Schneider National, Inc. Business Information, Profile, and History
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History of Schneider National, Inc.
Schneider National, Inc. is the largest truckload carrier in North America. Privately owned by members of the Schneider family, it was a relatively small player until the 1980s, when the trucking industry was deregulated. In that era when many small trucking firms failed, Schneider instead soared to the forefront, chiefly by deploying advanced communications technology. Schneider's fleet of approximately 14,000 trucks and 48,000 trailers is distinguished by a signature bright orange color. The company also is known for its logistics business, which helps other companies determine efficient ways to ship and distribute goods. A leader in trucking logistics, the holding company canceled plans to spin off Schneider Logistics, Inc. when the IPO market faltered in 2001.
Schneider National was founded in 1935, at the advent of the regulated truck era, by Al Schneider, known as "A. J.," in Green Bay, Wisconsin. Schneider was raised on a farm in east-central Wisconsin, and his education took him through the eighth grade only. He began with one truck, and took shipments through the Green Bay area. The company grew, as did the Schneider family. Eventually there were five sons and a daughter.
The trucking business, named Schneider Transport & Storage following the purchase of Bins Transfer & Storage in 1938, incorporated in Nevada in 1939. The storage aspect of the intrastate trucking business was dropped in 1944, but a corresponding name change would not come about until the 1960s. Schneider Transport was granted its first interstate authority in 1958. The first load in that capacity was for Procter & Gamble. Growth through the acquisition of other trucking companies contributed to growth in the 1960s and the early 1970s. The holding company, Schneider National, Inc., was formed in 1976.
Al's oldest son, Don, worked his way up in the business, becoming president in 1971. Unlike his father, Don had a thorough education to match his homegrown business skills. He graduated from a parochial high school in Green Bay, and then went to St. Norbert College, graduating in 1957. After a period in the Army, Don Schneider entered the University of Pennsylvania's esteemed Wharton School of Finance and Commerce. With this valuable business degree in hand, Don returned to Green Bay in 1961 and became an instrumental Schneider manager. Ten years later, he assumed control of the company, which was then an estimated $80 million business. Don Schneider seemed to have brought his father's company an unusual combination of skills. In a profile of the company in the October 31, 1994, Milwaukee Journal, an industry analyst proclaimed Schneider "a trucker who thinks like an economist."
Changes After Deregulation in the 1980s
Until 1980, thinking like a "lawyer" might have been the most valuable skill at a trucking company. Trucking was regulated by a web of state and federal statutes that determined minutiae of the industry's routes, rates, and loads. Thus Schneider was licensed to carry cellulose products, for example, but not paper products, and its lawyers had to negotiate for years in order to reclassify disposable diapers as a cellulose product so it could legally ship them. Both government rules and union contracts dictated much of the business.
Schneider itself seemed versed in legal finagling. From 1978 to 1981 the company claimed its headquarters were in a facility it used in Illinois, thus avoiding a higher licensing fee it would have owed to the state of Wisconsin. The state of Wisconsin sued Schneider for $3.8 million in licensing fees in 1982, and the case was eventually settled on appeal in Schneider's favor.
When the trucking industry was deregulated in 1980, such bureaucratic wrangling became much less a part of the way Schneider and other trucking companies did business. Under deregulation, truckers were freed to compete directly for customers. Around the same time, many large manufacturers and retailers were changing their business pattern, switching to so-called just-in-time delivery. Just-in-time meant that instead of warehousing huge stocks of common items, factories ordered raw materials as needed, and shipped finished goods directly to retailers. This cut costs associated with large inventories, but it put intense pressure on truckers. A truckers' delay of as little as 20 minutes could cause retailers annoying back-ups as they tried to get their goods out to waiting customers.
Don Schneider was quick to realize that his company had to change massively in order to adapt to the new business climate. Two major changes were in employee relations and in new use of technology. In the early 1980s Schneider began giving its drivers bonuses based on performance, while also eliminating such perks as reserved parking spaces for upper echelon employees. Deregulation allowed the company to hire non-union drivers, which it did, while pledging to keep its union employees. In 1979, all 1,500 drivers belonged to the Teamsters union. As the company grew, the percentage of unionized drivers became smaller. By the early 1990s, only 500 Teamsters were left, out of a crew of roughly 10,000 drivers. Attrition of the union allowed Schneider more freedom to set its own policies for employees. This gave the company more flexibility, which it needed to adapt to the increased demands of its customers.
