Keen-ly aware

24 April 2008

William Keen, president of Keen Transport, enjoys the business strategy of running the company. He d

William Keen, president of Keen Transport, enjoys the business strategy of running the company. He doesn't like dealing with the states and government entities on permitting, which he says is prolifer

Pretty much every day is a family reunion for the management team of Keen Transport. Siblings Bill, Betsy and Jesse Keen run the business that their father Harold Keen started in 1968. With Bill Keenat the helm as president, the trio has built the business into one of the top specialized transport companies in the US, in terms of fleet size and hauling capacity.

While the company's success can beat tributed to many factors, Keen says that staying focused on doing what they do best-hauling construction equipment - has been a key element. Plus, he and his brother and sister know the business inside and out, having toiled in almost every role in the company.

“We know how to perform the jobs that our people are performing,” he says. “All three of us have come up through the ranks.” In other words, when a subordinate comes in to talk about a particular challenge or difficulty, the Keen management team can empathize first hand because they have “been there, done that.”

Keen describes himself and his management team as hands on, with virtually no layers to peel back to reach a decision or consensus. “We have an open door policy,” he says. “None of us have secretaries and, because we know the business from the top to the bottom, we can show our employees that we care about them and that we care about a good working environment and providing good benefits for them.”

Keen Transport specializes in hauling construction equipment from where it was manufactured to its first jobsite and, from one jobsite to another and that often means coast to coast. Keen says that by developing a forte, the company has focused on a viable industry segment. In addition, a turning point in the company's operation was in the mid-1980s when, to exercise more control over the operation of their fleet, Keen started buying its own trucks and hiring its own drivers, rather than rely solely on the owner/operator trucker. Today, the company owns and operates 90% of its fleet, giving Keen Transport the ability to control its assets, build its customer base and be totally accountable to the customer.

Keen Transport's growth has followed that of the construction equipment industry, which is enjoying an unprecedented upcycle, Keen says.“We follow the highs and lows very closely.”

Last month ACT talked Keen about his company and trends and issues in the transport industry.

How do you describe the business climate - the overall state of the heavy haul and specialized transport sector?

We really feel that we are more a part of the construction equipment industry than the actual specialized transport industry. The construction equipment industry is very robust with five years of increasing sales.

The growth is being driven by housing starts, commodity prices and oil prices. The large mining equipment is extremely busy because of commodity prices worldwide - copper, gold and silver. We're moving equipment everywhere for that sector. Housing starts have been very strong throughout the US and housing starts drive a lot of the construction activity-meaning more roads, schools, retail, hospitals-all to support the new housing communities. We're seeing the rebuilding of the interstate roadway system. The synfuels plants in Canada need large mining equipment.

Construction equipment has been driving our business. The specialized industry is very strong because of plant machinery moves and government moves and the overall strength of the economy.

How have record high fuel costs affected the transport business?

Prices are obviously a concern for our customers. We, every one of us, as consumers are faced with it every day when we fill up our vehicles, but the trucking industry for the most part has implemented fuel surchargessince 1980. These surcharges compensate us for increased costs. We have not had a lot of issues with high fuel costs. Customers question it but they see it when they fill up their owncars. Industry has been able to absorb some of those costs or pass them on to the consumer. Some how these costs are being factored into the economy and being absorbed.

How does Keen Transport distinguish itself from its competitors?

One of the things, being an asset-based company, we can control our assets better, ourdrivers better. IRS regulations require that if you want to maintain independent contractors you cannot force them to take loads and you must offer them choices. We saw that as a problem because we couldn't deliver to our customers what we were promising. That's why we went to company trucks and we see this as an advantage by being able to maintain more control and deliver what we promise.

The same goes with having our own facilities. By putting in facilities that provide ancillary services, we can give our customers more than they expect.

And, finally, it's technology. We've created a lot of in-house software programs integrated with operating systems so we can provide online access for customers to track their machines whether they are in transit or in inventory or going through our support operation or in assembly. They have visibility the whole way through the pipeline.

What is the biggest challenge for Keen Transport?

