After nearly 80 years in business, you might think that Kottke Trucking Inc. is content with the status quo. That, however, is hardly the case for the third-generation interstate refrigerated, dry van and dedicated freight hauler, which recently acquired the over-the-road operations of Walbon & Company Inc.
“That acquisition included 60 tractors and 85 trailers, which increased our fleet size by 288% and boosted our carrying capacity by 60%,” says Kyle Kottke, general manager at Kottke Trucking. “Today, we field 108 company-owned tractors, 225 reefers and 20 dry vans, and use the services of 56 dedicated owner- operators.
“Our goal is to have 300 tractors in operation in less than nine years,” Kottke adds. “Our plan has always been to grow organically but with Walbon & Co., we stumbled into a great fit for our operation and would probably make another acquisition if the right opportunity arises.”
Kottke’s acquisition also expanded the company’s footprint. Based in Buffalo Lake, Minn., where it was founded in 1938, Kottke Trucking now has terminals and offices in Wildwood, Fla., and Eagan, Minn., to manage the newly acquired lanes and staff. The motor carrier operates primarily in the Midwest, mid-Atlantic, South, southeastern and southwestern U.S., as well as to west and east coast states on a dedicated contract basis.
“As we grow it is incredibly important to use analytics to make sure we are choosing the right freight at the right price,” Kottke says. “Using TCG activity-based costing and profitability management software, our revenue per mile has increased by 10.5% in just 18 months because we can make more informed decisions on freight we should haul, freight we shouldn’t accept and pricing adjustments.
“Drilling down in the TCG software, we are able to analyze profitability by state, lane, load, customer and origin-destination pairs,” Kottke continues. “As a result, we have reorganized some freight lanes and focused on operations in eight specific metropolitan locations, and we are able to provide customers with justification for rate changes. TCG shows us where we can be the most profitable. That’s almost impossible without the software’s analytics capabilities.”
After evaluating other cost analysis software, Kottke Trucking began using TCG’s Cost Information System in the fall of 2014 and fully implemented its activity-based costing and profitability management software for truckload operations in January 2015. Today, the combination of TCG for analytics and the carrier’s PowerPro Transportation Software enterprise management system, which handles all dispatch, operations, financial, mobile communications and equipment and maintenance needs, is providing integrated data for analysis on approximately 1,200 loads per month.
“Also over the past few years we have fully invested in analyzing total cost of ownership for our equipment to find the right time to divest and upgrade,” Kottke relates. “For the longest time, equipment and maintenance were an afterthought and it took us longer than we should admit to bring them to the table for discussion. We have learned this was a missed opportunity so as we continue to go forward with plans to increase the size of our fleet, we do so with cost control and maintenance support as part of that conversation.
“There is no question that scale allows you to look at things that you don’t consider when you are 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 time to grow, we only made additional purchases and lost track of true total cost of ownership.”
Today, safety, fuel economy and driver comfort factors are also a part of equipment and specification decisions at Kottke Trucking. The fleet now consists of International, Peterbilt and Volvo tractors, along with Kenworths acquired with the Walbon purchase.
“We now spec Bendix Wingman anti-collision systems on all new trucks, and that’s a good example of how much we value safety,” Kottke states. “In that case, there is not a lot of data to prove the payback but we know the technology improves safety and therefore we’re glad to have it.
“Sometimes, measuring ROI or justifying an investment in technology is simple because you can easily calculate the payback,” Kottke continues. “In some cases, though, you have to figure a soft return and view the investment with an ROI plus mindset. Just as important, having shareholders that are willing to see years instead of months ahead allows us to make investments based on solid assumptions and not worry about immediate quarterly or yearly returns.”
A measurable payback from an investment in fuel saving technology can be easier, Kottke notes. “For example, we added trailer side skirts and estimated an 18-month payback period for those devices,” he relates. “What we realized was a return on our investment in 14 months from increased MPG. And we pay our drivers based, in part, on MPG expectations, so giving them the tools to save fuel, including training and performance scorecards, is to everyone’s advantage.
“We’ve been lucky when it comes to the driver shortage,” Kottke says. “Before the Walbon acquisition, our turnover rate was in the mid-20% range and even with the growth we experienced in 2016 we anticipate it will be around 30%, which is still very low compared to industry numbers.
“We attribute a lot of that success to our investment in driver comfort,” Kottke continues. “We spec high trim levels, upgraded seats and mattresses, and we pay for XM satellite radio and EpicVue in-cab satellite TV systems. While we’re not seeing any real change in retention since we added EpicVue one year ago, it’s another one of those items we view as having a soft return because if I put myself in the driver’s seat I would want it.”
Behind the scenes at Kottke Trucking, two shops staffed by eight technicians are making sure equipment operates safely and efficiently. The company also outsources major repairs to local shops, all service providers that it feels achieve the same standards of reliability and quality as its own facilities.
“We value partnerships, not just relationships—ones in which there is a mutual benefit for vendors and Kottke Trucking,” Kottke says. “With that approach in place, we have and will continue to be able to build a company of great people and great service.”