Squire Transportation (Squire) is a large national truckload (TL) carrier in the United States covering routes going both east-west and north-south. Squire’s average length of haul is 1,200 miles with approximately 10 percent empty miles. Squire runs predominantly single driver tractors hauling 53-foot trailers. For years, Squire has relied on relatively inexpensive diesel fuel and nonunion drivers to keep its operating costs low. The location of its major customers requires either bobtailing tractors (repositioning without pulling trailers) or dead-heading equipment (running tractor-trailers empty) to pick up loads for delivery. These practices worked well when diesel prices were at the $1-per-gallon level.
However, the recent volatility of diesel prices has put a strain on Squire’s operating costs. Drivers must refuel at truck stops where diesel prices are averaging $3 to $4 per gallon. Repositioning equipment is becoming cost prohibitive, but customers demand on-time pickups for on-time deliveries. Although these increasing diesel prices can be passed on to Squire’s customers in the form of fuel surcharges, many customers are beginning to revolt against these rising surcharges. Squire’s management can either accept these higher operating costs, thus reducing their profits, or begin to examine the implementation of regional TL operations.
CASE QUESTIONS
1. If you were advising Squire’s management team on their impending decision, what would you tell them?
2. Is there an alternative to reduce the impacts of high diesel prices other than to develop regional operations?
3. If not, how would you advise Squire to develop a regional operation?
(Solved Homework): Squire Transportation (Squire) is a large national truckload (TL) carrier in the United…
Expert Answer
1. Various considerations that the company’s management should consider is the activities of their competitors as well as the loyalty of customers which they have to maintain despite the rising cost of operation. In this situation the company is presented by revolting customers when the increased gas prices are passed to them .On this problem , the management have a couple of alternatives to counter it on their side .First , the company can consider diversifying in its operations in that they can increase the range of courier products they deliver (Load pilot driver code,2009).If this is the alternative chosen , the company would be able to spread the cost among a larger market hence keeping its costs low while maintaining desirable profit levels .Another option the company has is merging with another company in the same industry .If this the case, Squire would acquire a larger capital base. This is so because when two companies combine, they have more shareholders meaning more capital. This kind of capital can be used to absorb the increasing costs of diesel while maintain original prices charged to customers. If it is a case where Squire takes over a company in the same line of business, the company would enjoy economies of scale .The merits that comes with this would enable Squire to maintain initial prices charged on the customers despite the rapidly increasing diesel prices.
2. . If the managers arrive at a point where none of the alternatives work best for them, Squire should take a drastic measure of absorbing the additional cost brought about by rising diesel prices in the country .At this point the consolation would be that rising diesel prices are due to inflation or other economic trends which are bound to go back to normalcy at some point (Diesel fuel prices what consumers should know, 2008). .Taking this into consideration , the mangers should plough back some of its accumulated profits back into the business in order to counter the swelling cost of production .The aim of such a decision would to prevent customers from revolting while maintain their loyalty to Squire .
3. The other option considered by the management is going regional .The professional argument for this is that there is a number of factors the managers have to scrutinize before implementation of such a measure .These factors can be viewed as pros and cons of regional truck load operations. Before embarking on this measure, the managers should carry out feasibility studies on the region where they intend to begin their operations in. This research would establish whether the people living in those regions require services offered by Squire. It would answer the question of who are the target market the management should focus on in the various regions .Finally, it would enable the mangers to deduce whether the move is economical or whether it would result to heavy losses.
