Walking into the headquarters of Schneider National Inc., the giant trucking company based in football-crazy Green Bay, Wis., is a lot like entering a sports arena: Heavy glass doors open into the lobby; a shop on the left offers Schneider tchotchkes and clothing for sale; plaques on a nearby wall honour outstanding associates; people bustle back and forth, getting ready for the start of the day’s action. But what feels most arenalike is the loge-style view from the second level. Spread out below is the company’s version of the playing floor – in this case, one full acre of space where more than 600 customer service representatives ply their trade. They are the playmakers, the folks in constant communication with drivers and customers, ensuring that load A gets to destination B in the most efficient way possible. A 20-foot wide screen serves as the Jumbotron, relaying messages (“We need more trucks in the Southwest!”) and keeping the reps updated throughout the day.
In short, this ain’t your granny’s trucking company.
Schneider National’s bright orange trucks are a fixture on the nation’s highways. Legend has it that A.J. “Al” Schneider used the proceeds from the sale of his family car when he founded the company in 1935. Today, the company has grown to become North America’s largest truckload carrier, servicing two-thirds of the Fortune 500. The privately held US$3.1 billion company owns 13,000 tractors (the cabs) and 42,100 trailers (the back part of the truck that carries the goods), making its truckload fleet the largest in North America. Its closest competitor is a distant second: When Swift Transportation merges with M.S. Carriers, the public company’s combined revenues are expected to be about US$2 billion.
And if the trucking industry conjures up images of CB radios, truck-stop pay phones and a bevy of gruff dispatchers barking orders to far-flung drivers, a closer look at this transportation behemoth reveals an entirely different reality. Schneider National might best be thought of as a high-tech company that happens to own a few thousand trucks. CEO Don Schneider, Al’s son, recognized decades ago that information technology could help the company and its customers wring more cost-savings and productivity from their supply chains. Today, Schneider is a leader in onboard trucking technology, has invested heavily in its e-business infrastructure and announced plans last year to spin off its technology-intensive logistics subsidiary. In sum, IT is as tightly intertwined with the company’s business strategy as cheeseheads are to the fortunes of the beloved hometown Packers.
Head Trucker
Don Schneider – who happens to serve on the Packers’ executive committee – is a CEO unadorned by all the typical CEO trappings. On the day of his interview with Darwin, he’s outfitted in blue jeans and a denim shirt with the orange Schneider logo, which speaks volumes about the down-to-earth, Midwestern character that permeates the company. All the executives’ offices, including Schneider’s, are the same size (not big); employees are known as associates; and drivers are just as welcome in the CEO’s office as are senior vice-presidents (he makes a point of regularly chatting with drivers). He sits at his small table and discusses technology’s role both at Schneider and in the economy as a whole. “How can you continue to get an economy growing so close to full employment without driving up inflation?” asks Schneider, who as a former member of the Federal Reserve Board’s Midwest board of governors thinks often about such issues. “[Alan] Greenspan and the economists [at the Fed] have surmised that it probably has to do with the increased productivity from technology….A lot of it has to do with the fact that when you have information [as a result of IT], you take the risk out of decision making that you used to have when you didn’t have information.”
Schneider’s embrace of IT manifests itself throughout his company. However, the coolest technologies – the ones that make trucking feel as technologically sexy as its airline or automobile brethren – can literally be found where the rubber meets the road.
Location, Location, Location
Schneider drivers aren’t just behind the wheel of big, orange trucks – they’re driving 65-foot-long mobile telecommunications units. Each cab is outfitted with OmniTracs, a satellite-based communications and positioning system from Qualcomm, a wireless communications provider based in San Diego. Schneider was the first fleet to adopt the technology, rolling it out in 1988. Don Schneider stuck his neck out, convincing the board of directors to invest US$30 million in OmniTracs. “There was a lot of financial risk involved. But the upside was so great that we couldn’t bypass the opportunity,” Schneider says. The gamble paid off. Customers were willing to pay for the real-time information it brought them. Drivers, frustrated by years of having to stop at phone booths every few hours to report to headquarters, loved it. “We thought drivers wouldn’t know how to use it or want to use it. What we found was exactly the opposite,” he adds. Today more than 1,250 fleets in the United States use OmniTracs. “[Schneider] looked at the capabilities it gave, and he had this fundamental belief that it would change the industry, his ability to service customers and the life of the drivers,” notes Chris Lofgren, CEO of Schneider Logistics, a separate business unit offering supply chain management services.
A black box, which the drivers refer to as the satellite, is mounted inside all Schneider cabs. It has a keyboard and allows drivers to send and receive text messages – via satellite, of course – to and from the customer service associates back in Green Bay. “We send and receive about 4 million messages per month,” says Paul Mueller, president of Schneider Technology Services, a unit of Schneider Logistics that provides tech support for all of Schneider National via an outsourcing arrangement.