The biggest challenge is balancing the needs of drivers who deserve as much quality home time as we can give them with our customers' needs with the assets to back all that up and capital to provide those assets. Drivers are in short supply these days and the commodities that we haul require - demand - a more experienced driver and, therefore, we have even a smaller market to pull from. Once we get them in the door and trained, we want to keep them. The national average for driver turnover is 100%. We have less than 20% annual turnover.

Turnover is caused by a lot of things. There have been a lot of studies done - it's work conditions, consistent home time, quality of life on the road, putting up with traffic and other things. Pay is not always the number one issue. If you look at them wrong they can go across the street and get another job.

The other challenge is trying to schedule and work with customers using the equipment we have available and also be able to get the proper permits we need to move in a timely manner. We need reliable advance in formation from the customer when they want to move [a piece of equipment] and factor in the lead time to get necessary permits.

Getting permits, it's prolife rating. It used to be just state permits. Now it's county and city permits. It is a problem and it is growing exponentially.

Do you envision any changes for the heavy haul/specialized transport business over the next decade? If so, what?

I think we're getting some more consistency between states as far as operation of permit loads and over-dimensional loads. Still, there are some states you can't run in on weekends. But in the past five to 10 years, we've seen afair amount of movement, some week end movement, some uniformity. I think that will continue.

On the negative side, I'm afraid the proliferation of the requirement for additional county and city permits will continue, and I think there may be some added restrictions on permit loads in larger cities. As the congestion on interstates continues to increase, I think you will see more metropolitan areas put restrictions on the movement of permit loads. We just celebrated the 50th anniversary of our interstate roadway system. More recently we've spent money on re-doing or maintaining our roads, not building new ones. We may need to focus on new roads. Fifteen years ago, every family had two cars and today, every family member has a car. That's not doing anything to help the situation.

Why are cities and counties now requiring permits?

They say it's to control their roadways and to know what is going on and to be able to put regulations in place to control over-dimensional cargo. They will not admit it, but a certain amount of it is due to revenue enhancement. The city of Baltimore's permit structure is $30 more than what the state of Maryland charges. A permit may be for a mile of a city street, but it will cost $30 more than the permitting for the rest of the state. It seems there is no relationship to cost of issuing a permit to the wear and tear on the highway. They have just pulled the fees out of the air.

What are the major markets for Keen Transport?

The construction equipment industry in North America and the import/export market. That's our major focus. We do not haul into Mexico, but we pick up a fair amount of equipmentat the border. We haul a lot of equipment into Canada. Our customers are construction equipment manufacturers, dealers and the construction companies that own the equipment.

Has the scope of moving construction equipment changed through the years?

In terms of size and weight, it's going both ways. Some equipment is getting larger and more difficult to move but there is also a lot of smaller equipment being made. It's heading in both directions. The mining business is driving the larger equipment. The manufacturers of this equipment are continually making larger and larger machines and trying to find ways to deliver it as complete as possible to the end user. Sometimes that is not possible. Sometimes it is easier and more cost effective to disassemble the equipment and haul it to the port or to reassemble it at a job site. Some of this is driven by the cost of permits in order to haul a piece of equipment complete on one unit. It's an economic question that has to be answered with each job.

Pretty much, we know what the answer will be on repetitive moves, and in some cases the equipment is never completely assembled by the manufacturer, and only the final assembly is done at the jobsite. Still, even with trucking a piece of machinery in pieces, there can be some very large components. Some of these large off -highway trucks can require up to three truckloads for the beds and six loads for the chass is, and that doesn't include the tires, which can be shipped direct from the tire manufactures.

Do you envision expansion beyond your current scope of operation?

We're updating facilities... on a regular basis. We do not see any new construction equipmentplants being built that would be of interest tous but we are always looking to see where themarket goes.

We will continue to grow our tractor/trailer fleet.

What is it you like best about your job? Least?

I like the variation from day to day and the challenges with this business. I like to be strategic and look down the road to see what is coming. You have heard the story about the buggy whip manufacturer who thought he was in the business of making buggy whips. When the automobile was invented it eventually eliminated the need for buggy whips. If he had realized he was in the transportation business he could have adapted with the new technology and remained in business supplying parts to the auto industry. Trying to figure ahead of the curve - I enjoy that. I don't like the problems of dealing with the states and government entities on the permitting side. It is frustrating.

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