THE timing of the move could have been better. In fact, Southwest Trailers & Equipment president Mike Dye will go so far as to say the experience turned out to be “scary.”
Last August, the company abandoned its 33-year-old facility in Oklahoma City and moved into a new 70,564-sq-ft building, more than doubling the space for a company that says it already had been the largest in Oklahoma. Twenty-six days later, four airplanes crashed into the World Trade Center towers, the Pentagon, and a field in western Pennsylvania, and the world stopped.
Dye had surmised that the trailer/truck equipment industry had bottomed out before that. But guess what? The next 45 days were the worst he had ever seen.
“Business basically came to a standstill,” he says.
Dye was sitting in a $2.6 million building on $1.7 million worth of prime real estate in the western suburbs of Oklahoma City. The obvious question: Now what?
“We probably should have made the move two years prior to when we did,” he says. “But you're throwing a dart on something like this anyway.”
To deal with the aftermath of 9/11 in an already unsteady economy, Dye reduced the company's inventory to reduce its total cost. He held weekly management meetings in which he stressed the need to sell off aged inventory, even if it was done at a loss. He stressed inventory turns and the importance of delivering whatever the customer wanted and whenever he wanted it.
“You get lean and mean,” he says, “and you work harder than you ever have in your life. I know that I have worked harder — and everybody here has — in the last 1½ years than in the previous 10.
“The economy is going to come back. And when it does, we're well-positioned. Typically, the trailer industry is on a five-year cycle — three good years, one so-so year and one bad year, and then it will be back for three good years again. The period from 1991-99 … we'd never seen anything like that. It was, ‘Let the good times roll.’ You kind of get complacent. You do well in spite of yourself.
“Well, from mid-2000 until now, we're definitely in a downturn. It makes you appreciate the good times a lot more. I have sales people who had never experienced a downturn. I kept telling them, ‘Guys, this is not reality. Eventually, it's going to turn.’ And well, it did. But it will come back. We're still profitable. We're not to the margins we had grown accustomed to and business is not back to traditional levels yet, but it's not the gloom and doom it could've been.”
Truck equipment sales robust
Just in the period since November, Southwest Trailers is ahead of its revenue totals at the old facility. Although the quantity of used trailers is the same, the dollar volume is up 10%. With new trailers, the quantity is up 10% and the dollar volume up 33% (due to Southwest selling more higher-priced units such as tanks, dumps, and reefers, as opposed to platforms). Parts and service sales are about the same, but the truck-equipment phase of the business is booming, with a “robust” boost of 25%.
“It's always amazed me,” Dye says of the truck-equipment segment. “It's always been a good product for us. I don't completely understand it. You think if people stop buying new trailers, they're going to stop buying trucks — heavy-duty pickups up to dumps. For some reason, those are going great for us. There hasn't been a dropoff. I thought it would drop off like everything else, but it didn't. It increased.”
He believes part of the consistency is due to the fact that Southwest Trailers is now in its 17th consecutive year in its state contract for dump bodies. The state of Oklahoma typically will order 50 dump bodies a year. The counties and municipalities have attached tag-along orders, increasing that order to about 75 units. With state revenues decreasing, Dye expects the order to decline slightly.
Truck equipment manager Terry Olson said the addition of Adrian Steel Co products has boosted business, with Southwest Trailers selling a lot of toolboxes and interior-van packages.
“They're a good company to work with,” he says. “They bend over backwards to do whatever they need to help your business. They put enough money into the deal to the point where we make money out of it. We're the only Adrian distributor in this part of the state. We've tried to go after other manufacturers in that type of business.”
Dye believes his truck-equipment business is going to get even more lucrative when his company begins operating a Ford pool in September. The approval letter has been received, the inter-creditor agreements are being processed, and truck inventory has been ordered.
“It just opens up another avenue we haven't been able to touch,” Dye says. “It gets us on a list for Ford heavy-duty pickup dealers throughout our region (Oklahoma, Kansas, Arkansas, Missouri, Colorado, and New Mexico). There's a Web site that identifies all Ford pool locations and what the inventory is. So if there is a truck dealer in the region that needs a particular truck — and that truck will be in our inventory hopefully — then the dealership doesn't have to have its own floor plan and put that inventory on that floor plan. They can pull from our inventory. But before that truck leaves here, we get to install a piece of truck equipment.
“It is not something that's going to substantially increase our truck equipment sales, but it will definitely have an impact — probably a 10-15% increase in truck equipment sales. We're doing $2.5 million a year now, and we certainly hope to do $2.75 million or higher. We hope to rig up an additional 200 trucks a year. Typically, it'll be a service body or a contractor's body.”
Downsides? He sees very few, unless truck sales “just fall flat on their face.”
