Cutting costs, keeping quality

Let's face it. In recent months, the market has not exactly been kind to the truck trailer industry.

That has been especially true for those who specialize in platform trailers — the type of trailer most directly affected by the woes of the troubled housing market. Platform fleets are feeling it. And when customers are affected, trailer manufacturers and dealers feel their pain.

Royal Truck & Trailer, a trailer dealer in Dearborn, Michigan, is no exception. Sales dropped by half last year. Yet President Carl Bumgardner, a 35-year veteran of the roller coaster ride that disguises itself as the trailer market, has not cut staff. Occasionally, he has even chosen to pay extra for items that are required to run a trailer dealership.

Why?

Royal is not a normal trailer dealer. The company routinely ranks at or near the top of its manufacturers' list of dealers each year. It also has something few other trailer dealers have: ISO 9000 certification.

Because he has lived and worked through other down times, Bumgardner knows that market conditions — good or bad — are never permanent. He also knows that good technicians will be hard to find when the market bounces back and that he has a good team of technicians.

“We haven't laid anyone off, and we haven't cut back on hours,” Bumgardner says. “We are trying to ride out the storm and are holding our heads high. Royal is a family business with a long history. We are in this for the long run. The market rises and falls. Sales are off by half right now; it's a hit that our company is taking. But we are doing all we can to keep everyone onboard because we know that if sales can drop by half, they can also double. And when they do, we will be ready.”

Cutting costs

While Royal strives to keep payroll expenses unchanged, the company has found plenty of other places where costs can be cut.

“Nickel and dime stuff really does make a difference,” Bumgardner says. “As a matter of fact, there is a lot of money to be saved by paying attention to details and not assuming that dealing with this is not worth management's time. A lot of money can go through a trailer dealer's fingers when he decides that things aren't worth his time to manage.

“When we look at those financials each month, we naturally focus on the big items. But there are plenty of things on there that we just don't question.”

Here are several areas where Royal has been able to cut costs painlessly:

  • Doormats

    Doormats? Yes, Bumgardner answers emphatically.

    “We want to make a good first impression, and the doormats can be the last thing customers see before they set foot inside our facility. We didn't want ratty doormats, so we hired a service to make sure our mats were kept fresh. That service was charging us $10-$12 per week. Do the math on that, and you find that we were paying more than $1,000 per year to rent two rubber mats — one for each of our entrances. So we bought two high-quality mats that are holding up well and saving us money every week.”

  • Telephone service

    Ma Bell is no longer the only game in town. Technologies and services are changing constantly. So are prices. The highest price does not necessarily equate to the best service.

  • Welding gases

    “We monitor our oxy-gas consumption. Our supplier's rep says that we can expect a 4% increase in our bill because of rising prices. It's tempting to accept that as a valid reason for some pretty consistent price hikes. But we don't accept that on face value. We are watching.

  • Shop door repairs

    “We had always used the same guy to fix our doors,” Bumgardner says. “Who wants to always shop for a new service provider every time a door needs repair? Yet we found we could get our doors repaired for half the price when we changed companies.”

  • Utilities

    Switching natural gas and electricity providers is another way Royal cuts costs without affecting its customers. “We are constantly looking for better deals,” Bumgardner says.

Spending extra

Not every purchase decision, however, involves selecting the lowest price. For example, the company recently decided to pay substantially more for an improved parts washer.

“We were spending $35 a month for our parts washer compared with $100 per month for the new one,” Bumgardner says. “But the new one uses a nonflammable cleaner than emits no fumes, and it is as effective as our old solvent-based system. It has a heater, so our shop guys can keep their hands warm in the winter. The cleaner does not chap their hands or crack their skin. It's been great for shop morale. On three different occasions, shop guys have thanked me for buying it.”

Paying almost three times as much for a parts cleaner, however, does not mean that Royal has gone on a spending spree.

