More than a name change
Apr 1, 2005 12:00 PM, By Charles E Wilson
SITTING in his company's technical center in Bonita Springs, Florida, Richard Manfredi reviewed the changes that are profoundly transforming the 73-year-old tank truck carrier that used to bear his family's name. It's a lengthy list that continues to grow.
For starters, there is the new name. Manfredi Motor Transit Inc became Distribution Technologies Inc (DistTech) toward the end of last year. Beyond the name change, the tank truck fleet has repositioned itself as a dedicated contract carrier. Several subsidiary and affiliated companies were sold or spun off. Finally, the chemical hauler has embraced a wide array of cutting-edge technologies in its drive to improve operating efficiencies and driver safety.
“Back around 2000-2001 we realized that we needed to redefine this company for the future,” Manfredi says. “We were still a family trucking company for the most part, but we knew that we had to be more than that. We got a taste of what the company could grow into when we became involved with the Alliance of Bulk Carriers, a partnership in which we did some sharing and matching of loads.
“We had actually begun developing a dedicated contract carriage service back in the 1980s, and it formed the core of our program with Master Builders (a cement additive manufacturer that now is a part of Degussa). We refined the process in the mid-1990s, and we believe we've taken it to an even higher level now. Dedicated contract carriage accounts for about 45% of our volume and should reach 55% by the end of 2005. In three years, we'll be at 70%.
“We see dedicated contract carriage as the future. What we're building are real partnerships with our customers. The reverse auctions that were initiated by some chemical shippers are the antithesis of what we're trying to achieve. Reverse auctions had a negative impact on the entire bulk logistics industry, and we had to walk away from some business. We believed the pendulum would swing back in favor of the carriers, and we saw the beginning of that in mid-2003.”
Supply and demand
Manfredi points out that supply and demand for the tank truck industry are more in balance right now than at any time in the previous 20 years. Contributing factors include a strong economy that is growing at 3½% to 4% annually, tight capacity in the tank truck industry, and a driver shortage that will be a long-term issue.
For DistTech, these factors have been a blessing. The carrier was able to move ahead aggressively with its reengineering effort. Of all the steps taken in the reengineering process, probably none had a higher profile than the decision to change the name of the carrier to Distribution Technologies. The decision was made in 2003 and implemented in 2004.
“Changing the name was something we had to do,” Manfredi says. “When we made that move last year, our divisions were operating under so many different names that we had created confusion in the marketplace. Adopting DistTech as the go-to-market name for the entire organization simplifies our identity and reinforces our commitment to delivering not only logistics solutions but also the technology that improves the cost-effectiveness and efficiency of our customers' supply chain processes.
“We put plenty of thought into this change. We wanted to show that we are not just a trucking company anymore. At the same time, we wanted to avoid over-used terms like logistics. Distribution and technology communicated the right message. The Manfredi name won't go away completely. It will remain as an operating division.
“We're still getting the word out on the new name, and we realize that some confusion probably exists. We know we have to communicate the message of change to the president of the chemical company and all the way down to the guy on the loading dock.”
The changes being communicated to customers are far more than skin deep. They include building a leaner, more focused operation. A review of the corporate holdings in 2003 showed that some elements didn't fit any longer. Changes include selling K-Limited back to the previous owners, spinning off a majority of Manfredi Special Services to the management, and arranging a management buyout for Dedicated Transport LLC. The sell offs started in 2004.
Under Manfredi Motor Transit, K-Limited had operated like an affiliate providing chemical transport and tank container drayage. Manfredi Special Services offers cleaning and repairs for intermediate bulk containers. Dedicated Transport focuses on dry freight dedicated contract carriage and logistics services to manufacturers, distributors, and retailers.
“By going through with these divestitures, we believe we'll be able to concentrate more intently on our core competencies and create even more value for our customers and employees as well as achieve meaningful growth,” Manfredi says.
Even with the divestitures, DistTech is poised to reach $80 million in gross revenue by the end of 2005, down only slightly from last year when the spin-offs began. Management expects revenues to top $100 million within three years.
“We grew our core business by more than 20% last year even with business we walked away from or lost through the divestitures,” Manfredi says. “Most of the lost business simply didn't fit our objectives for the future.”
Manfredi and his management team expect minimum growth of 15% per year for the next five years. “We've just scratched the surface when it comes to taking full advantage of the opportunities in dedicated contract carriage,” says Craig Cullinan, DistTech vice-president of business development.
Under the model developed by DistTech, dedicated contract carriage operates as a true partnership between the carrier and the customer. Equipment and manpower can be fully dedicated to a customer. Customers have the right to audit the DistTech operation, and they can negotiate driver rules with the carrier.
“This arrangement works well for chemical shippers that need highly specialized equipment,” Manfredi says. “The customer has the first right to buy the dedicated trailers when the contract ends. We'll put the customer's name on the equipment, and our drivers will even wear the customer's uniform if that's what the contract calls for.”
