Someone PLEASE call me ignorant....

[MPG]

Let me bounce something else off you guys and gals……..

Let me assure you I’m not trying to insult, make fun of , pick a fight with or belittle anyone.

First a little history about me……Just humor me here….. Read the WHOLE post…. Then reply…..(If you want to)…

I’m a Tool Designer (not an engineer) in SE Michigan. I have worked at the same company for 10 years, 15 years total “experience”. I’m lucky to be working in a family owned operation. About five years ago our business started to change.

Five Years ago:
There where about fifty or so tool design houses around town, if one employer irritated you, you went to work somewhere else for more money. It was a true employee driven market place dictated by our wishes and demands, we had the owners bent over a barrel. Times were good, as was the money.

Four Years ago:
Five of these tool design houses decided to save some money and send their work to be done overseas (at about a tenth of the price) and fired all their tool designers. We all chastised them and called them sellouts and un-American and things of this nature. It was no big secret everyone knew what was going on. Nobody with “experience” would go work for them doing work that could only be done in-house. They did find enough “newbie” employees, and trained them, to cover the workload and of course paid them half what the old tool designers made. These “newbie” tool designers had no idea what was going on, nor did they care. They were making some “decent” money. No big deal right…???? Tool Designers still have 45 other places to work.

Three Years ago:
Well, guess what happened. The five tool design houses doing all their work overseas are so cheap they’re getting a lion’s share of the available work. This chokes about 15 tool design companies to a dead halt and they close up shop. No big deal right….?????? Still have 30 places to work. I mean after all, these 30 tool design companies are providing their customers with great SERVICE and they’re happy.

So far to this point, about 3,000 tool designers have lost their lively hood. They’re thinking “No big deal it’s just a phase. I’m sure once these companies see what a crappy job these “newbies” are doing, they’ll be begging me to come back to work for MORE MONEY, of course. I’ll be back to work in no time.”

Two Years ago:
Guess what…..Out of those 30 tool design companies doing their work in-house, 3 are left now. What’s happening internally at these 3 companies? They are firing off their high pay “experienced” tool designers, or offering them 50% pay cuts to stay, and replacing them with newly trained “newbies”. At half the cost. Most tool designers are so desperate NOT to be fired they wind up taking pay cuts in order to feed their family. Others take their pride to the unemployment office. Do I blame them? No. The companies that are left have to TRY to stay competitive.

Today:
Well…..Two companies left doing in-house work as described above. Total employees, maybe 200 or so, down from 30,000 five years ago. The five tool design companies doing all their work overseas through mergers and back biting now total three. The companies still get all their machines. Maybe they’re SERVICE isn’t as good as it was five years ago but, look at all the money they’re saving. This scenario will NOT change back to the “good ole days”. IT’S PERMANET.

“Wow, it sucks to be a tool designer” you say “but how does that affect ME?”

Well, as I search for a new career(I no doubt will be unemployed soon). I was looking at careers that can’t be shipped overseas, or “outsourced” as they call it in the newspaper. I happened upon expediting. Partially through some fellow ex-tool designers who now call expediting their new career. Partially through research. I thought to myself “GREAT, no one living in China or India can drive a truck in America”. It’s impossible. What an ironclad career choice, where do I sign up..???

Well I see know, through research. That your business is exactly like the one I’m leaving. Only it’s about five years behind the times. You see, in the area that you call the “hotbed” of expediting, (Midwest) it’s all driven by industry. Whether it’s directly automotive or not, it’s manufacturing of some type driving it. There won’t be massive job loss, like in my case, it will just pay a lot less.

Believe me, when I tell you, once the “non-automotive” accounts see how cheap the Big Three and others are shipping their hot freight on the “load boards”. They will demand the same price. If they don’t get it, they WILL find the “load boards” all on their own. Initially, the load board companies won’t be able to handle the load. Soon enough though, they will have enough trained employees and the equipment to make it happen. In the meantime, the companies will “put up” with some service lapses while the bugs get worked out, and they will. Look at all the money they’re saving. It’s all about the BOTTOM LINE.

