The 2018 trucking outlook remained positive because freight demand was strong and driver supply was constrained, but carriers still needed better management, disciplined acquisitions, tax planning, and network decisions.
Trucks moved nearly 71% of U.S. freight, making changes in trucking important to the wider economy. KSM, King & Ballow, and KSM Transport Advisors convened the annual Trucking Owners Business Roundtable in Nashville to review benchmarking, acquisitions, economics, tax, regulation, and customer strategy.
Characteristics of Top Performers
The TCA inGauge platform analyzed data from more than 160 carriers. The TCA Profitability Program included 82 member companies in best-practice groups.
Chris Henry identified nine traits among high-performing carriers:
- They add by subtraction, eliminating redundancy.
- They invest in tangible and intangible assets and optimize time, distance, and price.
- They use dynamic pricing and understand commitment, capacity, and spot markets.
- They work on the business rather than only in it.
- They embrace meritocracy and accept that the best idea may not come from the top.
- They spend 95% of their time listening.
- They respect time and require meetings to have a purpose and outcome.
- They see the large picture and change when necessary.
- They tell their story and manage expectations.
Leading carriers also used social media to communicate their brand and reach new audiences.
Top performers had achieved five of six TCA predictions for 2018: 8% to 22% organic revenue growth, up to 14% gross-margin improvement, higher driver and non-driver payroll, shorter length of haul, and continued retention problems. The one prediction not observed was a high driver-to-non-driver ratio.
Key Factors for Savvy Acquisitions
An acquisition panel discussed growth strategy, how aggressively to pursue opportunities, niche carriers, tuck-in versus independent operations, traditional buyers versus private equity, tax deferrals, non-competes, and valuation factors.
The panel agreed that cultural fit and a strong management team were essential to a successful deal.
Supply and Demand
Brad Delco described the driver shortage as the main constraint on capacity. Driver age was rising, and pay remained less competitive than other vocational work.
Even with strong Class 8 orders, capacity was expected to remain tight because trucks still required drivers. Equipment cost, operating expense, drug and alcohol testing, and possible speed-limiter rules added pressure.
Delco expected spot rates to strengthen into the fall and holiday peak, contract rates to continue rising, and accessorial charges to become more common as detention increased.
Tax Reform
The TCJA changed taxation for C corporations and pass-through entities, bonus depreciation, like-kind exchanges, itemized deductions, the AMT exemption, and the standard deduction.
The result varied by whether a carrier was asset-based, leased or owned equipment, and used employees or owner-operators, but the presenters viewed trucking companies as relative winners under the law.
Legislative and Regulatory Changes
Speakers discussed ELDs, hours of service, young drivers, truck size and weight, drug testing, infrastructure, and federal preemption of state meal-and-rest-break laws.
The proposed HOURS Act would have given drivers more schedule flexibility, including the ability to avoid rush-hour traffic without losing productive time.
Customers, Demand, and Profitability
Carrier panelists valued shippers that established realistic service expectations, loaded efficiently, invoiced accurately, and offered consistent or distinctive freight.
Averitt Express described its goal as “profitable driver-friendly freight.” The company regularly surveyed drivers and used the results in decisions, including reducing weekend deliveries after drivers said they preferred to be home.
The market offered strong demand, but the highest-performing carriers were using the favorable cycle to strengthen the systems, relationships, and decisions that would matter after conditions changed.