Fixed and variable costs are broken out, and contracts are negotiated based on the costs. The fixed costs are billed to the customer weekly or monthly whether the dedicated equipment sits or moves.
DistTech serves its customers with a fleet that has grown to 400 tractors and 650 tank trailers. In addition to the headquarters terminal in Newbury, Ohio, operations are conducted out of 27 facilities. The biggest terminal concentration is in the upper Midwest, but most of the recent growth has occurred in the southern and western states.
The operation includes a mix of regional and longhaul activity. Chemical cargoes predominate, ranging from water treatment products to polymers. The carrier also hauls a variety of lubricants.
Managers use some of the latest technologies to track and oversee the far-flung operation. The core system in place at DistTech is TMW Suite from TMW Systems Inc. In addition to dispatch capabilities, TMW Suite gives managers the tools needed to continually measure the performance level — and cost — of every facet of the operation.
“The technology that we've rolled out across the operation is really changing the way this company does business,” says John Hazenfield, DistTech senior vice-president/chief information officer. “Our customers have benefited at least as much as we have. The dedicated customers, in particular, want to be assured that we have the ability to know exactly what our total costs are, and they want that information quickly. They also want a partner that can seamlessly handle data from their SAP management systems.”
To automate the process of measuring metrics and monitoring contracts, DistTech deployed ResultsNow, a web-based performance monitoring application. Key performance indicators tracked by the program include empty miles, revenue per working day, loads per day, and revenue per load.
DistTech also uses TMW's Watch Dog to define alert thresholds for each key performance indicator. Every morning, the management team receives an exception report that lists any data points that are outside the acceptable range.
The systems are paying off in many ways. Billing lag times have been decreased to less than five days between the time the shipment is delivered and when the customer is billed. Watch Dog has made it possible to quickly spot problems and resolve issues.
Revenue per working day per tractor and revenue per load have increased. DistTech has been able to reduce empty miles by approximately 7%. The level of monitoring has made it easier to test new markets.
Measurement metrics, such as cost per gallon, can be customized for each shipper. In addition, customers have immediate access to relevant information on their shipments that are in transit. The information is available online through a password-protected web site.
“Through our eStat online system, we provide a tremendous amount of customer information,” Hazenfield says. “In fact, our system is replacing customer order entry systems at some plants. That's precisely our objective. We want to get this technology out into the field.”
Much of the data available to customers is in real time. It's almost as though the customer is sitting in the tractor cab with the DistTech driver. The reason is that the Qualcomm satellite communication units in the tractors have been seamlessly integrated with the TMW management system.
That's just the tip of the iceberg in terms of on-board technology that the carrier is spec'ing in all of its tractors or is testing in selected vehicles. Management sees the on-board technology focus as a win-win for everyone.
“Looking beyond the information gathering aspects, we all benefit from enhanced fleet safety with some of these tech systems,” says John Rakoczy, DistTech vice-president of operations. “Security is another factor, and technology plays an important role in the DistTech Secure Bulk program. In addition, we were part of the Federal Motor Carrier Safety Administration test on security technologies. From our perspective, the tests went flawlessly.
“The technology side of our operation certainly appeals to the types of drivers we are trying to recruit. We're getting the message out that we want tech-savvy people. That's important because the tractors are much more high-tech.”
Manfredi adds that drivers must be viewed in a different context today. There are fewer people of the sort (such as young people moving out of rural areas) who were attracted to truck driving in the past. In addition, qualification criteria have been tightened significantly, further reducing the driver pool.
“Part of the challenge is that we have a work-ethic problem in the United States,” he says. “A lot of people don't want to work as hard as their parents did in the past. Truck driving has long work hours, up to 3,000 hours a year. You'll work about 2,000 hours a year in an office job.
“Truck driving still has an image problem, and the trucking industry needs to pay more attention to that. Some parts of the industry still don't understand that we have a problem. We need to reclaim the Knights-of-the-road image. There is still too much of the Smokey-and-the-Bandit attitude. That should have died out 20 years ago.
“We must continue to find new ways to attract drivers from non-traditional sources, such as foreign born individuals. However, it is difficult to hire non-US citizens today due to tougher hazardous materials security requirements. It's a bigger problem than it needs to be.
“Higher pay is the only way to overcome a lot of these drawbacks. Our average driver wage is now at about $55,000 a year, and we are moving toward $60,000, plus benefits.
“At DistTech, we've tried to make changes that will help make our company an attractive place to work. We've done a lot of private carrier conversions as we've built our dedicated contract carriage operation, and we've learned how they were so successful in attracting and retaining drivers. They pay their drivers well and treat them right. Everybody at the company must support the driver, and that's a message we communicate daily. In addition, we're giving our drivers the right tools to work effectively and reduce job stress.”
