Fleet. Management Pro. Your A to Z Guide to Managing a Fleet Operation. February/August 22-M (12367)

Transcription

1 Fleet Management Pro Your A to Z Guide to Managing a Fleet Operation 22-M (12367) February/August

2 Copyright 2018 J. J. Keller & Associates, Inc Breezewood Lane P.O. Box 368 Neenah, Wisconsin Phone: (800) Fax: (800) JJKeller.com Library of Congress Catalog Card Number: ISBN Canadian Goods and Services Tax (GST) Number: R All rights reserved. Neither the publication nor any part thereof may be reproduced in any manner without written permission of the Publisher. United States laws and Federal regulations published as promulgated are in public domain. However, their compilation and arrangement along with other materials in this publication are subject to the copyright notice. Printed in the U.S.A. ii 2/18

3 Introduction In a world that measures your success in terms of capacities, mileages, utilization percentages, rates, revenue realizations and losses, costs per mile, profits and losses, and return on investments, it is difficult to be aware of everything involved in the business of trucking. This is the world you live in. Your goal in this world is to try to bring order out of chaos and operate a safe and profitable operation. This manual is intended to be a tool to assist you with that goal. It is an aid to assist a Fleet Manager in handling the business of trucking. The emphasis is on the business of trucking. Many Fleet Managers are very familiar with the issues facing the company, but may not be familiar with other aspects of the business. Whether you are a new Fleet Manager, or an old hand at fleet operations, this manual is designed to provide you with information on all aspects of operating a profitable carrier. To sum it up, this manual is intended to expose you to all aspects of the business of trucking, making you a well-rounded Fleet Manager. Revision bars, like the one at the left of this paragraph, are used in this publication to show where significant changes were made on update pages. The revision bar next to text on a page indicates that the text was revised. The date at the bottom of the page tells you when the revised page was issued. Due to the constantly changing nature of government regulations, it is impossible to guarantee the absolute accuracy of the material contained herein. The Publisher and the Editors, therefore, cannot assume any responsibility for omissions, errors, misprinting, or ambiguity contained within this publication and shall not be held liable for any loss or injury caused by such omission, error, misprint, or ambiguity presented in this publication. This publication is designed to provide reasonably accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the Publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. The Editors & Publisher J. J. Keller & Associates, Inc. iii 8/18

4 Published & Printed by J. J. Keller & Associates, Inc Breezewood Lane, P.O. Box 368 Neenah, Wisconsin Phone: (800) Fax: (800) JJKeller.com EDITORIAL vice president of editorial & consulting services STEVEN G. MURRAY director of editorial resources PAUL V. ARNOLD project editor ROBERT J. ROSE sr. editorial manager transportation BETTY J. B. WEILAND regulatory consultant transportation management THOMAS E. BRAY sr. editor transportation safety DAREN B. HANSEN sr. editor transportation management MARK G. SCHEDLER sr. editor hazardous materials transportation THOMAS J. ZIEBELL editor hazardous materials transportation MICHAEL L. ATKINSON editor transportation safety KATHY L. CLOSE editor transportation management RICHARD J. MALCHOW editor transportation operations HEATHER L. NESS editor transportation safety JILL M. SCHULTZ sr. metator/xml analyst MARY K. FLANAGAN PUBLISHING GROUP chairman ROBERT L. KELLER vice chairman & treasurer JAMES J. KELLER president & ceo MARNE L. KELLER-KRIKAVA evp & chief operating officer RUSTIN R. KELLER chief financial officer DANA S. GILMAN sr. director of product development CAROL A. O'HERN sr. product development manager JENNIFER M. JUNG sr. product development specialist SUZANNE IHRIG product development specialist JOSLYN B. SIEWERT director of manufacturing TODD J. LUEKE sr. electronic publishing & prepress manager GERALD L. SABATKE The Editorial Staff is available to provide information generally associated with this publication to a normal and reasonable extent, and at the option of, and as a courtesy of, the Publisher. iv 8/18

5 Costs Cost Determination and Control Fuel Management Insurance and Risk Management Tax Structuring and Strategies Lean Trucking Concepts Revenue Growing Revenue Operating Ratio and Overall Performance Determining Rates Table of Contents Customers Customer Relations and Service Use of Third Party Trucks Short Term And/Or Long Term Business Capital Investments, Costs, Benefits, and Strategies Business Plans for Business Growth CSA Management Personnel Selection and Training of Low and Mid-Level Managers and Supervisors Driver Recruitment and Retention Driver Health & Wellness Reference Best Practices and Matching Sample Policies Sample Contracts and Agreements State Agency Contacts Federal Motor Carrier Safety Administration Regional Offices Corporate Regulations From 49 CFR FMCSA Summary Index v 8/13