In the meantime, all the other expediting companies are watching this happen and are powerless to stop it. Why are they powerless to stop it…??? They’re not at the top of the food chain. Their services are only worth what someone will pay for them. They either buy into the new way of doing business or close up shop.

Go back and re-read my story, only this time replace the words:

“Tool Designer” with “Expeditor”
“Overseas” with “Load Board Company”

Then reverse the time line to start with today and go five years into the future…..Is it impossible…???

Someone PLEASE tell me I’m wrong……..Some insider info you guys know I don’t………???

I want to expedite for a living……. Just don’t want to waste more time developing a career that falls apart in five or ten years. I’m getting too old to keep starting over.

No matter how many people say “NO” to cheap freight. There will always be someone to take it.

Jeff

 

[louixo]

You´ve just outlined the basic principles of "free market economics" aka "CAPITALISM". It will continue, but you paint a negative picture, and neglect to explore the opportunities that will be available in the future.( there will be opportunity). Remember 10 years ago, there was no "expediting" industry, though there were a few "expediters". Ten years from NOW there will be something else in trucking. Capitalism evolves with innovation, but efficiency and cost are always the cornerstones, innovation is not built on "love thy loyal employee". We all wish that it were.

 

[Glen Rice]

I don't think you understand the principles of what we do? You may sit and do nothing for three days and then the next thing you are running your tail off for a week straight. Our industry is not 8 to 5, for that reason I doubt you would last very long no matter what company you might be lucky enough to be excepted by. Save us all the time and heartache and find somewhere else to work. And please stay out of this great industry!

 

[MPG]

louixo or anyone else,

How long do you, as someone directly involved with it, see the current cycle lasting...???? I could have told you about four years ago my career was doomed. It was an awesome career choice for 50 years or so. Guess I picked a bad time to jump in.

I see mentioned on this forum alot "September 11th changed everything". Correct me if I'm wrong. But, I think the tighter restrictions on who can drive a commercial vehicle after this event, is the only reason why trucking hasn't been completely overrrun with Mexican immigrants (politcially incorrect I know) working for half the price. Unless it's happening already and I'm not aware of it. Which wouldn't show up on economic reports as job losses. But, sure would turn alot of peoples lives upside down.

 

[MPG]

Glen,

Again, if I've offended you I'm sorry.

Explain to me what I'm missing. I've never read on here or anywhere else for that matter what the basic principle is.

You can hate me if you like, but I'm sure the other 1784 users and counting would like to read your answer.

Jeff

PS.... What does the job not being an "8 to 5 job" have to do with anything being discused...???

 

[truckerron]

your right i ran parts in to gm out of a warehouse where the the otr driver brought them in now the otr driver take the parts straight in to the plant and it added more hours to there day butt they do it about the same thing i think your talking about///?? MAYBE MAYBE NOT

 

[davekc]

Expediting will always remain competitive. The greatest thing for drivers right now is the lack of them. Foreign labor is around the corner and will certainly work cheaper, but for now, they lack the capital and know how to launch themselves into expediting.
High operational costs and financing will continue to be the driving force behind low numbers of o/o's.
It does seem like we are reaching a breaking point with rates vs operating costs. Net profit per mile is at a record low. Miles for 03 and 04 have been up considerably but not the profit per mile. The winner being we made more income but our expense ratio is higher.
Market conditioning?.....when you buy fuel now, a 1.50 or 1.60 seems like a bargain.
Just my opinion and observation
Davekc

 

[KandS2]

Rates do seem to be going down overall though.

My better half talked to a Try Hours driver the other day. The driver told him that it was his last trip because their rates were lowered to .70 per mile. Now this was a van driver. I don't know if the same holds true for their bigger trucks.

Stay safe out there!