OmniTracs also allows Schneider to know where its tractors are at all times. The OmniTracs antenna, which sits on the back of the tractor, maintains constant communication with a satellite and automatically reports its location back to Green Bay. Besides being critical to the company’s customer service reps, the location technology happens to be quite useful when somebody decides to take a joyride in one of the trucks. “We can determine pretty effectively a tractor location within 300 feet,” Mueller says.
Schneider and Qualcomm also jointly developed a monitoring technology called SensorTracs, which uses electronic engine sensors to record information such as speed, rpms and idle time. In 1990, Schneider became the first fleet to implement the technology, allowing the company to receive engine data via automatic satellite downloads. SensorTracs helps Schneider manage wear and tear on its engines and also keeps drivers on their toes (and off the gas). “As a matter of fact,” Mueller notes, “one element of a driver’s monthly bonus is predicated on staying within certain key factor ranges when operating the vehicle.” Jeff Gordon wannabes beware.
Unlike tractor-tracking technology, which has been around since 1988, trailer-tracking technology is just starting to be rolled out to the nation’s fleets. Trailers need to be tracked for the same reasons tractors are – they are expensive units, and knowing in real-time whether they’re rolling on a train car through Raleigh, N.C., or sitting in a yard in Sioux Falls is critical. “Those are revenue-generating assets, so understanding where they are and the status of those assets is pretty important,” Mueller says.
Schneider began beta-testing a satellite trailer-tracking system from a company called Orbcomm in 1999, but that company filed Chapter 11 last year. Enter Qualcomm, which had been partnering with Orbcomm to offer the trailer-tracking system. Schneider decided to go with the Qualcomm technology which uses cellular, not satellite, technology like OmniTracs earlier this year and eventually plans to install it on all its trailers. Not only can Schneider monitor the whereabouts of its trailers, a sensor unit inside the trailer can tell whether the trailer is empty or full. Another sensor mounted in the bottom of the trailer can tell whether it’s hooked to a tractor or not.
If all that tracking technology feels Big Brotherish, well, it is. However, to Schneider and its competitors, staying on top – even staying alive – in the industry means knowing where your assets are at all times and moving them to where they need to be as efficiently as possible. “Trucking companies are asset-intensive businesses,” says Donald Broughton, senior transportation analyst at A.G. Edwards & Sons in St. Louis, Mo. “The guy who has the higher rate of asset utilization wins.”
The E-business of Trucking
Schneider’s aggressive use of technology isn’t limited to the highway; it’s integrated throughout the whole business. According to COO Scott Arves, the company spends in excess of 1.5 per cent of its revenues on technology, a figure that Don Schneider says is “higher than any of our competitors’.”
“We’re moving 10,000 loads every single day,” says Craig Dickman, vice-president of IT. “With the low-margin nature of this business, every decision that you’re making has an impact on profit and loss, so technology becomes important to allow people to make more effective decisions.”
The company has developed optimization software known as the Global Scheduling System (GSS). This tool gives customer associates the ability to optimize all of the company’s drivers and loads across North America. It processes 7,000 load assignments a day and optimizes at a rate of more than 7,000 driver-load combinations per second. For a trucking company, where every empty trailer or misdirected driver means a hit on the bottom line, that kind of decision-making tool is critical. “Every morning you wake up, your means of production or your capacity is in different locations,” Dickman says. “You really need to be able to look at ways to make customer commitments and say, ‘Yes, we have the ability to move this freight.'”
Half of Schneider’s customer orders are received electronically, either via the Web or electronic data interchange. (EDI, which has been in use since the 1960s, allows businesses to transmit documents electronically, generally over private networks.) “Anytime we can create an electronic transaction, we do so,” says Dickman, adding that in the trucking industry, that’s not always possible – Ma Bell and Pa Fax still hold their own, especially with smaller shippers. To encourage more Web transactions, the company continually elicits customer feedback to make sure its Web site, www.schneider.com, is easy to use. Customers can use the site to place orders, track shipments and print the documents necessary to complete their transactions. Another company site, www.schneidercarriers.com, serves as a portal that matches available freight to capacity for Schneider’s more than 6,000 carrier partners.
Linda Beth, vice-president of e-business solutions, says that the company’s goal this year is to receive 60 per cent of its orders electronically. For Schneider, increasing electronic orders means better order accuracy and higher productivity. So it will continue to nudge customers in that direction.
Industry Challenges
One of the major challenges facing Schneider is all too familiar to carriers: recruiting new drivers. According to the American Trucking Association, there’s a need for 80,000 to 100,000 additional drivers. COO Arves says, “It’s been an ongoing problem for us and really everybody in transportation.” He explains that the problem has existed for the last decade, and he anticipates that it will continue, because demographics point to a smaller labour pool in the coming years.
