Boise Cascade Trucking
Throughout its 45-year history, Boise Cascade Trucking Inc. has overcome numerous challenges – a union drive, deregulation, changing customer demands and converting its private fleet into a profitable for-hire carrier.
BCT Inc. has not only survived, but thrived in the transportation marketplace known for eating its young. At the core of its prosperity was strong and visionary leadership, an unrelenting focus on the customer, insightful financial management and good communications.
BCT Inc. is a wholly owned subsidiary of Boise Cascade LLC, a Fortune 500 manufacturer and distributor of paper products, office products and building materials.
The $57-million private fleet comprises 75 company-owned or leased power units and 198 owner-operators. The trucking operation is based out of terminals in Pico Rivera, Calif.; DeRidder, La.; Jackson, Ala.; Portland, Ore.; Wallula, Wash.; Bridgeport, N.J., and Bensenville, Ill. Although Boise Cascade is the primary customer, about 40 percent of its revenue is generated outside of Boise.
But no amount of success, vision or financial acumen could have prepared the fleet for what it went through during the past year.
On Oct. 29, 2004, Boise Cascade Corp., the parent corporation, announced the sale of its paper, forest products and timberland assets for approximately $3.7 billion to affiliates of Boise Cascade LLC, a new company formed by Madison Dearborn Partners LLC. The remaining part of the company – its office products distribution business – was merged into OfficeMax Inc.
With the stroke of a pen, the foundation upon which BCT had built its reputation was gone, and the future even more uncertain.
W. Thomas Stephens, the former president and chief executive officer of MacMillan Bloedel Ltd. and the former chairman, CEO and president of Manville Corp., was named CEO of Boise Cascade LLC.
"I remember sitting in a meeting with him last fall when he threw out the option of selling the fleet to raise more capital," says Roger Olds, general manager of the fleet.
For the normally reserved Olds, the reaction was as quick as it was decisive. "Sign me up," he told the management team. In an era in which many private fleet managers are forced to justify their private fleets periodically, Olds faced the ultimate test: Was he willing to take the private fleet public? In other words, did he believe enough in his own job to commit his own money to preserving it independently?
Part of his confidence stemmed from having a strong idea of the financials, the customer base and, most of all, his internal team. While Boise Cascade has, as of this writing, decided to keep the fleet in-house, Olds' tenacity helped ensure the long-term success of the fleet.
Leadership Starts At The Top
Olds' actions on behalf of his team won him a new sense of commitment from his staff. It's easy to see why. Knowing that he went to bat for them to preserve their jobs creates a loyalty and passion that extends beyond the normal work relationship.
Olds also buffers them from much of the internal political machinations that exist within any large organization. "There are some corporate rules and policies that just don't make sense in a trucking environment," he says. "I try to shield the team from these so they can achieve the primary mission of the firm, which is to provide highly responsive trucking and support services that complement and add value to the core businesses while also providing procurement leverage, strike contingency services and an acceptable return on investment."
Olds provides direction and then gets out of his staff's way, empowering them to make decisions. Because of his relentless focus on the key metrics of his organization, he is able to reward them with a pay structure based on their performance.
He also pushes his staff to get better by offering training programs. He has institutionalized the National Private Truck Council's Certified Transportation Professional (CTP) program (a total of four associates, including Olds himself, have earned the designation). He is active within the organization, serving as vice chairman of the NPTC Institute, the association's educational and training subsidiary.
Finally, he communicates effectively throughout the organization. Rarely do you find Olds at his desk. He is constantly walking around, talking to his staff, listening, learning and coaching as necessary. He shares the financial and operating statistics with them so they know how their performance impacts the bottom line. He sends a monthly 16-page newsletter to all team members, packed with personal and company news. And he holds regular cook-outs ("steak feeds") and holiday parties for all team members, including owner-operators and their families.
Equipment Philosophy
The importance of communication extends to BCT's equipment spec'ing philosophy. The company has standardized its specification for company power, opting for Kenworth T-800 models, which are held for 600,000 miles before trade-in, according to Dennis Saijo, fleet maintenance manager. The standardized spec allows him to improve maintenance at the one in-house shop in Wallula as well as the outsourced facilities in Boise and Portland by reducing service complexity, standardizing training and reducing parts variability.
Units rack up about 2,500 miles a week or roughly 125,000 miles per year. A recent analysis of maintenance costs shows the company spends about 2 cents per mile for the first two years. For the third and four years, the cost increases to 4 cents per mile and in Year Six, the cost increases to about 5 cents per mile. As a result, the company is looking to extend trade cycles by another year, up to 750,000 miles.
"Because our loads tend to be heavy, weight is the most sensitive guiding principle in determining the BCT spec," Saijo says. While the rest of the equipment spec is pretty standard, he insists on aluminum wheels, unitized axles and preset wheel ends. He has standardized on this spec to help make training of his maintenance technicians better and to help reduce complexity in parts storage.
"Where BCT looks to add value is the creature comforts within the cab," he says. Part of that comes from spec'ing premium seating, adjustable mirrors, even placing CB kits in the units so there is a power source drivers can take advantage of without opening up the dash.
The Labor Force
Olds, himself a former driver, knows how to build an organization that is responsive to driver needs. "We have listened to our drivers and found out what they're looking for," he says. "If it doesn't match, then we're doing them a disservice. It's how you treat them that matters."
As a subsidiary of Boise Cascade LLC, BCT is the primary carrier for the paper products manufactured by the company, Olds notes. "Accessibility to more freight than we can handle means plenty of miles for BCT drivers. All of our trucks are equipped with satellite communications for quick and reliable dispatch information."
BCT hauls predominantly paper – in rolls or on pallets, for Boise. Loads weigh as much as 46,500 pounds including the pallet. "The great thing about paper is that with power on and off, the loads are usually easy and quick to unload," according to Olds.
BCT dispatchers ensure that drivers are routed home at least once per week. Owner-operators are paid on a sliding scale, starting at 93 cents per mile for the first mileage band. Also compensated are authorized empty miles, paid at 74 cents per mile, and extra stops. The company offers longevity pay of up to 2 cents a mile in addition to some innovative recruiting bonuses if existing drivers help recruit new qualified drivers.
Drivers are protected from fuel spikes when the Department of Transportation National Fuel Index rises above $1.21 per gallon. For every 5-cent increase above that level, the owner-operator receives an extra 1 cent per dispatched mile, whether loaded or unloaded. His team has built a strong backhaul network that has allowed him to trim empty mileage to 8.1 percent.
The commitment to using independent contractors is part of Olds' financial strategy. By lowering the cost of invested capital to $6 million, he can help keep his fleet more competitive.
What has helped Olds remain competitive, and what provided him leverage in his bid to buy the fleet, was one of the most-developed financial management systems in the private fleet business. As a profit center, he knows where every penny is spent.
In fact, his unrelenting financial precision led him to question the way some corporate overhead expenses were being assigned to his fleet, particularly in the areas of information technology, human resources and workers comp. Because he was tracking those expenses and comparing them to industry averages, he was able to get Boise to reduce the charges to fair market value.
While dealing with the market and internal fluctuations, Olds' philosophy has remained pretty simple: Take care of your costs and proactively do the things that customers need before they know they need them. "If you answer both of these questions effectively, then you should be protected," he says.