 

[teacel]

>I don't think you understand the principles of what we do? What does principles have to do with hauling cheap freight?
>You may sit and do nothing for three days because all the expedite companies are HIRING to many drivers and then the next
>thing you are running your tail off for a week straight.[/b]that is because the driver got tired of sitting and decided to also haul cheap freight[/b] Our
>industry is not 8 to 5, for that reason I doubt you would
>last very long no matter what company you might be lucky
>enough to be excepted by Sounds like MPG struck someone’s nerve. I think MPG hit the nail on the head about expediting. Ask some of the driver's that have been in this industry (expediting)for the last ten years... look at the price drop over the last 5 years. I know when I started I was getting about 50 or 60 cents a mile more than I get now! I see guys out there everyday crying for a backhaul BY THE WAY WHAT THE %#&*@% IS A BACKHAUL ANYWAY? and will barter with a customer to deliver a load for cost plus 10% just to get home. Wait till you get dispatched to pick-up a load only to see another guy getting the trip at 1/3 the cost you were going to do it for. Save us all the time and heartache
>and find somewhere else to work. And please stay out of this
>great industry! I don't know what MPG said that ruffled your feathers? I think he is asking a valid question and should be concerned if he is getting ready to make a career change and invest in a new truck.

 

[MPG]

Thanks Teacel...So my assumptions aren't far off after all. I see backhauls mentioned everywhere, like it's no big deal. The concept is nuts and illustrates just how dog eat dog this business is.

I ruffled Glen's feathers in the "My Business Plan...." thread. I have said I'm sorry. I give up. You're right I think I struck a BIG nerve.

truckerron..If I had any idea what you're saying I could address it. Sorry.

davekc,
Your comments also further validate my views. "for now" everything is OK. But you point out all the signs of a business on the slide.

As far as diesel prices. Let's say that if gas were 30 cents cheaper than it is now you would be rolling in the dough...?? Let's assume your truck gets 10 "MPG" and let's assume you've screwed up in your choice of carrier to lease on to and aren't getting any fuel surcharges. Are you saying that 3 cents less a mile is killing business....???? This isn't even a miles driven business, like OTR. I think I read that it's more about how much per load.

If that was the case though, you and all the others here should be standing on the highest moutain screaming at the top of your lungs against cheap freight and "backhauls" and load boards.(It's killing me I can't name the "load board" companies, for fear of the thread being killed....BTW) You've got the perfect forum to do it.

The problem is if you did, no one would hear you. Sadly, not even those right next to you.

 

[Tom Robertson]

