Exclusive interview with Trailcon’s Al Boughton: Part 2

MISSISSAUGA, Ont. – Truck News interviewed Al Boughton on the challenge of growing a new company and a new culture – with no ceilings. This is the conclusion of the two-part interview…

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TN: Starting anew, with your own money on the line when you started Trailcon, must have made for some tense moments.

Boughton: I’ll tell you, until then I didn’t know what a panic attack was. My first day on the job back in 1992, this wave came over me. I felt faint.

I put the key in the door and walked into this building and realized I was incapable of even understanding exactly how the copy machine worked.

I had no people and I had to somehow run this company.

No customers, no revenue. It was terrifying. But the wave didn’t last for more than a few seconds. I did what I do best.

I picked up the phone and called someone. From that point on I never felt that way again because by the end of the first week I had actually put eight trailers on the road.

I started to do the math, and thought wow we could make money at this. In 2003 we did 711 trailers and $29.6 million in revenue, which was a record year for us.

TN: You had a large part to play in creating Kenderry Gate. What has this location meant to the success of Trailcon?

Boughton: One of the things we wanted to do is to take the image of transportation and remove the word “ugly” from it.

People associate anything to do with transportation with being unsightly, noisy, dirty and unprofessional. What we tried to do with the 26 acres we had to design was to put on a more modern appearance; we wanted to put our best foot forward.

If you take a look at our building, for example, even though we moved here in 1996, it’s still a modern appearance.

If you come here in the summer time you won’t find a nicer place. We have grass, rocks and flowers. The location also ties everyone in. We have Manac and Trailmobile, a reefer supplier, etc.

It has been positive from an image point of view and positive from having suppliers close.

I can bring a customer here and say let’s go look at this trailer or reefer and just walk him across the street. We are like a supercentre – it’s one-stop shopping.

TN: Image is clearly important to you – whether it’s having a modern building or a sharp-looking suit. Where does your attention to image stem from and would the industry be better off if it paid greater attention to image do you think?

Boughton: The first trip I ever went on with Jim Wilson, we were going skiing and we were flying to Aspen. We went on the airplane and we were on the front of the plane and he said something about being uncomfortable. I asked why and he said this was the first time he had ever been on an airplane without a tie on.

His father would say you should always wear a tie when on an airplane because you never know who you are going to meet and who you are going to sit next to. It was something that stuck. I think the industry as a whole could benefit by us putting our best foot forward by dressing appropriately and acting appropriately, although I guess I’m sometimes guilty of not doing the latter.

TN: Let’s talk about leasing. What do you see as the major issues affecting your customers going into the next few years and how has leasing in general, and Trailcon specifically, evolved to be in tune with such customer needs?

Boughton: Productivity and compliance are the two biggest issues for the customer. Productivity requires having the best assets in place. For example, Pizza Pizza has all these trailers that no one else has – with special side doors and compartments. To design the trailers for them was a very arduous process but worthwhile from a productivity standpoint. The other thing is compliance – making sure the trailers we put on the road don’t have a negative impact on a customer’s CVOR – which means proper maintenance at the right time. Customers can’t afford downtime because the trailer is broken down or have the driver sitting at the dock because the trailer lights don’t work. They can’t have a load delivered spoiled because the reefer ran out of fuel. The demands of our customers are the demands of their own customers, and they continue to increase. Everybody wants to go harder. If my customer needs to have his reefers fueled at four in the morning because he wants to get on the road before the traffic starts, then I have to have them fuelled by four in the morning. That’s the challenge and then to try to take all these demands from different customers and fit them into a schedule that still allows us to be profitable.

TN: What are the major challenges that leasing companies themselves face in trying to keep up with customer demands?

Boughton: Growth itself presents a challenge. You are constantly bringing new people in, which requires attention be paid to training and ensuring that every one who comes in is not only singing off the same page of the hymn book but actually knows the hymn book.

The demands of the customer are not unreasonable because they are a direct reflection of what they need to do to make their business sustainable in a changing market. You need to be ready to change all the time. Every Tuesday morning we have every manager here and every single item that needs to happen in the future is discussed.

If we are not a leader we are a follower and I hate to be a follower. We need to be better because the customer comes to us expecting to be better. You need to be able to say to the customer, we’ve run our own tests on this tire and this is the kind of improved performance we are finding. That’s what reinforces in his mind he is making the right decision.