“We justify every move we make,” Bumgardner says. “We pay cash as much as possible, and we do our homework. If an increased expense makes sense, like the new parts washer did, we can use some of the money that we save elsewhere to help us pay for it. As an owner, I don't have time to investigate every purchase we make. But I have a great team of managers who make it their business to manage the expenses in their departments. They are very conscientious about cost control.”

Quality cuts costs

Bumgardner says his company also benefits from the lessons it has learned as an ISO 9000 company.

“It made us a more efficient company,” Bumgardner says. “And when we are more efficient with our labor, we are more effective in reducing costs. Not every policy and procedure that we have came from ISO, but the process gave us the attitude we need to consistently do things better. ”

Royal first earned its ISO registration about 10 years ago. The Detroit-area trailer dealer decided to get its ISO certificate as a proactive move.

“At the time, ISO was a popular concept with the Big 3 and with the steel companies,” Bumgardner says. “There were rumors that the car companies would require ISO certification for truckers hauling anything in or out. Then some of our customers said they wanted their trailers repaired at an ISO shop. We thought there was a chance that some of our customers would begin requiring that level of quality. As it turned out, we never needed to do so. But from both a personal and business standpoint, the process we went through and the processes we have implemented have helped a lot. ISO seems to have fallen by the wayside lately. But once we got it, we became much more efficient.”

Becoming more efficient

Bumgardner cites the parts department and the shop as two areas of his company that have benefited.

An example: forklift batteries.

“What if you can't get a forklift to start because of a bad battery?” Bumgardner says. “We began asking ourselves how much that cost us. We also asked ourselves how many forklifts we have. We concluded that having a backup battery for our forklifts would save us money.”

ISO also prompted Royal to address its leaking air distribution system. But in addition to replacing its quick disconnects, the company also rerouted the air lines, adding a primary compressor away from the shop in order to reduce noise levels. From its location in a separate building, the primary compressor feeds a secondary compressor still in the shop. The secondary compressor can meet the needs of the shop if the primary compressor is down for maintenance. Both tanks are joined to feed the shop through the pressure regulator.

ISO also helped the company organize the parts department, particularly in terms of how parts are stored and labeled.

Many of the efficiencies and quality improvements were the result of direct or indirect suggestions from the consultant that Royal hired to help the company through the ISO process.

“He really helped us channel our thinking,” Bumgardner says.

Homegrown management

The task of identifying cost-saving actions (or technician-pleasing purchases) is the responsibility of Royal's homegrown team of managers — Jeremy Beal, parts manager; Mike Morrison, service manager; and Brett Ostrander, sales manager. It's a young group, with Ostrander the “old-timer” at age 38. Beall, 26, is the youngest.

“All of these guys have grown up with us,” Bumgardner says. “They have been trained to do what this company does in the way this company does things.”

The training and loyalty that these managers and the people working under them have received are two reasons why Bumgardner wants to keep his team intact.

“All of my people believe in their heart that this is a fine place to work,” Bumgardner says. “The reason is because of the way they are treated. They are treated with respect and as the teammates in this business that they really are. I am very open about the financial workings of this business. We still pay 100% of their medical insurance, for example, but they know how much it costs the company and what they have to do to help make it possible for the company to continue to do so — to always strive to be more efficient, to reduce waste, to never steal from the company.

“I never micromanage. But I'm always available to them if there is anything I can do to help. Bottom line, I manage this company the same way that my dad did.”

Like father, …

Roy Bumgardner started Royal in 1970 with a partner — Al Praito. The partnership between Roy and Al continues to be reflected in the company name, Royal, but Roy bought out his partner after only six months.

For most of the company's existence, it was more of a partnership (albeit a very unequal partnership) between Roy and his son Carl. Carl joined the company after its third year of doing business. The two men worked together until Roy passed away four years ago.

“A lot of the ISO ideas about personnel management are really similar to my dad's,” Bumgardner says. “He treated everyone great.”

The company is in its third generation. Just as Carl did 35 years ago, his son Ken has joined the company recently.

“I want to leave this company bigger and more secure than it was when I joined it,” Bumgardner says. “Royal is now in its third generation. We are in this business for the long haul.”

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