6 Introducing Lean to the transportation industry Over the last 25 years or more, the trucking industry has been a poor performer in terms of ROI (return on investment) when compared to other capital-intensive industries. Owners of trucking companies are delighted in claiming a profitable year when the books are closed and a profit margin of 2 percent or better is realized. At 5 percent profit, they are looked upon by their peers as a gifted leader with an innate capability of making money! Compare this to what you may know about other industries and the margins of profit those owners expect from their companies! The owners of trucking companies must navigate their way around many obstacles that have significant influences on their profit margins. Fuel costs, taxes and fees, government regulations, and union issues along with a slow growing economy all chip away at their profit and can immediately lead to the demise of their company if any of them suddenly increases to a large extent. However, these same challenges have been present all the while. It becomes necessary then for owners to take stock in the direction their company is trending. They must lead their managers into a new environment that is able to withstand the slow growth forecasted in the economic future. This, undoubtedly, could be the biggest challenge a leader will ever face. If successful, this new challenge will involve a change of culture within the company. Just as a lean manufacturing concept worked its way into acceptance by industrial management, so should a lean trucking concept be implemented throughout the transportation industry. What is a lean concept? COSTS Lean trucking concepts To many motor carriers, the term lean has a totally different meaning when discussing methods of management. To them, lean is defined as doing more with fewer people. It is not uncommon to hear a trucking executive state We have been running lean for years or Keep the operation lean, instructing the manager to operate without any added or unnecessary expense. The manager is kept on his/her toes and can become guilty of micromanaging others in their effort to stay lean. A lean concept in management is one where waste is removed by continual improvement in a process which, in turn, creates a better product or service. It is a method that produces a higher quality of product while LEAN TRUCKING CONCEPTS 1 8/11

7 lowering costs through the elimination of wasteful practices. Lowering costs is a sure path to survival and is at the top of the list of things to do today for any transportation company owner. Our economy determines the broadness of the transportation industry and all other industries related. The market has restricted the number of carriers who continue to struggle with the forecasts of future business opportunities. Motor carriers who become proactive in lean management have the best chance for survival. These carriers must rely on their own people to provide them the information technology they require to make well informed decisions and change old practices that are proven to be costly. How does the lean concept apply to the transportation industry? When a problem or a crisis presents itself, many managers take the responsibility to manage without input from others. Their instinct to take over the situation and put out the fire before the fire spreads overtakes their true responsibility as a manager which is to lead and develop their people. LEAN TRUCKING CONCEPTS 2 8/11

8 An example of this in the transportation industry is a manager who frequently stands over the shoulder of a dispatcher telling him/her what to do next and where to position the fleet. Or a Sales Manager who excessively critiques the freight salesperson on what he/she should have said instead of what he/she did say to the customer during a joint sales call. Or what s worse, takes over the sales call entirely leaving the salesperson as an observer in a two party conversation. In both instances, the manager has done nothing to lead or mentor the employees. They have not engaged the employees in the company business. Instead, they have detached the employees from the daily running of the company s business leaving the employee to feel a bit alienated, and even distrustful of management. This makes it even more difficult to keep the employee s engagement with their employer from faltering. Research has shown that as job satisfaction declines, so does employee engagement. When employee engagement declines, so too does productivity. Companies with a high level of employee engagement generally outperform those with few or no engaged employees. This can be measured by operating income or ratios, growth rates, and employee turnover. Employees are yearning for a sense of belonging and contributing to their work. They want their efforts to hold a greater meaning for their employer and are willing to push their own limits to satisfy that desire. Odd though it may seem, recognition is not what employees want the most, nor is it the way to engage employees. Progress is what will engage most all employees! And certainly if the employees had involvement in the process that led to progress! Employees gain the sense of engagement when the company asks for their input on a problem and then supports their efforts to overcome the obstacles in solving a problem. This fosters a dialogue with the employees, and throughout the organization, that develops thinking problem solvers. Employees feel most engaged when they can make progress and contribute to the success of the company. Their involvement in the progress of the company is the difference between a company fighting to survive, and a company who is solving problems and growing along with the economy. Lean toward employee engagement Employers in the motor carrier industry need to provide strong leadership in establishing and strengthening employee engagement. One method by which to accomplish this effort is through Problem Solving. Finding the cause of a problem exposes the obstacles that hold back progress. However, identifying the root cause to a problem is not always an easy task. This is where the value of engaged employees is openly evident. Who better than those involved with the daily process to uncover the obstacles within that process? Communication with the engaged employee increases at a rapid pace when an opportunity to make a difference is presented. LEAN TRUCKING CONCEPTS 3 2/11

