CEOCostDown Consulting
During a recession, carriers shed equipment and drivers to offset falling revenues. When this current recession will end is much debated. What is not debated however is that it will end, and when it does, carriers need to be in a position to quickly increase their capacity to capitalize on increased demand and higher freight rates.
What I don't discuss in this video is a planning activity carriers should embrace after the recession has ended. That activity is called ‘Lessons Learned'.
The recession provides a great learning opportunity for those carriers that survive; particularly for those that ask themselves: "If I knew in the 1st quarter of 2008 what our economy would be like these next 18 months, what would I have done differently?"
CEOs of trucking companies looking to minimize the impact of a future recession should analyze the aspects of their operations that have provided the biggest challenge in surviving the current recession. Common areas of challenge include:
* Cash Flow
* Securing Credit
* Downsizing
* Too Much Equipment
* Shrinking Networks
* Rate Wars
* Benefit Reductions
While analyzing these challenges, think about how they could be managed differently during a strong economy so that your company will be better positioned to survive the next recession.
For example, in the case of Cash Flow a company could use strong revenues from a healthy economy to build up much larger cash reserves than what has historically been allocated. Other activities could include reducing total debt, being more aggressive with accounts receivable and keeping an ‘in-a-recession' mentality about budgets, capital expenditures and inventory levels.
The Lessons Learned exercise should involve all departments and all department heads along with a representative group of your best field managers. Use their collective experience and intelligence to identify your recessionary challenges and develop strategies to diminish their impact next time around.
Recessions are part of a normal economic cycle. It is the economy's way of shaking out the excess and keeping inflation in check. We will get out of this current recession. We will someday enter into another recession.
Carriers that understand the value of analyzing their past to improve the performance of their future will be the organizations most likely to survive the next economic downturn.
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