Knight Transportation takes great pride in both its image and its performance.

In an industry where operating ratios often run close to 100, Knight Transportation of Phoenix, Arizona, stands out. According to management, years of ratios in the low 80s are the result of experience, together with the discipline to "stay true to the plan." Since its founding in 1990, Knight has been on Forbes’ "200 Best Small Companies in America" list four times, and was named "one of the 100 fastest-growing small companies" by Inc. magazine. With a 20 to 30 percent annual growth rate, that’s almost an understatement. Knight Transportation is even willing to share what it has learned with others.

Kevin Knight, CEO: “I think there are two main factors, the first being experience. When we started the company, the four founders each had an average of 15 years experience in truck fleet management. “Because of that, we knew that operating ratios like ours are possible, and we made it our goal to achieve them. “The other factor is discipline. We made a plan, and we’ve been loyal to it. So many people in this industry ‘get talked out of their plan,’ or rely on their customers to provide the direction for their business.
“We charted our own course, and we’ve stayed on it.”

Still, providing what customers want and need must be important to you.

“Of course. But you can’t be everything to everybody. Right now, we operate as a regional truckload hauler, serving the west, south central, midwest and south- east regions. “It’s tempting to become a coast-to-coast carrier, but we don’t believe it’s the right thing for us, right now.”

What’s the benefit of staying regional?

How does that work?

“Prices for hauling are essentially market-driven. So, you have to control costs in order to achieve your business goals.
“To do that, we have to maximize equipment utilization. We have to eliminate deadhead miles and downtime. By concentrating on just a few lanes, we can focus on filling them with profitable hauls. We can minimize costs, and offer better, more economical, more timely service to our customers.

“One of the biggest things is the ability to ‘optimize our lanes,’ and in that way, optimize our entire operation.”

“Sometimes we have to turn away business, because it doesn’t fit with the plan. Ultimately, that’s better for us – and for our customers.” “Prices for hauling are essentially market-driven. So, you have to control costs in order to achieve your business goals. “To do that, we have to maximize equipment utilization. We have to eliminate deadhead miles and downtime. By concentrating on just a few lanes, we can focus on filling them with profitable hauls. We can minimize costs, and offer better, more economical, more timely service to our customers.

How does “optimizing lanes” help you optimize the rest of the operation?

“It keeps us proactive. Instead of simply responding to any phone call from a prospective customer – wherever they might be – we have an outside sales force constantly calling on prospects in and near our lanes – to help us increase utilization.”

What other benefits does a regional focus have?

efforts in the geographical areas near our lanes. That – and shorter regional hauls – help get drivers home about three nights a week.
“As a result of that and our driver involvement program, turnover is running only 48 percent a year, less than half the industry average.”

Dave Williams,corporate director of equipment and maintenance: “Besides getting home frequently, drivers have many other incentives to help us meet our goals. Nearly half participate in our stock option program, which gives them a vested interest in our profitability. “Drivers may also be assigned to the same vehicle for close to two years. They get to know the equipment so well they immediately notice and report the slightest change in performance. Stock options give them ownership of the company, and assigned vehicles give them a sense of owning the equipment.
“And, they take care of that equipment very well.”

“We see our vehicles in our shop more often, which allows us to maintain them effectively. And, we concentrate driver recruitment

Can you give us an example?

“Every driver is issued a tire pressure gauge, and we strongly recommend they check inflation pressures every day.”

But do they?

“We believe they do. During regular maintenance, we always check tires. If we find one underinflated, we don’t just inflate it, we also talk with the driver about it. Drivers know we’re double-checking their work. It tells them we take inflation pressure seriously, and encourages them to be conscientious.”

How has tire performance been affected?
“Our regions include several areas with extremely high temperatures.” [Editor’s note: It was 115 degrees in Phoenix during our talk with Dave Williams.] “Heat is very hard on tires, especially if they’re underinflated. We’ve been using Bridgestone radials since the beginning, and with our

maintenance program, we’ve been very pleased with our tire cost per mile and retreadability.”

Are you outsourcing maintenance?
“Very little. So far, we’ve found we can control costs better by doing it in-house.”

You seem to be bucking an industry trend there.

“For us, it’s an economic decision. Our trade-in cycle is about 38 months, which means tractors are still under warranty when traded. And we find we can do routine maintenance for less than outside sources.
“Our total maintenance cost, including salaries and parts, runs about 4.5 cents per mile, way below the 8 to 20 cents per mile common in this industry.”

Smaller fleets probably can’t match your numbers, can they?

Kevin Knight: “Actually, we believe they can. Many of them either don’t know how, or aren’t committed to do it.
“This industry can be a bit complacent. As long as you maintain a 94 operating ratio and as long as your bank is willing to keep making loans, it’s easy to believe you’re successful. We want to create something that will last and benefit the next generation. And, we’re willing to share what we’ve learned with others.”

How do you do that?

Bruce Beck, president,
Knight Management Services: “About three years ago, we created Knight Management Services to provide consultation services to fleets who want to benefit from our experience. We concentrate on fleets that are not direct competitors and we charge a fee for our services.”

How is Knight Management Services different from other consulting firms?

“Many consultants are no longer actively involved in trucking on a day-to-day basis. Our knowledge is up to date, because our ‘testing laboratory’ is our own fleet.”

How does the program work?

“We usually begin with a two-day assessment of a fleet’s operations, focusing on 12 separate areas of goals.” [Editor’s note: See box on page 11] “Next, we prepare a report, showing how they compare to our operation – and to industry averages – in each of these areas. “Then, we can work with the fleet to create a plan to get where they want to be.”

What are the biggest problems you find?

“Many fleets have poor operating ratios because their trucks are underutilized. They work on a ‘You call, we haul’ basis, leading to too many deadhead miles. Their non-driver/driver ratio is too high and their costs are out of control.
“And many fail to market their services. Again, they tend to wait for the phone to ring. Finally, some can’t – or won’t – take the necessary action to improve their situation.”

Tim Saeli of Treadco, which supplies Knight Transportation’s tires, watches as one of Treadco’s automatic inspection machines checks a casing for retreadability.

Has your service been successful?
“In every case, the fleets we’ve worked with have significantly decreased their operating ratios, becoming more profitable.”

How can fleets find out more about Knight Management Services?
“They can call us, at (602) 269-2000.”

What does the future hold for Knight Transportation?
Kevin Knight: “We have 1,100 power units now. Over the next few years, our goal is to keep growing and to become a major player in our industry.”

How will you get there?
“By continuing to learn and apply our experience – and by remaining true to our plan.”

At Treadco’s Phoenix facility, Knight Transportation is one of Tim Saeli’s accounts. “It’s actually pretty simple doing business with Knight,” says Tim. “They know what they want, both from their tires, and from their tire dealer – and they’re very proactive.
“In retreading, they’re looking three to five months ahead at their casing inventory and retread needs. That gives us plenty of time to do a good job and to make sure they have what they need.
“And, both their drivers and maintenance people do such a good job of keeping inflation pressures right that we rarely have to reject any of their casings.