9 Asking questions is the first move in solving problems and engaging employees. Before a problem can be solved, the question must first be asked, What is a problem? A problem, simply stated is; an obstacle that prevents a company from achieving its goals and is related to the way in which work is done, or a pain felt by the organization or a gap between the way things are and the way the company wants them to be. Understanding any problem is the first step to solving the problem. As it was once stated by Charles Boss Kettering, A problem well stated is a problem half-solved. Motor carriers in the transportation industry who take advantage of the Lean process will find themselves far ahead of the curve when compared to other carriers struggling to find drivers, trying to lower maintenance expenses, improving operational practices, or eliminating waste and duplicity within office procedures. The lean carrier has already identified problems in these areas and has taken steps, along with the expertise provided by their employees, to solving these problems. This lean carrier is now Leaning Toward Progress! Why should a lean concept be a part of the transportation industry? Adding costs without adding value becomes a wasteful exercise practiced by poor management. A successful business remains competitive by retaining valued employees and recognizing their achievements. Management must find ways to communicate to their drivers that they are valued members of their team. All companies, regardless of their size, must come to grips with this ongoing waste of resources. Would a lean concept have a positive effect in this effort? That question can only be answered by management s attitude and desire to effect a cultural change. A culture of continuous improvement Is the organizational culture in your transportation company an accelerator or a barrier to process improvement? Does the Lean concept conjure up immediate comparisons to diet fads or flavor of the month remarks from those both above and below your pay grade? If so, take heart in knowing that this is typical for many within the transportation industry. Lately, though, many motor carriers have come to realize the value in a culture that continuously looks for ways to eliminate costly waste. This is accomplished by tapping into their employees shared understanding, awareness, and experience to improve their company s product. LEAN TRUCKING CONCEPTS 4 2/11

10 Industries such as manufacturing, healthcare, communications, and electronic technologies all have benefited by a cultural shift in management to engage their employees to make needed improvements through a factual investigative process that detects faults in a system. The employees who make up the Lean Team within these companies expose work processes and make them transparent so defects within the process can be identified. They are not interested in playing the blame game and who screwed up, but instead are only interested in what process failed and why! Cultural change does not come easy One of the many misconceptions of a Lean process is that it is another method by which the work force can be reduced and the same result can be achieved with fewer workers. Nothing can be further from the truth. A reduction in the workforce is simply not a Lean event! A Lean event improves a process without spending capital as the major source of change. In other words, a lean event: identifies the waste in a process, analyzes the costs of this waste, improves the process by eliminating the waste, and implements the plan to improve the process. Many people find change to be a very difficult period in their lives. Their routines have been altered. Their personal space has been invaded. That which they have counted on for a period of time barely exists anymore. On top of these emotions comes their own response to change. That s the way I was trained. We ve always done it this way. We have to do it that way there are rules! LEAN TRUCKING CONCEPTS 5 2/11

11 The Real World Imagine Betty and Al, the owners and founders of a motor carrier who built the business from scratch. Throughout the years, they prided themselves on their work ethic, decision-making and problem solving skills. They were always able to resolve problems that threatened their company s well-being by applying effective solutions. Now, their reluctancy to allow others to make changes may be the pivotal reason why their business has stopped growing. Effective change is hard. The owners, in this case, have an opportunity to make the best decision in their working career. By engaging their employees to find and eliminate the wasteful practices that can drive up the company s costs, they are able to utilize their employees pride, energy, and commitment to their job, their families, and themselves! Employee involvement along with a sense of making a difference every day is the motivating factor in this culture. Transform your working environment Most employees come to work every day wanting to feel a sense of belonging. They want to feel that their hard work will contribute to the company in making headway on obstacles that have held them back in the past. This sense of worth is evidenced through the support the employees receive from management by allowing them to make a difference. In order to transform their work environment, management must know their people and understand what is important to them. The allegiance that employees give back to management is the fair trade in this transaction. The value that is added to this transaction is the message being sent from the top that this is not a fad but rather a means of ensuring the future for all employees. LEAN TRUCKING CONCEPTS 6 2/11

