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By Patrick Gorman – March 20, 2018
For Target Freight Management CEO Mike Wagner, connecting with his employees beyond the workplace is important, and outlets such as youth sports are a great way to strengthen those connections. Wagner makes a point to support his employees’ children’s youth sports initiatives, whether that’s through coaching, funding teams or just supporting young athletes.
This year, six children of Target Freight Management employees are moving on to college with athletic scholarships, something Wagner is very proud of.
“It’s just good to see that their kids are pushing forward, trying to do something extra. And having that many in one group, especially in sports, it’s just unique. I know a lot of these kids personally because I’ve seen them play, I’ve coached their brothers and they’re friends with my daughter,” Wagner says.
Chief Executive spoke with Wagner about forging deep relationships with employees, managing growth, and some of the common misconceptions business owners have surrounding transportation and logistics.
Q: Why do you believe it’s so important to connect with your employees outside of the typical work environment?
A: For me, in today’s age, loyalty is a problem at times. I guess I’ve gone against the grain because I hire people that are friends, selectively. I have hired some family selectively as well. Pittsburgh’s not a huge city, but I’m in the neighborhood outside of Pittsburgh. And a lot of people in South Park, for example, where I’d lived for about 10 years, probably 7 or 8 families have lived in South Park. I’ve coached their kids. Their kids are friends with my kids. There are just a lot of interactions in the neighborhood as it is, and I think the difference between me and a lot of other people, as soon as we leave the building, it’s more of a personal relationship. It’s not talking about business and not carrying over your issues you may have in business on a day-to-day basis. The minute we walk out the door, it’s more about our kids and enjoying life and things like that.
“growth is a double-edged sword because you want to grow as fast as possible, but then at the same time, you must be able to handle it from an operations standpoint.”
Q: Tell me a little bit about how you’ve managed that growth in such a rapid period of time. Are there any kind of challenges or ways you’ve kind of handled that…kind of the rapid pace of growth within your organization?
A: In 2012, we were named Pittsburgh’s fastest-growing company and we grew from zero. We started in 2009. I think our base year revenue was like $500,000. And we did $18 million in the third year in growth. That’s 2,300%. You sit there and you grow like that and you’re like, “Wow, everything is just gonna keep on growing. Everything is gonna be great.” And I went flat for almost two years on the freight management side. That’s because we grew so fast, but that our operations was behind. We had our fair share of mistakes. We lost some customers and then you’re focusing on operations and you’re not focusing enough on sales, and we weren’t selling as much.
And part of that was we just weren’t prepared for how much business we were bringing on and that’s…I mean, it’s a great problem to have in some respects, but I was very focused on the customer experience and I don’t want anybody to look at my company in a negative manner because we couldn’t deliver on something that we promised. So we’re very careful before we promise or we guarantee our customers. I want to make sure that we can hit those metrics and not paint a rosy picture that’s not actually realistic.
The growth is a double-edged sword because you want to grow as fast as possible, but then at the same time, you must be able to handle it from an operations standpoint. And I came from a sales background. So selling was always something that kind of came natural to me. So I knew I could bring on clients. What I didn’t know when I started the company was how would I handle the backend.
And I think when you come from a sales background and you’re not on the back-end ops, there’s always some issues between sales and ops on, “Oh, if you’re just bringing on business or all you do is maintain it,” there’s a certain respect I have for the operations side now because it was much harder than I thought it was when I was just a sales rep.
Q: What are some of the common mistakes or misconceptions that you see with your clients and businesses that you work with in terms of transportation and logistics?
A: I think one of the common misconceptions is a lot of companies don’t want to outsource through a 3PL because they like to handle things in-house and they think they can do it better. And the problem is there’s so many moving parts in shipping and transportation and logistics today that if you’re selling widgets, you should be focused on selling widgets and that’s it. The transportation side is a whole other arena.
And 20, 30 years ago when you shipped something, it had a class associated with it. There was a cost associated with it. It was fairly easy to just ship it. You knew what your cost was. Today, most freight is moving to a density-based platform, kind of like the parcel companies that do a dim weight, meaning the pounds per cubic foot of the actual shipment you’re sending in the LTL world today will now determine your class which determines your cost.
If you shipped desks, for example, 30 years ago and they were just class 70, you knew your cost was fixed, essentially. Well, now, this is a density-based item and what you used to ship in class 70 may be going in class 300. Well, the basis for class and cost is class 100 was a table, class 50 is 50% of 100. Class 300 would be 300% of class 100. So we looked at it from that standpoint, and you think, “Today, well, I used to ship a desk in class 70 and now it’s class 300.” You think, “Wow, my rates are 330%. The problem is now carriers have had the ability to fluctuate those costs and class 300 isn’t necessarily 300% of class 100. It may be 600% of class 100.
So when customers start shipping products, and all of a sudden the NMFTA [National Motor Freight Traffic Association], which changes different products every quarter, makes an announcement that desks, which used to be class 70, are now density-based and now you’ve been shipping desks for 30 years at class 70. Now, they can be anywhere from class 100 to 500 based on the pounds per cubic foot of how you ship it. That is a huge change in how people have done business.
Q: What’s next in the transport and logistics field that you think that business owners might want to keep their eye out for?
A: There was the massive change last month where these ELDs [electronic logging devices] went into place. Every truckload carrier in the past could do paper logs and they could drive 800 miles a day. And as long as they had their logs clean, they were OK. The problem was long-haul truckers, for years, have been falsifying those documents. So, I think, the federal government stepped in and said, “From now on, electronic logs are required.” So now you can’t cheat and you can’t drive extra hours and extra miles because it’s all tracked through an electronic log and you used to be able to drive 800 miles a day and they reduced it to 600 miles a day.
So what it did, there was a huge trickle-down effect. A bunch of carriers didn’t get it done in time so they’re not on the road anymore. So there’s less trucks on the road but the freight is still growing with the way the economy is.
So a lot of that freight got pushed down to LTL [less than load], and the LTL carriers were prepared for it so they figured they’re going to get a bunch of long freight that’s not great and easy to handle. So they started changing all their pricing to reflect what the freight they thought was going to come down for the truckload market that they didn’t want so then basically made it less having pages to ship at LTL, even though that a lot of customers knew there was going to be a truck shortage and costs were going to go up substantially in the truckload market.
For example, I had a customer…I was at a trade show in Vegas in January and the customer said they were shipping flatbeds across the country for about $4,800 and now it’s $6,500, and they are no longer competitive. And it’s a problem because there’s not enough trucks, there’s too much freight, the electronic logs. And the trickle down was you used to be able to get across the country in like 4 days, but now that it’s 200 miles less a day, you’re taking 5 and 6 days to get across the country.
So then that drops down to rail, because rail used to be seven or eight days across the country and truck was four days, so everybody used trucks because rail took too long. But now rail is always seven or eight and the truck is five or six, so for an extra day or two, you might be able to save $2,000 per shipment. All these things have a trickle down on everything. I just think it’s going to continue to tighten up because there’s more and more culpability on driving and electronic logs and things like that. It’s just going to get tighter and tighter. It’s going to get harder for shippers to manage this process on their own and they’re going to need companies like mine even more down the road.