“We're going to go into it conservatively on the front end to see how it works,” he says. “We have spoken with several Ford pools and all have basically said, ‘Don't go in thinking you're going to get rich. But it is a very nice supplement to what you're already doing. If you get the opportunity to be a pool, certainly take advantage of it.’
“The only downside is they have a free-floor plan period — anything from 90 to 120 days. If by chance you order a truck and the specs are an oddball and there isn't a need for it, you could end up having floor-plan charges on it after a period of time. But we're certainly not going to do that. I hope we can keep inventory to the level where it turns within our time frame and we never do have an interest charge.”
Says Olson, “If you don't have a pool, you'll be left out. That's just the way it is.”
Time for a change
In 1990, Dye transferred from Fruehauf's Memphis location to its Oklahoma City facility. Three years later, he bought it from Fruehauf and named it Southwest Trailers & Equipment. The growth was steady and impressive in the 32,000-sq-ft facility on a seven-acre spread.
It started to occur to Dye sometime in 1998 that Southwest Trailers had outgrown its facility.
“We had so much repair work that our yard was filling up,” he says. “It was especially bad in the summertime. Our yard was so full of repair jobs that we didn't have a place to park them. We'd get one repair done and two more would come in. We literally were running out of space to operate. We had more business than we could handle, and you never want to turn away business. We couldn't hire more people because we'd have them working on top of each other.”
In 1999, Dye went to Oklahoma City's planners to research the city's growth pattern. He also used a map to plot the customer base and determine a location that would be convenient for them. Both compasses pointed west.
Their facility was located on Interstate 40 at MacArthur Blvd, about five miles west of downtown. When it was built in 1967, it was the only facility in the three-mile area west of May Ave. I-40 didn't even reach their property.
By the late 1990s, Southwest Trailers had superb visibility from I-40, but a new Wal-Mart SuperCenter was causing some severe traffic congestion that in turn was making it very difficult for tractor-trailer drivers to navigate their way into the facility.
Dye found an 18-acre parcel of land about four miles west of Southwest's facility. It was near the intersection of I-40 and Morgan Rd, where four truck stops were located.
Dye enlisted the service of Fitzgerald & Associates on the design of an L-shaped building. Pinion Construction — which had built the Freightliner and Thermo King facilities in Oklahoma City, and Freightliner facilities in Tulsa and Fort Worth — broke ground in August 2000, only to be shut down for 40 days in the winter because of two large snowstorms two weeks apart.
Last August, less than one week before the scheduled move-in, Dye found out that the city had issued only two of the 11 necessary permits — contrary to the assurances of the subcontractors that everything was taken care of. Between Friday and Monday, Dye was able to obtain those nine permits, delaying the opening by just one day.
Big difference
Nearly a year later, Dye has a difficult time believing the difference between the two facilities.
“It seems too big,” he says with a laugh. “It's funny. When we moved in here and went through that one-week period when we were completely finishing the move-out, the old facility seemed so small. It didn't seem that small when we were in there. Now that we're in this big place, we don't know how we did it before.
“We have more space in every regard — shop, parts warehouse, office. We had some people crammed into spaces that were almost broom closets. The only conference room we had was turned into an office. We have breathing room, elbow room.”
Says Olson, “This facility is absolutely marvelous. I never dreamed it was going to be this great.”
The results:
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24 bays instead of 17, and they are 16' wide instead of 12' and 70' long instead of 65', with a wider center walkway and 160' door to door, compared to 135'.
“When that old building was built, 40' trailers were the longest on the market,” says service manager L J Scarberry, who has two foreman supervising 24 mechanics. “Now, it's 53' and even 57' in Oklahoma. That's another thing we took into consideration. 57' is probably the next industry length.”
“We needed more bays so we could grow, so we could have more mechanics to handle the work load,” says Dye, who adds that they may have three additional bays by the spring. “We were more diversified than your typical trailer sales facility. We do a tremendous amount of truck equipment, whether it's truck rig-ups, putting bodies and hydraulics on trucks, or shelving systems. In the old place, we had only four bays designated for that. Here, we have seven.”
Five of the bays are designated for tank repairs in the ASME-certified tank-repair facility, one of just two in Oklahoma City. They are ventilated bays that remove the smoke and gas during welding, and they can be reversed to keep air flow going through the tanks that are being worked on.
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A separate paint facility and four-bay steam rack, as opposed to two bays.
“We can prep for paint or post-paint detail and still be inside the building,” Dye says. “It's night-and-day difference.”
The paint booth is 85' long, which Dye initially considered to be “overkill.” He has since changed his mind.
“We have a lot of oil-field companies in Oklahoma, and some of their equipment is longer than your typical trailer,” he says. “As it turns out, we're going to do some paint jobs on some 70' trailers we couldn't have fit in our old booth and wouldn't have fit in a 65' booth, so it worked out well.”
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Two frame-straightening bays, as opposed to one.
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Two frame-rack bays, as opposed to one.
