Small Trucking Companies Persist in the Face of Industry Giants
News David Owen, the president and co-founder of the National Association of Small Trucking Companies (NASTC), shares the origin story of his company and the need for small trucking companies.
In 1989, I was positioned in “National Accounts,” calling on companies with 500 to 5,000 power units. This was my first introduction to the mega-fleets.
It didn’t take long for me to realize that the mega-fleets enjoyed economies of scale, unlimited capital, political clout, and buying power that the smaller fleets could only dream about. Yet the one-truck, one-driver, one-trailer owner operator and smaller fleets (1 to 99 power units), performed the exact same operational function as the mega-fleets – they moved a full-truckload of product from point A to point B efficiently, on time, safely, and, hopefully, for a profit.
The beginning of NASTC
The conventional wisdom in 1989 was that these small fleets and owner-operators would soon be gobbled up by bigger businesses. When Buster Anderson and I shared our idea and business model for NASTC, the formation of a for-profit association and buying group for small carriers, we were ridiculed from every corner of the transportation industry, except those very small carriers who we visited.
Not only has this segment of trucking persisted, they have also grown in market share, become much more efficient and competitive, and have assumed a very important place in the industry as an essential part in the day-to-day working of our distribution system.
To understand this phenomenon, you have to go back to 1980 and the deregulation of our industry. This allowed the owner-operator, the smallest business model, to lease-on to a larger entity but he could apply and gain his own authority to operate as an independent carrier.
With deregulation, contract carriage replaced common authority as the most reasonable way to operate and tariffs and monopolistic lane protection evaporated as did the Interstate Commerce Commission. In rural America, truck farming, once a seasonal necessity to get crops from the field to market during harvest season, became a year-round, for-hire small company model, that moved their own products and raw materials as well as products for others.
Parallel to this timeframe, freight brokers somewhat replaced the traditional freight salesmen who were so essential for common carriers to exist. Through these brokers and truck and load boards, there developed what we call today the “spot market.” Brokers and agents became real-time logistical partners with small trucking companies. Landstar became the first mega-fleet to use this approach to logistics with their dispatch software and almost unique capacity owner concept.
Small but mighty
“[Owner-operators] have assumed a very important place in the industry...”
There are many other reasons why small carriers continue to thrive in comparison to the mega-fleets. Some include corporate top-heaviness, large dispatcher-to-driver ratios, and the pressure to grow corporate dividends and profits. Trucking is a unique business in that all revenue is produced by loaded miles driven. The only way to grow revenue is to run more loaded miles and to do that there is tremendous pressure to grow the size of the fleet – more trucks, more drivers, more revenue. It is my belief that this obsession with growth reaches a tipping point and that growth becomes cancerous.
That leads us to the one and only significant and competitive advantage enjoyed by our niche in trucking. Simply put, our companies have the ability to find, hire, train, and retain million-mile drivers.
The very nature of the small, rural-based company is family. As the company grows, the drivers become an extended part of that family. The business model of a company evolves as “driver-centric” when the decisions made take into account the individual success of its drivers. After all, the only revenue producer in trucking is the driver. The formula is fairly simple: put the producer in a well-maintained truck, provide him with consistent loaded miles each week, and get him home to be paid and re-charged every week. Keep the ratio of dispatch to driver below 20-to-1 and never compromise your standards for drivers. Unfortunately, the larger you become, the more difficult this model becomes.
People, not profit
The mega-fleets with their urge to grow develop driver turnover well over 100%, constantly have to put inexperienced drivers under load, have dispatch-to-driver ratios north of 50-to-1, and develop a micromanaging, adversarial posture with their drivers where they’re treated as capacity or yield, rather than human beings.
Our owners and managers on the contrary, as former million-mile drivers, treat their producers in a respectful, empathetic, caring way. For without them as a point of reference, small carriers might forget who brought them to the dance.
NASTC today has 7,800 member companies, about 75,000 power units, members in all the 48 contiguous United States, and is growing at a record pace. We haven’t faltered in our continued trust and faith.
NOTE: According to Fleet Owner article “Trucking By the Numbers” of August, 2016, “Thereare 441,000 for hire carriers in the US only 1,440 have over 100 power units.”