One way Schneider is combating that trend is by making more of an effort to recruit women and minorities. “You’ll see us and others trying to do a better job in the future of recruiting people from the Hispanic population,” he says, adding that Schneider has already made great strides in this area. The company also uses technology as a recruitment and retention tool; its Touch Home program includes in-cab e-mail via satellite and discounted 800 numbers to help drivers stay in touch with their families while they’re on the road.
Then there’s that little issue of the economy.
Like many industries, trucking has been slammed by the downturn. Higher fuel prices hit where it hurts most – at the pump, the lifeblood of a transportation company. The slowdown in manufacturing has led to fewer shipments, another blow to truckers. Insurance costs have risen. And used truck values have recently declined in the neighbourhood of 30 per cent.
Schneider doesn’t have it nearly as bad as others in the industry, especially smaller companies, which suffer more in a sour climate. “This is a marketplace where size matters,” says A.G. Edwards’ Broughton. “You buy trucks cheaper and fuel cheaper.” He also notes Schneider’s high level of lane density, which means that once a trucker delivers a load, there’s a greater chance the trucker’s next load is nearby. As he explains, “100 trucks chasing 100 loads nationwide are worse off than 1,000 trucks chasing 1,000 loads.”
Higher levels of lane density lead to higher levels of asset utilization, which gives large players like Schneider a leg up in the 400,000 company-strong (or weak, as the case may be) trucking industry. “Last year more trucking companies filed for bankruptcy than in any other year in the last 10 or 11,” Arves says, adding that this year looks no better. There is a silver lining in those dark numbers for Schneider, however. “It takes a lot of excess capacity, if you will, out of the industry,” Arves notes.
But even well-positioned companies such as Schneider can’t afford to sit back and wait for the upturn. It’s pursuing an aggressive cost-cutting strategy, looking to save US$50 million this year. It’s also cutting its purchases in half and being more conservative in its growth plans. Technology spending is also staying flat compared with last year’s spending. But has Schneider changed its view on the benefits technology brings to the table? Absolutely not.
“We believe technology drives productivity, and we continue to push aggressively to drive productivity gains within our corporation,” Arves says.
That type of thinking is warmly embraced by Don Schneider. “We hire competent people,” he says. “What we want to do is give them as much information and as many tools as we possibly can so they can be as effective as they can.” He insists the company doesn’t do technology for technology’s sake. “It’s for the customers and ultimately they have to pay for it,” he says. “So there has to be value in it.”
Led by Schneider, who is entering his fourth decade at the helm of his father’s venerable company, the colossal orange fleet rolls on, a thundering herd of old economy trucks masking a decidedly information age modus operandi.
Schneider Snapshot
Schneider National is North America’s largest full-truckload carrier. (Full-truckload carriers transport freight from single customers; less-than-truckload carriers handle smaller loads from multiple customers.) It is privately held.
Headquarters: Green Bay, Wis.
Year founded: 1935
Revenues: US$3.1 billion (2000)
Employees: 19,000
Lines of business: Schneider National offers van, dedicated, truck-rail, specialized and bulk services. Schneider Logistics provides supply chain management services.
Major full-truckload competitors: J.B. Hunt Transport Services, Swift Transportation, Werner Enterprises
It’s Not My Way Or The Highway
In most companies, information technology projects begin like this: CEO reads in magazine at health club about Competitor X using Technology Y; CEO says to CIO, “Why can’t we do that?” CIO makes feeble attempt to explain why but understands that the unspoken message is “Do it.” In other words, the request is thrown over the wall to IT sans any business-IT collaboration. Chris Lofgren, CEO of Schneider Logistics, says that view of IT as a service organization was prevalent at Schneider, too, until the company launched a technology steering committee a few years back. Since then, any wall between business and IT has disappeared – business executives understand technology because, frankly, their jobs depend on it.
Craig Dickman, vice-president of IT, and a team of five work for Schneider National. Dickman’s role is to look for opportunities where technology can make the company more productive and efficient. He and his team work closely with business leaders on all aspects of strategy. “We go out of our way to manage the [business-IT] alignment, at a deeper level than is typical,” he says.
The nine-member technology steering committee oversees IT-driven projects. That committee takes a hard look at these projects to make sure they are really delivering value. Lofgren says that when it was formed, the committee cancelled most of the 500 or so projects that were under way. They were cut because they weren’t strategic investments, nor did the business side have any accountability, he notes.
Members of Dickman’s team and a business team bring proposals to the committee. “That drives alignment between the business and tech teams as they come together in front of the committee and allows the committee to take an enterprise view of all the tech initiatives we have,” Dickman says.
Senior Editor Todd Datz has taught his preschoolers the universal trucker-blow-your-horn signal. He can be reached attdatz@darwinmag.com.