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Riding the High-Tech Highway

Company overturns trucking industry conventional wisdom by using computers to pinpoint profitable loads.

OTR Express overturns conventional wisdom in the trucking business by using computers to pinpoint at any given time where its most profitable load of freight is most likely to be found

OTR Express is a small trucking company that sits out at the prairie's edge in Olathe, Kans., just southwest of Kansas City, in a neat and tidy one-story concrete building rising out of a windswept industrial park that hardly suggests the grit and brawn of trucking. Inside you'll find no scuffed linoleum on the floor or pinup calendars on the walls, no beefy men walking around in cowboy boots and fringed vests. OTR is more of a CPA's delight: spotless wall-to-wall carpeting, and computers humming on every desk. The company's principal founder, Bill Ward, favors somber ties and neatly pressed oxford shirts. His passion -- which soon burns through in conversation -- is for data processing. His background is in real estate.

Unlikely as it may sound, those two callings thrust Ward into the trucking business in the early 1980s, when the real estate market around Kansas City was beginning to head south in a hurry. He started OTR Express with his wife, Kathy, a former schoolteacher, and Dick Walpole, his real estate partner. The day they opened the doors, they had no customers. They did have one truck but no idea what road fortune would take it down. Walpole recalls heading off to the local library "to read up on trucks and what they looked like."

Ward and his associates certainly could have chosen a less competitive business. There are 40,000 trucking companies in the United States, and as many as 10% of them will go bust this year. Given those numbers, it's not exactly surprising that your average trucking company hardly amounts to a rolling gold mine. If you're clearing 2% or 3% after taxes, you're doing well. A net return of 5% is exceptional.

Today OTR has 230 trucks, and in the first three quarters of 1992, it rang up $15.9 million in sales while earning a net profit of $514,000. And those numbers have not come about because of shoddy equipment or disgruntled, underpaid, and inexperienced drivers. OTR provides some of the best equipment in the industry, to drivers who have an average of 14 years' experience and who earn 20% above the industry norm.

So how exactly did Bill Ward pull this off, given that he didn't know very much about trucking when he started OTR?

A closer look reveals that Ward's mechanism for success was twofold. First, he was an outsider. "We were fortunate to come into this business without a preconceived idea of how to run it most profitably." Ward came into the business, appraised it with a fresh eye, and has gone on to apply novel methods to running a trucking company -- methods that clearly fly in the face of the perceived wisdom about what makes for success in the industry.

Second, and more specifically, Ward, applying his passion for data processing, has brought high technology to a low-tech business, using elaborate proprietary software he and OTR's two programmers have written and refined over the past eight years, programs that now exceed 200,000 lines of code. That software is run on a network of Macintosh computers, giving OTR, by Ward's estimate, as much computing power at one-tenth the cost of -- and with a lot more flexibility than -- the mainframe computers used by other companies. OTR's computers rigorously chart, track, and measure numerous facets of the company's operation, from the amount of fuel each of its trucks consumes to the difference between the cost of spare tires bought in Albany and those bought in Albuquerque.

Most critically, Ward has used his computers' number-crunching ability to position and deploy his fleet in its movements around the country, to ferret out freight in the most efficient way possible and thereby run the business more profitably than the average trucking company.

Bringing computer technology to OTR's operation, Ward stresses, is an ongoing process, as OTR's programmers continue to refine existing programs -- and they currently have another 46 separate programs they plan to write when time and money permit.

* * *

In mature industries, management often falls into a mind-set about how to run the business. There evolves, in short, a right way and a wrong way. The relatively insular and conservative world of trucking proves no exception -- and according to conventional wisdom, OTR's strategy, which is very unusual, is also considered the wrong way.

That conventional wisdom says there is one preferred way to run a company in the trucking business. That strategy derives from what is called the core-carrier concept, in which the trucking company develops close ties with a handful of customers, or shippers. It is a relationship founded on loyalty and service. The shipper offers the trucker steady volume and premium rates. In return, the trucker agrees to provide superior service.

Such a relationship creates risks for the carrier. It requires that it have extra equipment because it may have to drop off an empty trailer or two at a customer's plant to be loaded at a moment's notice. It tends to require the running of more (non-revenue-producing) miles without cargo ("deadheading," in industry parlance), because the trucker might have to move an empty truck to a pickup point at the shipper's whim. Last, becoming a core carrier can make a carrier overly reliant on a few large customers and thus vulnerable if one or two should grow dissatisfied and take their business elsewhere.

Enter, then, OTR Express and Bill Ward, who decided not just to pursue the path less traveled but to blaze a new one altogether.

* * *

The fact that OTR Express had all of one truck when it started out drove much of its strategy. The company couldn't really be a core carrier, because it simply lacked the resources. But beyond that, Ward saw risks and constraints in the core-carrier concept, and his intent was to avoid that strategy even after his company grew big enough to consider it.

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