John Paugh is used to looking for new truck drivers. The president and CEO of Carter Logistics LLC employs 1,150 people in six states, and 800 of those employees are truck drivers. Out of that group, Paugh expects to replace 240 drivers each year.
It sounds like a high rate of turnover, but statistically speaking, Paugh is doing much better at retaining truck drivers than the rest of the industry.
The most recent data from the American Trucking Association shows driver turnover at large truckload fleets — those with more than $30 million in annual revenue, which includes Carter — averaged 96 percent for all of 2013, down 2 percent from the previous year. And that’s a drastic improvement over the all-time high of 130 percent turnover in 2005.
Carter is significantly better the industry average at just under 30 percent turnover, but even at that rate, he’s still looking at a lot of change.
“Internally, when you get to the dock or dispatching, turnover is not that big of an issue,” Paugh says. “But for the drivers themselves, there’s a big shortage nationally.”
He says the high turnover rate in the industry makes it very easy for a truck driver who’s upset about something to switch.
“You have all your competitors, and myself included, that give drivers sign-on bonuses. So if an individual becomes upset or dissatisfied with your company, he can have a job the same day and probably get a sign-on bonus for switching.”
It’s a lot easier to keep a driver than to hire a new one, Carter says, which is why the company focuses on reducing its turnover.
“We spend a lot of time on (recruiting) and a lot of money advertising,” Paugh says. “It’s a problem for the industry, there’s no question. And honestly, I think it’s probably going to get worse before it gets better. The average age of an over-the-road truck driver is in the late 40s.
It just doesn’t seem like we’ve got younger people coming into the industry, so as they retire, the problem just gets bigger.”
 
Focus on training
Carter has invested in a strong training program. Because logistics companies are fighting over the same pool of drivers, training new drivers is key to replacing those who leave.
“We train more than 100 people a year,” Paugh says.
Carter has a program worked out with Workforce One, the state’s workforce development entity, to fund training the company then matches for tuition to send drivers to school. Trainees are paired with an over-the-road trainer for anywhere from six to 12 weeks after they get out of school to ensure they follow proper safety requirements and can execute competently on the job.
Many of its driver trainees and newly licensed drivers come from SAGE Truck Driving School, which is part of Ivy Tech Community College of Indiana.
“Ivy Tech has done a great job working with the state of Indiana and Workforce One and ourselves to try to help us get funds to train those individuals. And they seem to do a really good job,” Paugh says.
The company also has weekly orientations, which run three days.
“When you’re bringing that many new people in, you just have to do it a lot more often than monthly,” Paugh says.
“If you’ve got empty trucks, you don’t want to wait a month to fill them.”
He says he tries to make a point to go to new driver orientation every week and meet the new individuals because “the driver is absolutely key. I mean, we cannot do any of the rest of our job without a driver.”
While it’s easier to meet with new employees at the company’s home office in Anderson, Indiana, where 700 of its total employees work, it’s not as easy to meet the rest of his staff.
Carter has a facility in Laredo, Texas; Andersonville, Tennessee; Paragould, Arkansas; and Romulus, Michigan, as well as a large facility in Vandalia, Ohio, where it has just fewer than 200 employees.
Despite the constant challenge of replacing truck drivers, the company is experiencing a 15 percent annual growth rate.
“We’re 90 percent automotive and the auto industry seems to have recovered,” Paugh says. “The numbers of cars being built in North America is equal to what it was back before ’07 before we had the adjustment.
“In fact, North America has actually become an exporter of cars for the first time. Mexico is building about 3 million cars a year and only going to consume around 1 million of those, so we’re actually shipping automobiles offshore for the first time.”
But because Carter’s business is mostly automotive, and automotive operates under very lean processes, there are additional challenges that can only be met with training.
 
Reducing errors
Carter has also found that errors in labeling meant materials were being shipped to the wrong location.
“We pick up at multiple destinations for multiple plants, and we put that material on the same truck,” Paugh says. “So when it gets to our dock, we may have six different plants getting material from that same supplier. It’s very important that it’s labeled correctly and that we get it split apart. We may end up sending one plant’s material to the wrong plant if it’s not labeled correctly.”
So the company adopted a scanning process. Outbound material is scanned when it’s received and when it is put on the trailer. If it doesn’t match that manifest, the load can’t be closed out to ship it, which has eliminated a lot of errors.
“We build a manifest for the outbound trailer and it lists exactly how many pallets are supposed to be on there and who they’re supposed to be from,” Paugh says.
“So if you have a shortage or an overage it basically red lights and won’t let you complete that load.”
 
