Transervice business model has delivered 50 years of success

A personal interview with Transervice President Dennis M. Schneider

President, Transervice
As originally appeared in FleetOwner Magazine

This year marks the 50th anniversary of Transervice. Based in Lake Success, NY, the company provides dedicated contract maintenance, dedicated full-service leasing, dedicated contract carriage, dedicated material handling equipment leasing, maintenance services and freight management out of 122 local and regional facilities across North American.

Fleet Owner recently interviewed Transervice president Dennis M. Schneider about the unusual business model that has been the foundation for the company’s long and successful history as well as to talk with him about the changes and challenges facing the trucking industry today.

FO: What has made your company so successful for so long? 

Dennis Schneider: The company is extremely customer-focused. I think that is, in a nutshell, what sets us apart or at least what is distinctive about us. We don’t sell package goods and products; we are a service company. That is the function of the organization and the focus of the people who constitute the organization.

This year is our 50th year in business. There are a lot of employees who have been with us for a long time. We have a long-standing tradition at Transervice, the Employee Anniversary Club.  When someone is employed for 10 years, the individual enters the club and every five years is honored. We have had a few 40-year tenured employees and quite a few 35-year, 30-year, 25-year and 20-year veterans. Fortunately, we also have some people who have not yet celebrated their first-year anniversary because they are new to the company, which means we are continuing to grow.

I have great pride in the people who work here — their dedication, focus, dependability and expertise. When I say “here” I mean throughout the U.S., plus we have a couple of significant operations in Canada and some business in Puerto Rico; that is our geography.

There is another thing I would add in terms of how the business works—our approach is to operate from the customer’s premises and we do that for two reasons: first, we don’t want to add unnecessarily to costs for bricks and mortar but, more importantly, as a service business we want to be proximate to the customer. So, we set up a shop facility on each customer’s site or sites, put in all the shop equipment, place the inventories of parts, fluids and tires and create a turnkey operation.

We have a couple of locations out of 122 total that are off-site because there just were not facilities available on those customers’ premises. In cases like these, we will rent something that is proximate so we can get to the customer. The strong preference and the business model, however, is to operate on the customer’s site where we can become intimate with the customer and their personnel. It has been an effective way for us to transact business and provide the services customers contracted for.

FO: You offer your customers full financial disclosure, full transparency, plus something you call “gain sharing.” How does that work?

Schneider: Everyone likes to say that they are partners with their customers, but we truly are.  For starters, when we are fortunate enough to be invited to present to a prospective customer, the approach that we prefer is full disclosure of our financial information — whether we are presenting information about our contract maintenance or full-service leasing options or our dedicated carriage capabilities.

We share with the prospect every component of the cost [we quote]. It includes mechanics’ wages, mechanics’ benefits, shop equipment, insurance, supervision, G&A, parts, tires, fluids, refrigeration and (if it is full-service leasing) amortization. And, certainly with dedicated carriage, [it is also] the technology, logistics and routing, and things of that nature. And we also include our fee or what we hope to earn. There isn’t a company within our industry, in my knowledge, which shares that level of detail and certainly not what its expected earnings are. Credibility is inherent in this transparent approach.

Since we also function as almost a subdivision to our customers, we are very comfortable sharing information with them.  We set up a separate ‘division’ for each account; we have a DBA for every customer contract for the company.

The customer gets a periodic operating statement, a P&L statement. When I say “periodic” we do it monthly in the grocery industry, for instance, where we have a significant amount of business. No matter how often the customer wants to see a statement or how the customer wants that operating statement to look, whatever detail they want to see, that is what we deliver. It is never “cookie cutter.” We listen to the customers’ expectations, interests and preferences and we set up a separate division with separate accounting records. We also entitle customers to come in and audit those accounting records if they so choose.

At the end of the year, whether it is calendar or fiscal for that particular contract, we guarantee [our quoted rate]. If we earn less than we projected, we earn less. If we earn more, we offer what we call a “gain share” and we share that extra revenue equally with the customer. The only modifications are for miles driven or reefer hours (if it is a refrigeration account) because maintenance expenses and consumables are not labor, but a function of the miles driven and/or the reefer hours. Otherwise, we guarantee the quoted cost.

We don’t structure our rates so that the customer is going to almost automatically get a credit or a bonus at the end of the year because then we would not be competitive. We structure our rates based on what we think is necessary and appropriate for what we are going to provide and the services that are required. In many cases, though, through operating efficiencies, we can reduce expenses and then there is a gain share. We have numerous customers who get money back. We have one rather significant account that gets back hundreds of thousands of dollars a year. Smaller accounts, of course, don’t have that upside potential.

I tell prospective customers to presume that they are not going to get a gain share, but to know that we will work together to try to achieve one. They should assess the opportunity based upon our service capabilities and the fact that the cost structure we are quoting we guarantee. Because of full disclosure, there are no hidden costs. We don’t have any add-ons; we don’t have adjustments; the cost is the cost. That is what transparency is.