12 Creating this environment becomes somewhat contagious throughout the workforce without announcing a major change in the direction of management! In fact, these qualities likely exist already. They may need to be dusted off and brought back out to the practice field, but by and large, they are based on the same principles we were all taught early on in our lives: Be open to change Often times, a change in course proves to be quickest way to the finish line. The old way of doing things is similar to playing Follow the Leader. Consider ideas that promote a new level of service or better yet, listen to what your customers want. Changing the pace on the competition has its rewards. The answer is always Yes, we can! It may not be an immediate possibility, but with teamwork, a plan, and the knowledge from all involved, most anything can be accomplished. Focus on the process Distractions in our lives can cloud the main reason why problems exist and delay us from reaching our goal. Follow the money and the fault in the process will become evident. Look for simple solutions Tiny victories can lead to attaining your goal. You will not re-create the wheel, but you may make it roll a lot smoother! Those who do the work have the best perspective. Listen to them. Your employees are your most valuable asset. They can effect a change quicker than you might expect! Use creativity, not capital Cost is what the lean process manages. Creativity comes from those who are engaged to put their knowledge and their feelings into action. The Lean concept in transportation management has its place alongside manufacturing, healthcare, and all the other industries that have benefited from its application. Our destination has never changed. We are determined to achieve success. It is the route we choose that will determine how we will define our success! How do you grow a Lean culture? No venture has a higher chance of success than one backed by executive management. The encouragement, support, and acknowledgement from the executive office alone can add significant value to the effort. This backing also becomes the seed from which a lean culture can grow and produce quality results. Once this seed is planted, it then becomes the duty of the leaders within the lean environment to focus on spreading and sustaining this crop. LEAN TRUCKING CONCEPTS 6A 2/11

13 Lean becomes a part of the culture when leadership is passionate about excellence and is willing to change. Leaders must focus on encouraging the entire organization to be willing to consider the idea of change so that continuous improvement will be accepted. Once this door is opened, then the focus should be to sustain the change. Resources and reactions The facilitators of a lean group can be considered as a resource and made available to all employees. The facilitator serves as a visible leader who can demonstrate technical and analytical skills to ensure a process flows. Enthusiasm and the ability to not only think independently but also to contribute and communicate are valuable traits of an effective facilitator. The capability to draw active participation from fellow employees enhances this resource and allows the team members to become co-advocates of the lean culture. Their inclusion to effecting a change in a process gives them ownership along with a sense of pride in knowing that their experience and desire to improve a process is valued by management. The plan to grow a lean culture can be made simple by drawing attention to recent successes. Begin by communicating to all employees via company newsletter, bulletin board postings, s, etc., the lean team s (or lean teams) project selection, its current progress, and its accomplishments to date. The members of the lean team soon begin to spread the benefits of their efforts to other employees, whose interest in becoming a problem solver and a difference maker is envisioned. Offer opportunities for more employees to participate in lean projects and for current team members to be trained as facilitators. Include members of management, both mid level and upper level, to this system of progression in the lean culture. Continuous improvement is pursuing perfection. And while perfection may never be fully attained, a lean culture with engaged employees realizes that a lean culture delivers value to the customer and selfsatisfaction for the employee who added to that value. Lean is a continuous journey; embrace it! Managing lean growth The transportation industry is motivated by the needs of their customers. It has been this way for many years and will likely continue to go on in this manner for many years from now. Economic trends will have an effect on both parties, but in the end, the customer will set the pace for the industry. It will be up to the carrier to be in physical and financial shape to answer the call of the customer and respond in ways that will prove their credibility and consistency. LEAN TRUCKING CONCEPTS 6B 2/11

14 This is the point where the motor carrier must make hard choices in evaluating the strength of their own operation with the direction business levels are trending. They are assigned the task of foreseeing the future and determining if their solutions for customer needs and trends will be a part of that same future. The traditional way of managing and thinking is to keep heading in a secure direction where the future is somewhat predictable. This method is based on the standards that have been achieved in the past and for some, may be the safest route and the most comfortable one to travel. The danger lies in the carrier s inability to see exactly where business trends are leading, and the motor carrier s failure to make the necessary adjustments based on those trends. In simple terms, the carrier s existence may be secure for a period of time. However, their growth will likely be limited and may soon run the risk of their customer base progressing beyond the carrier s capabilities. The impact of customer expectations The first step to take is to start with the customer and truly listen to what they are saying. Never assume that you know what they need and that they will be satisfied with what you provide them. The basic questions needing answers are: What are the customer needs? Do our products or services answer the voice of the customer - at a price the customer is willing to pay? How do we know? This is the path to lean organizational thinking. It is supported by a lean organizational culture committed to how the company is managed, how decisions are made, and how to grow the customer base without adding costs to the operation. On many occasions, customers want a higher quality at lower prices. When this higher quality is realized, the customer judges the carrier based on the carrier s performance in delivering this quality and can thereby assess a value to their relationship with the carrier. On the other hand, if the carrier is not prepared to listen and react to the customers needs, but instead, is satisfied with its own performance over a period of time, the carrier could soon realize that much of their customer base has moved on and the gap between what the customer wants and what the carrier s performance has become, has widened. LEAN TRUCKING CONCEPTS 7 8/10