TN: What’s the impact of the steel shortage on your ability to get new trailers and how do you see this situation playing itself out? Do you see it having an impact on the decision to lease?

Boughton: It was an issue in 2004; it slowed supply down no question about it. We have some smaller suppliers who didn’t have the clout to influence on-time delivery. And it wasn’t just steel, many raw materials were affected. Tires were worse than steel. We had trailers built with no tires. It drove the price of trailers up and it slowed deliveries down. Both of those left the customer unhappy. Where does it go from here? Ask China.

We don’t know the amount of steel they will be using up as they continue to plow consumer products back into the North American market. But China is going to continue to be a major consumer of natural resources.

TN: So you see the shortage having an impact on the buy versus lease decision of smaller carriers?

Boughton: No question, particularly if a carrier can be flexible on the specifications. We spec’ a trailer a particular way with a number of maintenance reducing items, from heavy-duty dollies to LED lighting.

If the customer has 30 options but can live with 18 of the revenue-producing options we go with, and we can make his order part of our 150-trailer order instead of his 10, the price becomes so substantially less than what the order of 10 would be.

It becomes very palatable for him because he doesn’t have to put the capital out. He can spend his money on primary areas such as warehousing or buying new trucks, satellite tracking or invest it in his people. I think the trend towards leasing will continue as long as the carrier continues to struggle with margin.

TN: The trailer market itself is on the upswing. What impact is the upturn having on leasing opportunities? And how is the high Canadian dollar playing into this?

Boughton: If a carrier phones a trailer manufacturer and wants five trailers, the manufacturer will build them but the price is going to be up here and delivery is going to be several months out. We fill big orders so we can offer advantages on price and delivery to our customers.

TN: Trailer purchases can make up to 1/3 of a carrier’s CAPEX. Is it your sense that Canadian flee
ts pay as close attention to their trailer assets as they should? Have they twigged in to the financial and other benefits of leasing or does the industry still have an education process ahead of it?

Boughton: There is a lot of attention paid to the tractor to ensure the right level of comfort for the driver, onboard technology, etc. But the last time I checked you can’t get a lot of freight inside the tractor.

Customers don’t pay as much attention but that can also be a direct reflection of having good providers that take care of looking after a lot of the trailer equipment. Trailers are built better than before.

The technology is superior. The maintenance scheduling can be stretched out just like in your car. There’s not as much complexity in the maintenance as long as you spec’ it right. If we’ve done our job right we become invisible to the carrier’s operation.

TN: There’s a lot to think about in making the decision to lease. What would you consider the main things a fleet owner should understand about his operation before making the decision to lease?

Boughton: Number one is do you have the capital to buy the trailers and if you don’t you better be leasing. Is the return on buying a trailer equal to the return you get by buying a tractor or extending a warehouse, or investing in software? That’s really 1A. and 1B is what are your maintenance capabilities?

If you are not prepared to run a shop and invest in the personnel, hardware and software to manage that fleet, recognizing how important your CVOR is, then you shouldn’t be even thinking of going to anything but a full-maintenance lease. The trailer then becomes an invisible component of the business.

TN: Effective and efficient maintenance management is increasingly important for carriers required to pay higher insurance premiums and under pressure to boost productivity. What’s your advice for how to properly evaluate a leasing company’s maintenance capabilities?

Boughton: Is it real or is it script? Anybody can say they have the service.

When you’ve given the job to somebody else and you find out they don’t really have the equipment and procedures in place to take care of it, it’s a really lousy time to find out, particularly when you’ve signed a five-year deal.

Ask for their customer list. Take any number of names off the list and call them. If you ask for references, they will always give you just the good ones.

TN: Where would you like to see this company 10 years from now?

Boughton: Ten years from now I think our market penetration will continue to expand. We will grow as the industry grows. How quickly you implement technology and how quickly you will be able to be responsive to the needs of the customer is crucial. If we are faster, more efficient and respond better than Brand X, where are we going to be? More branches, expansion into the U.S. You know what, when we started the company our goal was to reach 2,000 trailers, then it became 4,000, now it’s 5,000 by end of this year. Why not 15,000 or 20,000? Will we branch out of trailers? No, but we may have more specialty trailers. There’s no ceiling.