WHAT do you do with high-volume production lines in a low-volume market?
Dry freight van trailer manufacturers are prone to have some very good years. Historically, they produce roughly two of every three trailers built in North America. Production numbers can be very impressive in the years when the market is strong.
But when the market softens (a euphemism for crashes) as it does periodically, what happens to the production lines that are geared for boom times?
Wabash National believes the answer to that question is to diversify. The company that built a reputation for cranking out dry freight vans by the thousands has decided that there can be safety in numbers — small numbers. Niche markets can offer a valuable cushion when main markets fall.
The Lafayette, Indiana, trailer manufacturer has been executing a multi-year plan to make itself less vulnerable to the swings of the trailer market. The idea is to remain true to its base while building a presence in markets that have better stability and solid profit margins.
“The changes we have been making are part of a five-year plan,” says Dick Giromini, Wabash president and CEO. “At the core of it is the need for us to diversify our business. We set a goal to grow through diversification.”
The first step was to diversify the markets and applications for DuraPlate, the Lafayette-produced composite panel that fueled much of the company's success in building thin-wall van trailers. The company began thinking of ways to use the material outside the trucking industry. This effort is being conducted by Wabash Composites, a new name for the effort to expand the brand to applications such as emergency shelters, mobile offices, and storage structures, along with truck-related products such as truck bodies and aerodynamic devices.
Another diversification step was to get into the energy business. Wabash started its Energy and Environmental Solutions business unit to serve this market. The initial effort Wabash has taken in this area is to develop and market a steel frac tank to service the growing fracturing technology used to free trapped petroleum and/or natural gas deposits so that they can be pumped to the surface.
“This product is not the high-volume trailer application that we are used to,” Giromini says. “But it does provide us some cushion in a downturn, and good margins.”
Wabash also targeted the energy market for another new product — a carbon steel vacuum tank trailer. This is another product that does not necessarily follow the ebb and flow of the dry-freight trailer market. And while it, too, is not a product that zooms quickly down an assembly line, it is one that can be produced profitably.
The biggest move, however, was the company's recent acquisition of Walker Group Holdings earlier this year. The $360 million purchase gives Wabash an instant presence in the tank market, with established brands such as Walker Stainless, Brenner Tank, Bulk Tank International, and Garsite/Progress.
“Walker met all of our criteria for diversification,” Giromini says. “They are in the trailer business, but their markets are completely different than ours. They sell to the aviation industry, the military, dairy, and other markets. With all the markets Walker serves, it's unlikely that all will be down at the same time — which makes business less cyclical. The clincher for us was the cultural fit. They really value their customers and their associates.”
In spite of acquiring a tank trailer manufacturer, Wabash has begun manufacturing tank trailers in Lafayette where it manufactures dry-freight vans.
“We already had the line set up when we acquired Walker,” Giromini explains. “Plus, Walker is set up to produce stainless and aluminum tank trailers. With our carbon steel tank trailers, we can offer another option to customers who haul water.”
Carving out space
So where does Wabash manufacture these new additions to its product line? By reassessing how to best utilize the 2-million-sq-ft of manufacturing space in Lafayette, the company was able to create space to manufacture the new products without having to expand any building.
“We applied some of the principles we learned when we developed our ‘Alpha line’ a few years ago,” Giromini says. “We are a lot more flexible as a result.”
The changes go beyond creating a space for tank trailer production. As a key part of their Lafayette Transformation Initiative in 2008, Wabash dismantled three production lines and modified two more to manufacture the trailers that had been built on the other three lines.
“We are now producing our pup trailers, high-spec vans, and our sheet-and-post vans all on the same assembly lines — Lines 1 and 2,” Giromini says. “We had been building them on separate lines — 3, 4, and 5. This is a huge transformation for us that will continue to pay dividends.”
Simulation modeling software gave management a good idea about how traffic had been flowing and how material handling could be optimized.
The goal was not simply to find space to build tank trailers. By intermixing production on Lines 1 and 2, Wabash now uses the freed up space from Lines 3, 4, and 5 as warehouse space, enabling the company to place material close to where it is used and drastically reducing material handling. (See adjacent story.)
“That has been a significant benefit to us,” Giromini says. “It's easy to focus on direct costs associated with providing customer value and to overlook the indirect costs. We were impressed with how much we were able to reduce this unnecessary motion and expense.”
New ideas coming
Wabash has made a lot of recent changes in the way the company manufactures trailers. Changes are coming, too, in the products themselves.
“We spend a lot of time asking ourselves, ‘Wouldn't it be great if…,’” Giromini says. “Some of the things we were thinking a few years ago had to be postponed when the market dropped. But that doesn't mean we have given up on them.”
For example:
- Thin headers for dry vans with roll-up doors
Dry vans equipped with swing doors offer loading advantages over trailers with traditional roll-up doors because of the space required for the door track.
“In the past 18 months, we have come up with three iterations of a thin-header design for trailers equipped with roll-up doors,” Giromini says. “The idea is to be able to offer the same door opening clearance that we have on trailers with swing doors. If we can offer the same door opening, regardless of the type of door that the customer wants, the customer could seek a wider range of loads on his return trip. Although this could reduce his overall need for trailers, it would improve the customer's operating efficiency.”
- CHMSLs for trailers
Under FMVSS 108, center high-mounted stoplights (CHMSLs) have been mandatory on cars and light trucks for years. This portion of the federal lighting safety standard, however, does not apply to trailers.
The technology now exists to provide CHMSL-type functionality using the trailer's ID lights even on a thin header of a van trailer. A trailer equipped with a CHMSL could let multiple cars — not just the car immediately behind the trailer — know that the truck driver has applied his brakes.
“Adding a CHMSL to a trailer is the right thing to do,” Giromini says. “If you improve trailer visibility, you help reduce the risk of accidents.”