Jeff:
First of all I would like to tell you that this industry will not change... but lying is not one of my forte's.
My expediting business began 20 years ago with nearly 99% of my business moving through the air. As weights and sizes of material being moved increased it became increasingly more difficult to move all the material on passenger aircraft and not having cargo planes of my own I began moving this material by truck. In my local market there were no cargo only aircraft and through options printed on every airbill we had the right to move this material by ground if we could imrove on the transit time of the scheduled airlines. About 15 years ago approximately 35% of our business was moving via surface. Ten years ago over 70% of our business was ground transportation. In 1996 we handled the last of our air shipments. The rules and regulations, surrounding the airfreight induatry changed on a weekly basis, the pilots has the last word on what would fly and what would not. Weight restrictions could leave your packages sitting on the ramp with nothing moving to the designated delivery point until the next day. We found that we could provide equal to or better service within 750 miles of our base. For quite a while we had the luxury of billing at air freight rates, which allowed us to deadhead back to our base with enough revenue to make a reasonable profit.
The big guys starting making inroads into our market and our local customers moved to the cheaper rates. We could compete in one direction but could no longer afford to return on the revenue. "Backhauls" were attempted but service provided often went uncollected.
Time to "RETOOL!"
Experience in the industry allowed us to approach and secure a contract with Daimler Chrysler, which led to a contract with GM. This "automotive freight" is considered by many to be "cheap freight". We do not consider it to be cheap freight! We run a very well organized company with little overhead and we pay our drivers well. Every driver in on our team is earning more with our company than the earned with any of the majors. We don't use qualcomms and we know each driver by name, not a truck number. The majors charge truck owners $35 a week for the qualcomm... I checked out our cost two years ago and for a small fleet like mine the cost is actually $90 a month! SO the majors are making $61.66 per month on every qualcomm on every truck in their fleet. Plus the insurance coverages and costs for such are also suspect for major sources of revenue for the larger companies. Their concern for the drivers expenses and miles driven are non-existant!
My reasons for going into all that detail are simply to point out the validity of an earlier comment I read to your post regarding capitalism. It seems the nationals have gotten greedy, not only with the percentages of profit on each load but also with the sums deducted (read stolen) from the very source of their income: their drivers!
It appears that our retooling has us once again in a position of making a reasonable profit for the services we provide. Which by the way are tops in the NLM program!
Another response accurately predicted forein labor being right around the corner. I believe that all of us need to prepare for the day that our government actually allows that to happen. Through organizations like this one, OOIDA, and the teamsters union, collective action could put a stop to any laws allowing foreigners to take over the jobs of professional drivers in this company. A week without any truck rolling would convince everyone to remand any action taken to allow our professionals to have to compete in our own country with foreign labor. This topic is one that should be addressed by any and all in this industry.
Unlike the tooling industry, inexperience and errors in this field not only will cause a collapse of the industry,... it will lead to many deaths on the road.
Competition is good for all industries and will normally produce a better product at less expense. But when it comes to allowing outsider to enter the country, place our lives in danger and erode the income of millions, it is time to make a stand.
They can have all the roads in Mexico, (I've driven a few and you don't want to drive there) and we'll keep ours!
So I cannot call you ignorant! You have many valid points. I believe that as long as we are able to keep the mainstay of our economy (the professional driver) an American citizen, that the industry will prosper and the drivers will benefit. Changes will occur, the greedy will settle for less or get out and the hardworking owners and operators looking for a reasonable profit will always have work... as long as we keep our roads, "OUR ROADS!"
Good luck in your endeavor in a great industry.
Tom

 

[MPG]

Tom,

Thanks for an excellent post chock full of info.

Let me bounce this off you.....

I believe the Big Three and other large manufacturing companies, in their neverending quest to squeeze their suppliers have seen "JIT" as a major cost they can do away with rather easily.

I don't view JIT exactly the way you here do. I see it a little different, as an insider. JIT started, for me about 8 years ago (what a coincedence), when Ford decided they didn't want to manufacture a car from scratch anymore, they wanted to just buy the parts and assemble the car only. All the others soon followed suit.

What do I mean by that. Well if I'm building 500 cars a day. I need 500 fender assemblys RH/LH. Why would I want to buy the tooling, house all the tooling to make that assembly, perform all the maintenance, pay all the high dollar UAW employees it takes to procure the tooling and operate the line, when I can find some sucker to do it for me. So what they do is buy that fender assembly from a Third Party vendor someone like Tower,Magna,ABB,American Axle,Thyssen-Krupp Fabco,Oxford,Kuka,Visteon,Lear,Delphi(I bet most of you recognize those names) and have it shipped into the plant, daily, for final assembly. I think almost all this auto freight is shipped expedited, but I'm not sure. This works well but if one of my supplier's lines goes down. I don't have enough inventory to continue assembly. That's where an expeditor steps in. The problem is, if it takes my supplier 8 hours to get back on line and 4 hours to fill the dunnage boxes and 4 hours for the trucks to get from Michigan to Ohio, I just lost 16 hours of assembly time, big problem.

How do I fix it, well in the future, I'll tell my suppliers if you want my business you're going to locate the building where you're building my fender assemblies to within a 5 mile radius of my assembly plant. If you don't want to do this I'll find someone else who will. In this scenario, I still lose the 8 hours of line downtime, I don't have to wait for a full truck load of parts to be completed, I can put them on a stake truck and ship 'em box by box. I lose maybe 9 hours of assembly time. Not great but definetly better. Plus, as a plant manager, I can get in my car and drive over to my fender facility and see exactly what's going on, and I get to yell at my fender supplier in person, good times.

