The company has been working in the trucking business for more thanfifty years. John Powell, president and originator, faces a challengeof decoding about future. The challengeresonates to making the correct strategic alternative of the company.Due to major alterations taking shape within the trucking industry,Powell is unsure if to expand his business, as a result simplifyingoperations, or resign from presidency and elect someone else to takethe position. The company has demonstrated growth in the formeryears, which makes it a suitable time to simplify and expandoperations. This means the need for the construction of an adventcentral facility, expansion of services, addition of more onlinetools to enhance the company’s competitiveness. Following thesolutions, is the probability of more customers resulting in moreventure into the Canadian/American markets.
Identifying the issue
The truck transport industry is integral to Canada’s economy. Itresults in $43 billion sales every year, in addition to hiring400,000 persons. This means that 40% of the for-hire sector in Canadais filled by the transportation industry. It comprises of truckload,which is the full load amid two locations and less than load,referring to pick up from several regions, reorganization anddelivering to clients. Conventionally, the less than load have ahigher charge. The for-hire truck business has been experiencingmajor alterations, which have a negative impact on PowellLogistics Inc (Cauterman 1). The increasing competition as wellas escalating expenses in the business is resulting in poorperformance for the company. It is apparent in the company’s 2007financial statements, which have been compared to those of the formeryear. As a result, John Powell is tasked with the job of ensuringthat he comes up with a strategy for securing the prospect success ofhis company as he plans on expanding operations. As the president,others look up to him and the decisions that he makes concerningPowell’s future.
Based on the case study, it is apparent that the trucking industry isfacing a number of challenges.
A rise in fuel cost in the past years has been resulting in moreoperational expenses and fuel surcharges. The outcome has been anextreme rise in the operation expenses among all carriers.
The increase in value of the Canadian dollar against the Americandollar had an impact on the cost advantage of Canada’s manufacturedproducts, as a result reducing the movement of goods amid US andCanada.
There is a shortage of competent truckers, which is worsened by therate of aging personnel. Apart from aging personnel, the work is nolonger popular, which will make it almost impossible to get youngcompetent drivers. It is foreshadowed that the scarcity of driverswill result in a direct impact on what drivers demand as salaries,resulting in enhanced operating expenses.
The trucking industry is highly regulated by the American andCanadian administrations. The regulations are apparent duringtransportation in form of stringent security examinations, as well asregulations on what weight and goods to carry. In addition, thecompany must adhere to rules on cross-border trading according toNAFTA. Failure to meet the regulations costs Powell financially andtime.
Competitively, the clients have numerous available alternatives totransport their goods. As a result, the transportation business isgreatly competitive. The major competitor, “TravelersTransportation Services” provides lesser prices, as well as havingadditional value services like minimal expedited services.
An internal analysis of the company demonstrates that theirmarketing is personalized, accessible and use of online platformsminimizes customer relations. In operations, Powell strengths derivefrom using the less than load, which charges higher due to manypickup and delivery locations, the company has an improved dispatchstructure, as well as satellite tracking structure. The weaknesses inoperations include the need to drive back and forth due to less thanload, has to pay employees overtime and increase personnel by double.
There are a number of alternatives available for “PowellLogistics”.
One is to progress with the existing operations. The advantages arethat it is already in progress and making income, which results inmore sales. Disadvantages are the president will not retire, andcosts will progress to increase.
Second, involves expanding business. The current interest coverage islikely to enhance due to an increase in interest rate, as well asearning. The benefits and services become affordable, generate incomefor personnel and reduce spending saving $60,000 every year on wages.Demerits are that Powell does not resign, and possibility ofrecession. Expanding operations will cost the company more to investin land and building another central construction to cater for PowellLogistics Inc actions. The investment is approximately $10million. It is not possible to spend such a huge amount, especiallyat a period when the gains and income for the company has beendropping.
Third, is allowing the children to take over the business. Theearnings and name will remain in the family, possible to ensureproper company associations and Powell may resign. The peril is thepossibility the president’s children will be incapable of managingthe business as effectively, expenses stagnate and possible familyproblems.
Last, is selling the business. The advantage of this alternative isthat Powell will get the benefits as long as the company progressesto become successful after completion of sale. It also relieves himthe stress arising from emerging issues in trucking and he can enjoya peaceful retirement. The problem is that it is not possible tosettle on the most appropriate time for selling. It can beimmediately or following expansion. After sale, Powell will becompelled to wait for almost two years get benefits. The amount ofsale is too high, which may result in no potential buyers. Thechildren may be unable to agree with the father over selling a familybusiness.
The most appropriate recommendation involves simplification of theoperations and expansion of Powell Logistics Inc. Because ofthe increase in sales, the company has resorted to renting a bigwarehouse facility based at Toronto (Cauterman 4). The facility istwo miles from the main office. The main office is also locatedwithin a rented premise, and holds a majority of personnel working inadministration, in addition to truck repair centers. After concludingtheir shifts, it was expected that the drivers would empty thecomponents of their trucks and store them in the rented warehouse.The drivers would then take the trucks back to the main office foreveryday repair and maintenance. The following morning, the driverswould get the trucks from the main office and back to the warehouseto commence their shifts. Every driver spent almost 30 minutes dailyin addition to the regular shift, hence compelling the company payfor overtime. Constructing a central place and doing away with rentedfacilities will reduce the labor and travel expenses amid the presentlocations. It will also do away with duplicate payments toadministrative personnel from the main office and warehouse. As aresult, the company is able to save $60,000 every year. Additionalrecommendations involve providing advent value added services, whichare common among competitors, which can be done regularly. Inaddition is the need to introduce online tools through whichcustomers can place quotes and order.
Implementing the Recommendation
Since John Powell is the president, he ought to be directing theplanning and make possible the construction of the proposed office.The president will work together with the VP Operations Executive. Toachieve any success from the recommendation then the planning oughtto start as soon as possible and last for a few months. After the newlocation has been identified and its construction complete,administrative roles should be assigned to Sarah Powell. Her dutieswill involve determining individuals that have duplicate positions.This should take a period of less than two month, to ensure that thecompany does on incur extra expenses. John and Frank should proceedwith the decision of implementing value addition services. Thisservices will help the company is remaining ahead of competitors. Inorder for the services to become public and generate profits, it isnecessary for the marketing team to work towards the marketing of thenew services.
Cauterman, Sean. Powel Logistics Inc. Richard Ivey School ofBusiness, (2015): 1-8.