Admitting to mistakes
“We’re a logistics company, so it’s pretty common to have miss-ships and errors. Our biggest challenge is getting the people to accept that we have made a mistake and get the attention of the shipper or the ultimate person who’s going to receive that material and letting them know as early as possible. Some people just don’t want to admit when they’re wrong,” Paugh says.
Mistakes are inevitable, he says. But it’s how the employee handles them that matters.
“It’s a training issue. You just have to spend a lot of time with your people and make sure that they know how important it is,” Paugh says. “The earlier the receiver of that material knows that there’s going to be a delay, the easier it is for him to make adjustments.
“If he finds out that it’s not coming when it’s supposed to be there, then it’s too late. As soon as we know there’s been an interruption in the process, we have to alert the person that’s waiting on that material that there’s going to be a delay and then make every effort to get it there as soon as possible.”
Paugh says it doesn’t matter how good a company was yesterday. It’s what it does for its customers today.
“The biggest thing is just to admit where you’re wrong and correct the problem so you don’t make that mistake again,” Paugh says. “Don’t try to hide it or don’t try to get around the fact that you made a mistake. Step up to it, fix it, and make sure it doesn’t occur again.”
Carter’s automotive clients’ goal is to have a part appear right before their customers need it.
“Typically, they’ve only got about four hours of inventory. So the earlier they know, the farther upstream you catch that delay and let them know, you make it better for them,” he says. “You can avoid a plant or a line shut-down; it’s just very important for them to have that sort of information as soon as possible — and correct information.”
Carter services several plants four or five times a day. If the first shipment opportunity is missed, Carter can typically get it there in another two hours. Knowing that most often allows customers to make adjustments.
A lot of Carter’s customers have a lot of line changes where they build multiple parts.
“So if they know there’s going to be a delay they can delay that switchover or switch over to a different part. They can make adjustments, but they really need that information. It’s critical,” he says.
If Carter employees don’t know the ultimate destination or what’s going to be done with the inventory, they don’t realize the importance. So, employees need to understand the whole scope of the process. Making sure information is communicated and processes are understood is a training issue, he says.
“I don’t know that it’s a situation where you can find the right people as much as just training them,” Paugh says.
That training involves role-playing. Employees are shown the proper way to do something and then asked to use that training experience to execute a solution. Trainers then show them what they did right and what they did wrong.
Leads on every shift also work to correct mistakes. When mistakes are caught they use the mistake as a training tool so the employee doesn’t have the same problem again.
Carter’s ability to reduce errors and keep turnover low are not only an operational focus, but a measure of the company’s success.
“A lot of people get enamored with gross, and I don’t think that’s really the measure of a successful business. I think it’s if it’s sustainable, profitable, low employee turnover and good morale, (those) are all measures of a successful business.” •

Takeaways:

• Invest in a strong training program to give employees a good start.
• Analyze bottlenecks where errors could occur.
• Admit to your mistakes and learn be proactive.

The Paugh File:

Name: John Paugh
Title: President and CEO
Company: Carter Logistics LLC
Birthplace: Indianapolis, Indiana
Education: He earned a bachelor of science in Agriculture from Purdue University. He says he earned Purdue’s first Environmental Science degree. I was in the first graduating class, and their School of Environmental Science was in the College of Agriculture for Purdue, so my degree reads ‘B.S. in Agriculture.’
What was your first job and what did you learn from it? My first real job was working for Midland Guardian, which was a small loan company down on Washington Avenue in Indianapolis, and they made loans from $32 to $1,000. It taught me a lot about credit. It was collecting loans for people that were borrowing money for disposable goods and paying for them long after they’d used the good up. So, it taught me a lot about credit and the value of good credit, and what it’s supposed to be used for.
What’s the best business advice you’ve ever received? There are things that are worth less than nothing. I’ve looked at some businesses that look good on the surface, but when you really look deep, they’re not profitable and probably aren’t going to become profitable, and you couldn’t buy them cheap enough to make it work.
What’s your definition of business success? Well, lots of things, but obviously the perception of your peers. How your competitors look at you, I think, is a real good measure of whether you’re successful or not.
Who do you admire in business? Roger Penske. I’m fortunate enough to know Roger. Locally, one of my people I really admire is Jeff Stoops. He’s got five Freightliner stores, and he was on the Super Bowl committee. (He’s) just a real good community citizen and a great businessman.