Sep 1, 2006 12:00 PM
DON Kerper of Misty River Consulting said milk haulers must meet future market implications of change by developing and executing a viable financial plan that measures business costs, determines what drives the revenue stream, and shows key prospects for improving profitability.
He said at the International Milk Haulers Association annual convention that improvements should include route and delivery efficiency, improved energy conservation, reduction in paperwork, and standardization of farm and plant loading and unloading equipment.
“Try to improve energy efficiency, even it it's only three percent,” Kerper said. Comments also came from a milk hauler, Chad Hollon of Thad Hollon Trucking, and Robert Gilchrist of Agri-Mark Inc, a milk producers cooperative.
Kerper added that tracking, documenting, and analyzing business finances will reveal what a company is able to do and what it will not be able to accomplish. It also places the carrier in a better position to negotiate with customers. “Use fact-based negotiating tactics,” he said.
Changing an operation, versus the risk of remaining the same, can be crucial. Some haulers may not understand how changes are occurring regardless of their actions unless they monitor their operations over time.
“Things do change,” he said. “They change constantly. When we're comfortable, having fun or being successful, we are even less likely to see the change. As the change occurs, it becomes more and more risky for us regardless of whether we know it or not.”
He pointed out that both positive and negative changes occur. Business may change because opportunities dry up. Innovations and technology change the way companies operate — for example, more complicated truck engines introduced over the years have called for skilled labor to maintain and/or repair vehicles.
A typical business cycle over time begins with inception and then experiences growth, maturity, and decline. “This also can be used to your advantage,” Kerper said. “When the company begins to flatten out, the time has come to look for other opportunities.”
The dairy industry experiences variations just like individual businesses. In the Midwest, small-scale under-capitalized cheese plants are failing and small family dairy farms are going out of business. Among the situations driving these changes are lack of relatively large inexpensive tracts of land and high costs for dairy farmers and processors who couldn't reinvest or capitalize to grow.
Meanwhile, large farms emerged in the western United States where the climate is milder and large cheese plants were built to process milk. As a result, milk production increased beyond local needs, prompting the product to be shipped to the Midwest for secondary cheese processors.
“It's messing up the economics,” said Kerper. “The situation gets very confusing about what's happened.”
Hollon noted in a later session that unexpected changes have occurred in Ohio prompted by people from the Netherlands buying farms and introducing large herds, and Amish and Mennonite families are moving from Pennsylvania after acquiring farms to handle small herds.
Gilchrist said Agri-Mark has sold its last tankwagon, a two 1,800-gallon two compartment truck, so that the fleet is now filled with 7,500-gallon tank trailers. “We have to keep up with market conditions,” he said.
Gilchrist also discussed new hours-of-service regulations and predicted the rules would end in more dropped trailers with one hauler picking up and another delivering. “Haulers will have to be adaptable to these changes as times goes on,” he said. “Transporters really must know what their costs are, so they can be paid fairly. They need to know the costs of picking up and holding over until the next day versus the cost of direct delivery. We have got to get more ingenious as the changes come up.”
“The most inefficient part of the process is getting the truck unloaded,” said Hollon. “Not only is the truck idle, but it impacts driver retention significantly. For drivers, it's the worst thing we have.”
© 2013 Penton Media Inc.
Acceptable Use Policy blog comments powered by Disqus