Now granted you won't be able to get every part within 5 miles but can you get 50% or 75%. I don't know the exact answer.

You can see this plan in action at the Ford Chicago Plant and the new Mercedes Plant in Alabama. A bunch of other plants will soon be on board.

So how much you think those expeditors are going to make on that 10 mile round trip run..??? $11.50. Cost eliminated.

Tom....you say lying isn't your forte. I'll take your word on that, but, are you going to tell me that an "American" is the only race of people "smart" enough to operate a truck safely. COME ON!!!! The ACLU is much stronger than the two you mentioned. The Unions are dying a little bit everyday. Like you mention greed got the best of them too. They're already making major concessions on current contracts (two-tier pay scales and such) just to stay alive. It was a helluva run though.

Teacel....I know the "cheap freight" thing really gets under your skin. But, there's really more than meets the eye behind the "cheap freight".

Oh BTW Tom.....Get ready for a re-tool.....The times are a changin'

 

[louixo]

MPG, you´re scenario is largely theoretical throughout your rant. You seem to be pushing the panic button, and trying to draw parallels between the industry you are in, and expediting. There are some, of course, but not many. The only real parallel is that both indusrties are constantly faced with competition. Read Tom Robertson´s post again, he RETOOLS and COMPETES, and if he continues to do so, he will be the competitor to beat, and he will continue to make money. Again...CAPITALISM! Build a better mousetrap etc. In your last post you paint a picture of expediting trucks running between plants for $11.50. Get real! Who´s going to do that? IF..big IF..that came to pass, it would probably turn into an hourly job at decent pay. And in closing, you asked if I could tell you how long the present cycle will last. If I had that crystal ball, I´d be sitting where Alan Greenspan is sitting. Economics is an inexact science, by it´s very nature. Too many variables, and not all predictable. The best economists in the country can´t agree on what´s going to happen in 10 years, in any area. In your original heading, you mentioned calling you ignorant. I don´t think you´re ignorant at all. Misguided maybe. If you geared your business plan in the direction of competing and winning,(what Tom called retooling) you might have something. That´s the name of the game, and that´s how the game is won! Take another look.I wasn´t sure if you weren´t just funnin´ at first. Good discussion. Tom, really good post.

 

[MPG]

I am funnin' in the other post.....but not this one.

I thought my sarcasm or humor as you called it would play to a bigger market, but it didn't. Ooops. Looks like I made a couple enemies in the process. Oh well...

On to the topic at hand.

I am pushing a HUGE panic button. I've got mouths to feed.

Nothing about what I said is "theoretical" it's reality. Go to the home page of some of the above named companies. I'm sure if their site has been updated recently they will have new offices in Chicago and Alabama.

Hold on tight, here's a real good one.

http://media.ford.com/article_display.cfm?article_id=18911

A half mile away. I guess the answer to my question is 60%. "For now"

I think if you do some internet searches you'll find that ABB built a state-of-the-art plant about a mile or so away from the Mercedes plant supplying just that plant with just about all the "Body Structures" they need.

I'm sorry it's not ABB but Oxford with the new plant in Alabama.

Story is here at the bottom:

http://www.bizsites.com/2003/article.asp?id=401

I guess I lied to you it's 14 miles away. The load is now worth $32.20 at the going rate for a D-Unit. Half that if you don't get empty pay. The equipment in the plant is easily $200 million. That's ALOT of assembly tools.

