After nearly 80 years in business, you might think that Kottke Trucking Inc. Satisfied with the status quo. However, this is not the case for the third generation refrigerated and dry vans and custom freight carriers, which recently acquired the ground transportation operations of Walbon & Company Inc.
“This acquisition included 60 tractors and 85 trailers, increasing our fleet size by 288% and enhancing our carrying capacity by 60%,” says Kyle Kottke, General Manager at Kottke Trucking. “Today, we supply 108 company-owned tractors, 225 refrigerators, 20 dry vans, and employ the services of 56 dedicated owner-operators.
“Our goal is to have 300 tractors running in less than nine years,” Kottke adds. “Our plan was always to grow organically, but with Walbon & Co, we find ourselves well-suited to our operations and would likely make another acquisition if the right opportunity arose.”
The acquisition of Kottke also expanded the company’s reach. Kottke Trucking is headquartered in Buffalo Lake, Minnesota, where it was founded in 1938, and now has terminals and offices in Wildwood, Florida, and Eagan, Minnesota, to manage its newly acquired lanes and employees. The auto transport company operates primarily in the Midwest, Mid-Atlantic, South, Southeast, and Southwest United States, as well as the West and East Coast states on an ad hoc contract basis.
More informed decisions
“As we grow, it’s extremely important to use analytics to make sure we’re choosing the right shipping at the right price,” Kottke says. “Using TCG’s activity-based cost and profitability management software, our revenue per mile increased 10.5% in just 18 months because we could make more informed decisions about what freight we should move, what freight we should not accept, and rate adjustments.
“By digging deeper into the TCG software, we are able to analyze profitability by status, route, load, customer, and origin,” Kottke continues. “As a result, we have realigned some freight lanes and focused operations in eight specific metropolitan locations, and are able to provide customers with justification for price changes. TCG shows us where we can maximize profitability. This is almost impossible without the software’s analytical capabilities.”
After evaluating other cost analysis software, Kottke Trucking began using TCG’s cost information system in the fall of 2014 and fully implemented an activity-based cost and profitability management program for its truckload operations in January 2015. Today, the combination of TCG’s analytics and carrier software provides a management system Enterprise PowerPro Transportation Software, which handles all your dispatching, operations, financial, mobile communications, equipment and maintenance needs, provides integrated data for analysis for approximately 1,200 loads per month.
“Also over the past few years, we have invested fully in analyzing the total cost of ownership of our equipment to find the right time to divest and upgrade,” Kottke says. “For too long, equipment and maintenance have been an afterthought, and it took us longer than we should admit to getting it to the table. We knew this was a missed opportunity, so as we continue to move forward with plans to increase our fleet size, we do so by Cost control and maintenance support are part of that conversation.
“There’s no question that scale allows you to look at things that you wouldn’t consider when you were a smaller operation,” Kottke adds. “At the same time, it also allows us to operate at the lowest possible cost. In the past, when it was growth time, we would just make additional purchases and lose track of the true total cost of ownership.”
Determination factors
Today, safety, fuel economy and driver comfort are also part of equipment and specification decisions at Kottke Trucking. The fleet now consists of International, Peterbilt and Volvo tractors, as well as Kenworths acquired through the purchase of Walbon.
“We now specify Bendix Wingman anti-crash systems on all new trucks, and this is a good example of how much we value safety,” Kottke says. “In this case, there is not a lot of data to prove the payoff but we know that the technology improves safety and so we are happy to have it.
“Sometimes, measuring ROI or justifying an investment in technology is simple because you can easily calculate the return,” Kottke continues. “However, in some cases, you have to set a simple return and look at the investment with an ROI-plus mindset. Just as important, having shareholders who are willing to see years ahead rather than months ahead allows us to make investments based on strong assumptions and not worry Regarding immediate quarterly or annual returns.
Kottke points out that a measurable return on investment in fuel-saving technology could be easier. “For example, we added trailer side skirts and estimated an 18-month payback period for those,” he says. “What we realized was a return on our investment within 14 months of increased mpg. We pay our drivers based in part on MPG projections, so giving them the tools to save fuel, including training and performance scorecards, is in everyone’s best interest.”
Low rotation
“We’ve been lucky when it comes to the driver shortage,” Kottke says. “Prior to the Walbon acquisition, our turnover was in the mid-20% range, and even with the growth we saw in 2016, we expect it to reach around 30%, which is still very low compared to industry numbers.
“We attribute much of this success to our investment in driver comfort,” Kottke continues. “We are specifying higher trim levels, upgraded seating and mattresses, and are paying for XM Satellite Radio and in-cab satellite TV systems from EpicVue. Although we don’t see any real change in retention since we added EpicVue one year ago, Another one of those items that we consider a little bit of a return because if I put myself in the driver’s seat I would want to.
Behind the scenes at Kottke Trucking, two shops staffed by eight technicians work to make sure equipment runs safely and efficiently. The company also outsources major repairs to local shops, all service providers it feels meet the same standards of reliability and quality as its own facilities.
“We value partnerships, not just relationships – ones where there is mutual benefit for the vendors and Kottke Trucking,” says Kottke. “Using this approach, we have been able and will continue to build a company with great people and great services.”
