapped niching, low cost and differentiation in developing its Chevrolet, Buick, Oldsmobile, Pontiac and Cadillac product lines. Federal Express is a stellar example of a company that used both niching and low-cost to advance its sales. So is Bic with its disposable pens, lighters and razors. The point of all this is that truckers can choose from a number of marketing strategies. But, they do need a strategy that makes sense based on their fit in the shippingmarketplace.
HOW TO INSURE YOUR GROWTH: We've all seen the stories about rising stars in trucking and in other business sectors. A few years later they maybe out of business. People Express was supposedly a messiah in the airline business with a new state-of-the-art management concept. But, look what happened to it. So how does the seasoned CEO in trucking progressively move forward without buying into some high-risk new wave management concepts. We offer two ideas: (1) Forget about trying: to do 3or 4 things 1000% better. It won't happen. Trydoing: 1000 things 1% better.Getting people at all levels in your organization to buy into incremental improvements is a universal ingredient present in almost all well managed companies. (2) If you follow those who have had real long-range staying power in trucking, you'll find that they are constantly generating new service approaches or management concepts. Attack yourself before the competition does. If you've got some good things going, don't be afraid to make further improvements. This principle of self attack seems to be another common ingredient in excellentoutfits.
WHERE'S THE BEEF? That's a question many truckers may be asking themselves as we evolve from a manufacturing to a service economy. How about the future of the big manufacturers and their suppliers who have been the backbone of trucking? Here's the big picture. American industry gave up the ghost of its postwar glory two decades ago. Manufacturers grew smug and sluggish. Innovation faded...and so did our world market dominance. America's share of the global electronics market is now less than 10%, a scant third of its 1965 level. Similarly, our piece of the auto production pie has been halved.Butheavyindusttyisbynomeansdead.It'sbeing:reincarnatedintheformof"flexiblefactories"-based on computer-integrated manufacturing: (CIM).Here's a look at the future that's happeningtoday....With computer-assisted design and engineering, automated plants can crank out customized products on demand. A cue from the central computer is all that's needed to switch from one set of specs to another....
Traditional factories spend 25% to 35% of their manufacturing costs on quality control. But CIM enables companies to minutely monitor production, preventing most errors. Automated factories, therefore, havedramatically lowered quality control costs.... Surprisingly, CIM's primary cost savings come from automating information flow, not from slashing direct labor costs. When paired with just-in-time inventories, CIM can shave 45% off indirect labor, middle management and overhead costs. The biggest block to automation is human resistance to change. Adopting CIM requires five to ten years of intense, and often painful, re-education. Manufacturing is going the way of agriculture. It will produce more volume with fewer people. But, there will always be plenty of freight to haul. Bad news for factory workers does not equate to bad news for those in our industry.
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