I understand capitalism. The thing is, if what YOU (an owner/operator) do for a living disappears. Then there's nothing left to innovate IT'S GONE. Unless, your positioned where Tom is...farther up the food chain. Otherwise you're screwed. How long do you think it will take them to turn that 60% figure into 90%. I'm guessing about two years, tops. Then they have no use for NLM anymore. So now NLM doesn't want to go out of business so who do you think their new business is going to be. All the non-automotive accounts, maybe..??? Tom is back in business. I'll correct myself Tom. No need to re-tool. The real problem for Tom is, eventually the freight is going to reach a price so low he won't be able to get anyone to drive for him. Then what happens...?? He's going to have find cheaper labor to do the work. He has righteous principles now, but he's going to have to make a choice sooner or later of going out of business or hiring cheaper labor. If Tom doesn't want to do it some else WILL. Trust me.

Of course I'm not suggesting an expeditor would take an $11.50 run. I'm painting a picture. What's "decent" pay to run 100 miles a day? Maybe, $12.00 an hour times 40 hours. $480.00 a week. I know you guys are making more than that. So, if's that's rolling with changes and innovating. I'll be starting over again.

What parallels am I drawing that are incorrect...????

One more thing....PLEASE....Give me a percentage of how many of your loads are not related to automotive industry in any way.

 

[pellgrn]

I to have enjoyed all the comments,I can say for myself that if i wasn't making the money i needed to make in expediting i would find something else to do.I am wondering were your at with your business plan? are you still gonna follow threw,or try something else.

 

[MPG]

The business plan is just something to talk about. That's all. I have explained it in both posts now.

 

[pellgrn]

So what are you gonna do?

 

[The Gibster]

As we roll down the road we almost daily ask when will the growth of the industry stop . . .or expediting become so common-place that the price falls out from under us?

We can only remember the Fed-Ex story, and I still don't understand why business leaders can't forsee or plan events to stop eating hugh costs in overnight letters. But it's basic, standard bill of fare now.

Our carrier has grown many fold, and 'they' say it doesn't look like it's slowing down. We even get load offers when we're out of service!

Just FYI - there's a book by a Jewish Economist named Paul Pilzer; the book is called 'God Want's You to be Rich'. In his book he discusses planned obsolescence . . .8-track to cassette to CD; carbs to fuel injection, etc.

One chapter he remembers 'The Graduate', where in the movie the wave of the future was claimed to be PLASTIC. Invest in plastics. Now Pilzer claims the next thing is TRANSPORTATION, and REGIONAL WAREHOUSING to support the just-in-time-manufacturing.

I don't claim to have the answer, but the book is a good read, and may give you some insight. Personally, we only see growth and prosperity. And yes, there will be change.

 

[MPG]

I don't know what I'm going to do yet. That's why I'm here.

I'm trying to make an intelligent informed decision. Am I going about it the wrong way, I don't know. But, I've got to do SOMETHING.

Why would I spend $40,000 on a truck and start a business if it's doomed from the get go. I'm trying to determine if my fears are founded in fact or a figment of my overactive imagination.

I feel I've presented my concerns and backed them up with factual information. I hope I'm not coming off as a know-it-all. It's up to the members here to help me, and I'm sure many others just lurking, decide.

I am at your mercy......

 

[davekc]

Expediting is no different than any other industry. The ones that adapt or "retool" will be the survivors. As foreign labor creeps into our market it will effect all aspects of trucking. Look what foreign labor is doing in Canada. You will see a carbon copy of that same situation in five years. As the current driver pool shrinks, it becomes a open invitation to let them in. It has already started. As mentioned, they lack the investment capital, but that will change in time especially through government programs.
Does one get into expediting? The economy runs in cycles and freight should remain steady through the next couple of years. If you keep your investments reasonable (truck purchase) you should do ok. If the economy booms you will do well, if it tanks, trucking feels the first effect. I think it is always in someones interest if possible to diversify and have income from other sources. These are risks in numerous types of business. So the answer is it depends on what risks one is willing to take in a up and down market. Can you make it? yes clearly many have including myself. However, for every reason you can think of, many have failed. You could almost compare it to the restraunt business. 100 percent turnover rate doesn't happen by accident.
Davekc