As a result, our credibility with our customers is rather special. We don’t always sign business, but when we do, we hold customers for a long time. We have two customers now that are entering their 39th year of doing business with us. One is a nationally known beverage company; the other is a household name in the drug industry.

FO: You have been in this industry a long time. Do you think trucking and logistics has generally improved over the years?  Are there some things that you wish still worked as they used to do?

Schneider: I think, by and large, what has taken place is very positive. Equipment manufacturing, for instance, has improved dramatically. I think also that the enhancements to safety are leaps and bounds from where they were years ago in terms of operating the vehicle and in terms of improving the drivers’ well-being and hopefully also that of the public. There have been any number of [vehicle] enhancements — inside-cab cameras (we have a number of those in our transportation operations that are fully equipped in every tractor cab, inside and external camera views) lane-departure systems, and other accident abatement systems. All of these are wonderful things.

I don’t know where the turning point was, but 25-30 years ago there was also a different perspective on how you disposed of old batteries, filters, oil and used commodities — hazardous materials and otherwise. EPA and OSHA regulations have made very significant improvements in this regard.

On the less positive side, some of the latest engine developments have been problematic, I think for the whole industry, in terms of DEF and [particulate filter] regeneration. I don’t know that I want to turn that back necessarily. I care greatly about the environment, but they are costly solutions and most players in the industry have had some hard lessons to learn about what the maintenance expenses are for these new systems.

The only other thing that I wish was a little different is that I think the workforce is more transient now than it was some years ago. Maybe it is just because of the technician and driver shortages, which are significant nationwide and in Canada as well. It may also be because of the high employment level generally and the fact that fewer people are coming into the industry.  We are fortunate to have far less employee turnover than the industry average, but I would still like to see a less “transient” mentality overall and more interest in joining a company from the start to make a career with that company.

FO: Do you think there are things the trucking industry could be doing to help address the technician and driver shortages? Or is this a problem that must be dealt with on a company-by-company basis?

Schneider: This is obviously a very critical question for all of us who participate in the industry, regardless of what services we provide. I don’t know that the industry is motivated to work as a cohesive unit on this, however, because I think most companies look at their skilled workers as an important competitive advantage. That said, I think organized labor and industry organizations could do more in terms of marketing jobs within the trucking industry as good career choices.

It is kind of ironic to me that a truck or tractor driver can make a very good living today and a technician can make a very good living today — both with very meaningful benefit packages [and yet we aren’t attracting the people we need.] Certainly, in the technician area the job is not as physically demanding as it was many years ago.

Technicians need a better technology/electronics background today, which can be challenging to people who have been in the industry 30-plus years, but I think it falls to each company to provide that training.

Recruitment for us, until about four and a half years ago, was on a more localized and regional basis. Then we established a recruitment department with people who are extremely skilled in this regard. Thank goodness we went that route. It is a buyer’s market now and there are lots of opportunities for an individual to choose among. Today, we offer signing bonuses and we have also reduced some of the entry-level requirements that we used to have.

We had very, very stringent requirements, particularly for drivers. We wouldn’t consider someone who did not satisfy all of them. We still have requirements, but they are somewhat less stringent than they were three years ago because that is just the practical approach. We will hire people now with less experience but plenty of aptitude. They are road tested and then we will train them. It is an expense to us, but in a few months, we have someone who has been trained in an operation and is skilled. It is an investment for the future that we would not have had to make a few years ago.

When it comes to technicians, we’ve made presentations at diesel tech schools and we have talked to administrators. I think working with technical schools to find technicians is an avenue, but the primary challenge is that hiring someone with theoretical knowledge, aptitude and attitude is wonderful, but we are still talking about someone who is inexperienced, and you have to have a maintenance operation that can absorb somebody with a lack of experience. For instance, if you have a two-or three-person shop, the new hire would have to be on his own shift, and that might not be affordable. If you have a six- to eight-person shop and you can embed the new-hire with a more senior person who is really a wonderful teacher and enjoys doing that, it can be a great environment for providing necessary on-the-job experience to somebody.  And we can sometimes offer that.

It is not the solution, though, because I do not think there is a single solution. It is great to hire inexperienced technicians and groom them, but it will take two to three years to get them to the right place and if you don’t have the luxury of two to three years, it is not viable.

This training challenge is not temporary. It is very real and very pervasive throughout the industry. Sometimes if you are contending with something that is problematic and painful to your business you need to be objective and ask, “What are we doing wrong? Can we do something differently?”  We need to continue to ask tough questions to address this issue.

FO: Is there a plus side to these challenges — a silver lining?

Schneider:  Yes, there is. From a sales standpoint, your resources, your capabilities, become meaningful and valid selling points for the customer prospects you are calling on. Potential customers can see that they are likely to be more successful because of the resources you can leverage on their behalf.  In the case of Transervice, we are talking about the monies we have committed and the experience we have assembled for solving the challenges customers have—or at least helping them to do so.

Very often challenges are really your opportunities if you can find the means to address them, perhaps even master them. The fact is if there weren’t problems and challenges our customers would not need us. Finding solutions is why the customer sought you out, why they contracted with you and why, if you are fortunate enough, you retain their business.