The Roemer Report March 1988

read most recent issue blue.png

Trucking and the Quality Movement

Most of the industrial companies you now serve are deeply involved in the area of total quality control. In our view, it's a matter of time before the quality movement migrates into thetrucking industry.As it does, it will 'rewrite many of the axioms of trucking management. Consider this: American industry has been shaken to its core by the remarkable success of the Japanese. Their marketing strategies are almost universally predicated on the continuous pursuit of quality. We have a long way to go before closing what has become a large quality gap with the Japanese. But as the movement inevitably grows in America, the quality of service in key sectors such as trucking are destined to receive far more attention. Manufacturers in our country are already turning their operations upside down in focusing on internal quality…It’smerely a matter of time before they demand comprehensive and measurable qualityprograms from all key suppliers-including truckers.In many cases, an operational quality program will become a precondition to serving a manufacturer.

YOUR SERVICE QUALITY ANDYOURGROWTH: Practically none of the enlightened trucking executives we've met want to build the futureoftheiroutfits solely on the price factor. There will always be a marginal operator that is willing to give his service away in order to get an account. We believe a key to growth in today's trucking is the ability to differentiate your company on factors other than price.Quality is the prime route in accomplishing this. There are three avenues for continuous growth and renewal in trucking - quality, customer service and systematic innovation. All of them can be enhanced in a well-conceived quality effort.

THE REAL COST OF SERVICE QUALITY: Conventional American management thinking suggests that first-rate quality costs more. That's dead wrong. It usually can produce lower costs and even more competitive rates. Why? The cost of “unquality" in most organizations is enormous. It is the cost of waste and crap, delays, rework, unproductive people, lost sales, etc. Quality experts typically put this cost of "unquality" at about 20% - 25% of the total operating budget of a typical company.Viewed in this context, the price of training your people in the principles of service quality is an inexpensive investment in your future.

THE FUNDAMENTALS OF SERVICE QUALITY: First, it's not a program. It's a state-of-mind that must pervade your entire organization. It is the continuous ongoing pursuit of improvement...and it's a never-ending process. Here are some other key quality principles: (1) Quality thinking starts at the top. It's essential for all the senior managers in your organization to buy into the quality concept before you expect your front-line people to embrace it. Top management must become merchants of your quality vision. (2) The quality of service in this country is generally poor.How often do you receive really good service and what kind of impression do you get of an organization that is genuinely customer obsessed? (3) Get your people all of them - actively involved in brainstormingqualityideas.You'lldiscoverthattheyhavemanyinnovativeideasthatcostlittleor no money. (4) Everyone in your organization has a customer. The customer is the next person your work goes to. (5) The quality of the service you provide to one another inside your organization will basically determine the service quality you are able to deliver to the shipper. (6) Quality of service is always defined by the shipper, never the trucker. Get passionate about feedback from your shippers and you'll find yourself growing and becoming more customer responsive.

FEWER CLOUDS FOR THE SMOKESTACKS: Remember those depressing obituaries being written a few short years ago for America's so-called "smokestack” industries? Call them premature, because a number of U.S. "smokestack" companies are coming back strongly from the endangered list. The lower dollar is one factor helping embattled steel companies like Bethlehem and Armco gain new momentum. They've also closed obsolete operations and trimmed costs. Now they're operating at close to capacity with-sharply increased earnings. One report notes that steel companies are "lean, mean and overflowing with orders. "Prospects are also brighter for aluminum producers like Alcoa and Kaiser. Things are looking up, too, for heavy equipment producers and Caterpillar is now price-competitive withJapan's Kamactsuin international markets. Another good sign is that business capital spending for new plants and equipment is heading upin 1988. U.S. machine tool builders doubled their January orders from last year and see 1988 shaping up as a great year. Production of farm equipment and trucks also is on the rise. It's too early to tell whether the business surge is only a boomlet resulting from the falling dollar. It's beginning to appear, however, that much of the improvement must be chalked up to good management and sound cost-cutting moves.

THE DOWNSIZING OF AMERICAN UNIONS: The nation created some 2.5 million new jobs last year. Meanwhile, organized labor lost 62,000 members. These divergent trends highlight what now is clearly a structural decline in the unionized sector of our nation's work force. Union membership was placed at 16,913,000 in 1987, down from the 16,975,000 level of 1986. In 1979. unions represented some 24% of the nation's work force. Today they represent just 17% of our workers.Some attribute this slippage to the erosion in U.S. manufacturing jobs, but this assessment is not supported by recent statistics released by the Labor Department. Last year's rebound in domestic manufacturing helped put 400,000 more workers on the assembly lines than the previous year. But union membership in the manufacturing sector still declined by 175,000 workers during the same period. Union members docontinue to enjoy wages of 36% or $123 per week more than those of their nonunion counterparts.Rutgers University labor economist Leo Troy says the inability of unions to generate any major increases in membership after six sustained years of economic. recovery suggests that they will not fare well in an economicdownturn.

THE GOOD NEWS ABOUT CORPORATE PROFITS: Corporate earnings receive heavy emphasis in the news media. Still, they can be rather deceptive in revealing the underlying health of our economy. Most companies report their earnings via net income figures. This is the profit left over after a firm pays its bills, taxes, salaries and other current expenses. Yet, what often look like impressive financial results frequently mask far deeper organization problems. For the past 15 years the profitabilityof U.S. businesseswhich measures actual return on assetshas been on the decline. In reality, American business has lost ground in this pivotal barometer since the mid-1960s. It is no coincidence that our global competitiveness has diminished during the same time. But some economists are beginning to note what they consider to be a very encouraging rebound in the pivotal return on assets measurement. With years of meager returns on their investments, corporations were understandably reluctant to invest heavily in new plants and equipment. In retrospect, many would have done better by liquidating their assets and investing in Treasury notes or bonds. Now, what seems to be a steady growth in corporatereturn on assets bodes well for the long-term health of our economy.If this trend continues, major investments in plants and equipment will be far more justifiable. Moreover, they should significantly enhance the global competitiveness of U.S.industry.

TARGETING THE EMERGING BUSINESS MARKET: The massive economic shocks of recent years have far-reaching ramifications for your marketing strategies. Many businesses have traditionally targeted their marketing and selling efforts at larger companies because they are easier to identify and more efficient to reach than smaller firms. But consider this: From 1980 to 1986, Fortune500 companies laid off a net 2.8 million workers while companies with fewer than 100 employees createdalmost 10 million jobs…Thus, the once tried-and-true market is now in well you may be if you continue concentrating 'your marketing efforts in the same old place. The new growth markets are, for the most part, a breed apart from the kinds of customers you used to sell to. They are a host of small, unstable companies in the grips of severe growing pains. Marketing to these firms is a challenge unlike any you’ve encountered. First, they're tough to find since they are emerging out of a vast morass of tiny businesses. Distinguishing tomorrow's winners from firms destined to flash and fade is no mean feat. Second, timing is everything. If you wait too long to make your move-that is, until their strengths areclearly visibleyour competition is likely to grab them first. Even supposing you find these "comers" before someone else does, be prepared for ups and downs. Their volatility can complicate your job...unless you find a way to customize your product or service to theirgrowing pains.

Subscribe to the Monthly Roemer Report

Enter Email Address Below