Schneider also pioneered the use of satellite technology in trucking. Traditionally, drivers on the road would find a phone at a truck stop and call a company dispatcher for a periodic check-in. This was sometimes a frustrating process, as pay phones were often engaged, or the dispatcher busy and unable to accept the call. Schneider National made a large investment in computer and satellite technology in 1988 to give it a new way to communicate with drivers. The company spent an estimated $50 million, and installed a satellite dish and communication console on every truck it owned. Each truck was linked by satellite to the company's home base in Green Bay. Specialized software ran continuous updates on the many variables of the business, not only keeping track of where each truck was, but logging how many hours the driver had slept, fuel use, and average unloading time at each customer's facility. Changes in routes could be beamed directly to the driver on the road, and if a customer needed an empty trailer in half an hour, the computer could determine which driver was nearby and eligible for another load. Schneider was the first major trucker to make use of satellite technology, and soon the rest of the industry was scrambling to keep up.
Meanwhile, Schneider prospered financially. The trucking market in the 1980s was characterized by intense competition and recessive prices, yet Schneider managed to grow at around 20 percent annually. Revenue in 1981 was a modest $200 million, but by 1992, revenue exceeded $1 billion. Because the company was privately held, it was able to reinvest freely with an eye to long-term profits, and Schneider continued to put money into technology and new ventures.
Expansion in the 1990s
With its rapid growth, Schneider needed to expand its facilities in the early 1990s in order to accommodate more drivers. The company began work on a huge facility in Memphis in 1990, building a driver service center and operations center and enlarging an existing maintenance center. The driver service center gave drivers a place to relax, rest, and shower while their trucks were being refueled or repaired. Originally planned in the late 1980s as home base for about 600 drivers, by the early 1990s the Memphis site grew into a hub for close to 1,000 truckers. The expansion cost Schneider an estimated $6 million. Schneider also employed its high technology at its new service center. When drivers refueled in Memphis or at any of the company's other major service centers, their mileage was automatically beamed to Schneider's headquarters in Green Bay. If a truck was using an atypical amount of fuel, the computer could note that, and alert personnel of possible maintenance needs on that vehicle. The investment in cutting edge technology let the company save money over the long term, by giving it such tight control over its fleet.
Schneider also began investing in equipment in the early 1990s, specifically truck trailers that could be used on railways. Schneider entered the so-called intermodal transport industry in 1991, working with Southern Pacific railway to serve routes between the Midwest and southern California. Though industrywide far more freight was shipped by road than by rail, being able to combine the two often gave the company more efficient routes. By 1992, Schneider had worked out intermodal shipping agreements with several more railroads, giving it access to most major markets in the United States. Schneider invested approximately $12 million in the early 1990s to replace existing truck trailers with trailers that could be stacked on flatbed rail cars. Then the company spent around $600 million over several years to buy a new kind of convertible trailer called a roadrailer. The roadrailer was a modified truck frame that could use steel rail wheels and travel directly on train tracks. Unlike stackable containers, which required special lifting equipment found only in rail yards to place them onto rail cars, the roadrailers could move onto rail tracks anywhere there was a spur. This gave Schneider the kind of flexibility it liked.
Schneider National was an innovative, fast-growing company in the 1990s. It had surpassed much of its competition by embracing change and new technology. In 1993 the company formed a subsidiary, Schneider Logistics, to sell its shipping expertise to clients. Large manufacturers were working to reduce inventory and streamline operations to improve profits, and Schneider was effective in determining how that could be best done. Schneider Logistics garnered large contracts early on, including one with General Motors to improve the delivery of auto parts to its dealers. By 1995, Schneider Logistics had 140 contracts, ranging in size from about $2 million for small companies to $200 million for such large firms as General Motors and auto parts maker PPG Industries. By the mid-1990s, Schneider was getting 15 percent of its profit from its logistics division, and the subsidiary was the fastest-growing part of the company.
Branching Out in the Late 1990s
By the late 1990s, Schneider National was the nation's largest full-load trucking firm, with sales approaching $3 billion. The firm had distinguished itself in the 1980s by moving quickly into advanced communications technology. As the Internet changed the face of business in the United States in the late 1990s, Schneider found a way to adapt.