Drivers are assigned to Peterbilt 387 and Freightliner Columbia tractors that were specified for comfort, ease of operation, and productivity. All of the tractors are sleeper units and have roomy cabs. The Petes are spec'd with 54-inch mid-roof sleepers, while the Freightliners have 58-inch mid-roof berths. Both tractors have superb visibility.
Driver comfort features include premium air-ride seats, air suspensions, and a quality audio system. The tape deck gets a lot of use because drivers have access to an extensive collection of audio books at the company terminals. Mysteries have proven to be most popular.
In addition to Qualcomm units that are in all DistTech tractors, some vehicles were fitted with various technology enhancements that are in test. Much of the technology under test is intended to enhance safety.
Eight tractors based at the company's Neville Island, Pennsylvania, terminal have the Driver Fatigue Monitor marketed by Attention Technology Inc. The unit mounts on the dashboard to the right of the steering wheel and has a video-based sensor that measures slow eyelid closure associated with drowsiness. An alarm sounds if fatigue conditions are detected.
Currently priced at around $800, the Driver Fatigue Monitor is portable and can be moved easily from one vehicle to another. In fact, DistTech has encouraged drivers to try the device in their personal vehicles, and the response was enthusiastic.
Sixty new tractors scheduled for delivery in early 2005 were ordered with the passenger side blind-zone video system from DAWN Automotive Video Inc. The $450 system includes a compact, rugged infrared SUPERBullet camera that attaches to the passenger side mirror. The camera provides the driver with continuous motion, real-time video of the blind spot day or night. When another vehicle enters the blind spot, an alarm sounds.
“The payback should come with fewer accident claims,” Rakoczy says. “The majority of our accidents have occurred during backing and lane changes. Our goal is to have the safest fleet in the industry. We want to win another National Tank Truck Carriers Outstanding Performance Trophy for safety, as well as make the highways safer.”
Tests also are continuing with 10 tractors that have the Eaton Vorad collision avoidance system. “We've linked the Vorad system to the tractor electronic control module, which automatically reduces vehicle speed when an obstacle is detected,” Rakoczy says.
Five new Petes are going into test with the Electronic Stability Program (ESP) from Bendix Commercial Vehicle Systems. The ESP capability is integrated with the tractor antilock braking system and provides yaw correction and roll stability.
The Caterpillar C13 engines are rated at 430-horsepower and are configured for a maximum road speed of 65 miles per hour. Most of the tractors have Eaton 10-speed manual transmissions, but the carrier is testing 20 Freightliners with Eaton's UltraShift clutchless automatic transmission.
“This is the beginning of a 12-month test with the UltraShift to gauge driver reaction,” Rakoczy says. “We believe UltraShift will impact safety by reducing the workload in the cab. We believe the automatic transmission will help with people who are new to truck driving, who have little or no experience with manual transmissions.”
Product handling systems on the tractors include Bendix 30-cfm compressors and Gardner Denver's Hydrapack and Blackmer hydraulic systems to power trailer-mounted pumps.
DistTech dropped most of its foodgrade hauling last July, so most of the tank trailers in the fleet are dedicated to chemicals. The standard unit is a DOT407 stainless steel, insulated tank. Key trailer suppliers are Brenner Tank Inc, Polar Tank Trailer Inc, and Tremcar Inc.
The carrier recently added 10 fiberglass-reinforced plastic tankers from Poly-Coat Systems Inc. The trailers will be used for corrosives.
Single-compartment stainless steel trailers typically have a 7,000-gallon capacity. DistTech also runs more than 150 multi-compartment trailers, and the average capacity is 6,800 gallons. About 100 stainless tankers in the fleet are lined with baked phenolic, which provides corrosion resistance and makes them much easier to wash out.
“We provide a large percentage of our customers with what is essentially bulk less-than-truckload (LTL) service,” Cullinan says. “We excel at that, and we do it with one of the largest multi-compartment trailer fleets in the industry.”
LTL capabilities include equipping trailers with coriolis-type meters. A variety of product pumps are in service, including Blackmer, Ibex, and Roper units. Tank hardware includes Betts domelids and valves and Girard and Fort Vale vents.
Revolver upper coupler plates are standard in the fleet. Running gear includes Hendrickson Intraax air suspensions, MeritorWABCO antilock braking, and the Meritor Tire Inflation System by PSI.
DistTech leases some tank trailers in its fleet from Bulk Resources Inc and Matlack Leasing LLC. “Leasing is a good option when testing a new market,” Rakoczy says. “We work with leasing companies that are interested in the same sort of partnerships that we are trying to build with our dedicated contract carriage customers.”
Leasing helps DistTech achieve maximum flexibility in meeting the changing needs of its customers. It's all part of the overall strategy to provide the most comprehensive dedicated contract carriage service in the industry.
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