15 The hope is that the carrier soon realizes that this gap is widening and can make adjustments to their operation that will be of value to their customer. This can be accomplished by a lean transformation of management and methods that can: Analyze the core value creating process Address customer current needs Determine how to create more value, and Maintain current utilization of resources. Only the customer can define value. This is generally the quality of the product or service delivered and not the methodology with which it is generated. Adding costs without adding value becomes a wasteful exercise practiced by poor management. A successful business becomes competitive by lowering their costs through a reduction of wasteful practices which in turn, improves quality thereby offering a greater value to their customers. Identifying waste in your transportation operation In a lean environment, waste is defined as activity that does not add value to a product or service. Some of these non-valued activities in a transportation operation can include: Waiting Staging Checking Recording LEAN TRUCKING CONCEPTS 8 8/10

16 Obtaining approvals Copying Filing Rework Some of these activities have a purpose in managing an efficient operation. However, determining the source of what causes the waste and reducing or eliminating the duplicity by others contributing to this waste is the objective. Another way to identify waste in your operation is to ask your employees. In fact, it is the surest way to involve your workforce in a positive activity that contributes to the success of the operation. By empowering the employees to use critical and creative thinking to solve problems, work cooperatively in a team environment, and demonstrate personal integrity through responsible behaviors is an asset that can ensure the future of the company. Those who know the work are in the best position to impact positive change. The effects of waste have a consequence that can further diminish the effectiveness of your operation and can lead to reasons why profits are not in the range desired. Some of those effects are: Physical fatigue Emotional fatigue Increased frustration Increased stress Placement of blame Decreased self-worth Indecisiveness You may be surprised to find that systems and methods that have been in place for a long time are directly link to a cause of waste. These items are seldom recognized as our eyes are trained to see things that we are told to see and what we are expected to see. It becomes a classic example of something hiding in plain sight! Learning to recognize things that cause waste in our operation begins with our understanding of the process. All processes comprise a series of steps. Some of these steps are wasteful activities. We already have determined that wasteful activities are non-value added. Better news is that non-valued activities generally outnumber value-added activities, so the opportunity to add value to our product or service is possible. Let s take a look at some activities that can cause waste and examples of their effect on the operation: LEAN TRUCKING CONCEPTS 9 8/10

17 Defects. Activities that were not completed properly the first time and must be handled again. Examples are billing errors, improper handling and signing of bills of lading, incomplete training, and equipment problems. Is the work you receive free of defects when it comes to you? Unused Human Talent. Position employees where their efforts have the greatest effect on the operation. Are there employees who handle a lot of unnecessary paperwork? Are there employees who may be skilled in tasks that they don t perform regularly? Waiting Time. Do you wait for someone to finish their job before you can start your job? How much time is spent waiting at a customer s dock? How much of this wasted time is caused by the customer? Can we discuss this with the customer and make other arrangements? Is our operation reacting by dispatching too soon causing an overproduction waste? Inventory. Do we have too many loads waiting for loading or unloading at customer docks or on our own premises? Is there too much paperwork piling up in the office that is waiting to be worked? Unbalanced workload, unleveled scheduling, poor market forecast, equipment and materials that haven t been used in 30, 90, or 180 days? Transportation. Do we unnecessarily move freight from one location to another to finish a task? How often is freight handled that never needs to be? Do we have small or inefficient work areas that cause waste? Processing waste. Do we have to do tasks that don t add value to tasks we are purposed to do? Examples are: fueling twice a day, handling and re-handling freight, generating information that is of little or no value. These are self-assessment questions that must be asked and answered among the lean team. They are not meant to be inclusive of all transport operations, however, they should direct your efforts to items and situations that are direct causes of costly waste. Selecting a lean project As a Fleet Manager, you likely have a good grip on where a process could be improved. It can be anywhere in the office, in the maintenance shop, within the operation, and even the process to recruit and hire drivers. To help you decide whether a particular process is a good candidate as a Lean project, determine if it meets the following criteria: It consumes too many resources or fails to meet the company s objective Its improvement is important to leadership LEAN TRUCKING CONCEPTS 10 8/10

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