“With just one, we had a backlog and had trailers out on the yard waiting to get on the frame rack,” Dye says. “It's worked out extremely well with two. It's rare that we don't have two trailers on the frame racks on any given day.”
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The addition of a five-ton Demag bridge crane.
“It's been a tremendous help,” he says. “In the old days, we had to bring a forklift in and set the body on the truck frame. With the bridge crane, we can bring a body in and we can do two short trucks conceivably within one bay. We don't have to wait if someone is using a forklift. It's nice getting raw materials into the racks with the crane. One guy can load and unload a whole rack.”
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Increasing transient work from the nearby truck stops servicing cross-country drivers.
“We sent a packet out to 53 national fleets and their maintenance directors, letting them know we want to be their central service center,” Dye says. “We've seen some business from those fleets.
“When guys go in to the truck stops and have a problem and call the office and it's closed, who do they see? Well, Southwest Trailers is right there. We're also on a punch board on some truck stops, so they can direct-dial here.”
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There is inside storage for parts.
“We used to store a lot of our parts outside in the weather, about one-third of our inventory — all of our wheels, some of our flooring, support legs, rails, fifth wheels, winches,” Dye says. “We'd have to sand the rust off and repaint them. Now, all of our components are under roof. The only thing now in the yard is the trailer inventory, customer repairs or truck bodies.”
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The crushed-asphalt surface surrounding the facility is nearly dust-free, and they have concrete pads for the trailer support legs.
“Our old facility had a gravel yard,” he says. “Over the years, gravel turns to dust, and that was blowing into the building. This property is draining better. We don't have the mud we had.”
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There is a loading dock, as opposed to the old setup where trucks would be unloaded by forklift.
Diversified operations
Dye's company is a full-service parts and sales outlet for trailers and truck equipment, representing Wabash, Fruehauf, Clement, Travis, Landoll, Polar, Benson, and Holden trailers. Truck-equipment lines include Galion, Supreme, Omaha Standard, Adrian, Maxon, Warren, and Valk.
But the company does not stop there. Since 1988, Southwest Trailers has produced equipment for Remington Park, a horse-race track on Oklahoma City, and other tracks in the US, Hong Kong and Australia. The orders range from roller harrows to water-tank trucks to horse ambulances.
Southwest Trailers also is doing work for the Navy, putting side kits on armored personnel carriers.
Dye says that the company has been sustained during the economic downturn by increased service work, noting that when customers stop buying trailers, they typically start bringing their old ones in for repairs.
He says his largest trailer inventory is in dry-freight van sales, which tend to be part of a boom-and-bust cycle.
“When it's going well, lead times are over a year, and you end up ordering for a year from now,” he says. “When it stops, it stops overnight, and people just stop buying. You've got these babies sitting on your floor plan and the meter is running. It gets frustrating. It's not that dramatic in platform sales or dump sales or tank sales. You can't get them or you can't rid of them — that's kind of how it is in van sales. When it comes back, the guys out there want to get complete equipment utilization, and they want to do that for six months before they start buying new equipment.”
That's not a problem at their Tulsa facility, which accounts for 20% of the company's business while serving strictly as a parts and service operation.
Dye says that during the downturn, the company has been more conscious of soliciting service repairs, wreck repairs, and preventive maintenance.
“The shop is what makes this animal go,” he says. “The service department carries the biggest burden. At any dealership, service is the horse or the engine that makes it run. Everybody else contributes. If we were strictly a trailer dealer with no shop and parts department, I'd be scared to death. I don't know how they make it — and a lot of them aren't making it.
Trailer sales
“Trailer sales, by dollar volume, are No. 1. That's because trailers are an expensive item. You sell a few of those and all of a sudden, there's quite a bit of dollar volume. Who generates margins? Service, then parts, then truck equipment, and then trailers. You sell trailers to perpetuate the rest of your business. It's kind of a trickle-down thing. As diversified as we are, when one falls off, the others pick up.”
Dye says he is much more conscious of what he orders for inventory.
“No manufacturer has a lead time of more than six weeks now, to where vans, as ridiculous as it sounds, were at one point 2½ years out,” he says. “Platforms were a year out. Dumps got as much as four months out. When that happens, you're just forced to order and you get it and hope the economy is still going at that point. Today, we don't order anything for stock unless it's an item that traditionally sells. We'll keep one in the pipeline and when that sells, we'll order another one, where in the past you might order four of them and have them spread out.”
Dye can talk about products and inventory, but in the end, he knows it all comes down to employees. Keeping them is a priority. That's how Southwest Trailers has maintained its stability and reputation.
“I'm very thankful we have the experience we have,” Dye says. “I've got a lot of guys who've been in the industry for 45-plus years. It's the people who make this thing go. It's certainly nothing I've done or any leadership I've provided. Everybody's been around and been through the good times and the bad.”