In June 1999, the company launched a new subsidiary, Schneider Brokerage, which handled a web-based service. Schneider Brokerage operated a web site called the Schneider Connection, which posted trucking jobs online and let shippers find available loads. Schneider also found other ways to work with the Internet. In June 2000 Schneider Logistics formed an alliance with an online construction service business, ContractorHub.com. ContractorHub.com brought together businesses looking for construction contractors and contractors looking for jobs. Schneider Logistics provided the new company with its expertise in shipping, order fulfillment, and tracking, and gained exposure through ContractorHub.com's wide marketing.
By the year 2000, Schneider's logistics subsidiary had grown so rapidly and profitably that the parent decided to spin it off to the public. Schneider wanted cash to help pay for more technological development at Schneider Logistics, and to allow the subsidiary to expand into international markets. This was the first time the closely held Schneider considered letting any piece of it fall to investors. However, the company announced it would sell off only a minority share in Schneider Logistics. The majority would still be held by Donald Schneider and other shareholders of the private parent firm. In 2001, the holding company dropped plans to spin off Schneider Logistics, unwilling to risk the deteriorating IPO market.
North America's biggest transportation and logistics concern gained a new leader in 2002. For the first time in company history a non-family member would direct the company. Christopher B. Lofgren, former COO and CIO, succeeded Don Schneider as CEO and president. Schneider continued to serve as chairman of the board.
The company had created an independent board late in the 1980s to address corporate governance issues and leadership transition, according to Traffic World. Just the third person to run the company since 1935, Lofgren was named COO, in 2000, a position, designed to groom him as successor to Schneider. That slot would remain unfilled but a six-person executive board would share in the company's oversight. Lofgren joined the company in 1994, as vice-president of engineering and systems for Schneider Logistics. Operating primarily in North America and Europe, Schneider Logistics expanded into China during the new millennium.
Despite the economic recession at home, the company continued to grow its logistics as well as intermodal and brokerage units while maintaining its strong trucking business brand name. "Don will say there are two times when you're well-positioned to grow," Lofgren told Industry Week's David Drickhamer. "One is in a recession. The other is when the economy is growing. So it's really a mindset." In response to the 2001 to 2003 economic downturn, Schneider National cut costs and paid down some debt. A solid market position also helped the company produce double digit gains during 2002 and 2003. The privately held company was "solidly profitable," according to Traffic World.
By 2004, Don Schneider had cut back on his hours in his role as chairman, although another family member, his son Paul, served as manager at the Green Bay operating center. Under Lofgren, the once family-run company revealed more of its inner workings and views about the state of the trucking industry. "'We think it's a competitive advantage to be privately held,' said Lofgren. At the same time he has adopted some of the business disciplines that public companies follow, such as forecasting. 'We had a board like a public company, so I said let's put the disciplines in place from the operational and executional level on how we forecast the business,'" he told Traffic World's John D. Schulz.
Schneider National topped $3 billion in annual revenue in 2004. Its diversification, including truckload, intermodal, brokerage and non-asset businesses, financial services, and freight payment companies, contributed to ongoing success. Its acquisitions, also part of the story, had been relatively small in size, ones relatively easy to integrate.
External forces pressed the trucking industry during 2005. A shortage of truckers during a time of rising demand drove up wages. Yet oil prices skyrocketed, threatening to propel fuel cost into the top spot among trucking companies' expenses. Moreover, new emission standards for diesel engines, scheduled to go into effect in 2007, meant added equipment related expenditures. Federal changes regarding driver hours and delays on the borders also put pressures on profitability. Schneider National passed along a portion of its added fuel expense with a surcharge. Since the industry was running at capacity, even customers with considerable clout, such as Wal-Mart Stores, Procter & Gamble, and the Detroit automobile makers, had few other options than to pay.
Schneider Logistics, Inc.
J.B. Hunt Transport Services Inc.; Swift Transportation Co., Inc.; Werner Enterprises, Inc.
- Key Dates
- 1935 Company is founded in Green Bay.
- 1958 Company begins interstate shipping.
- 1976 Schneider National, Inc. is formed as a holding company.
- 1988 Schneider makes first big investment in satellite technology.
- 1993 Valuable subsidiary Schneider Logistics is founded.
- 2000 Company plans, but later cancels, move to spin off Schneider Logistics.
- 2002 First non-family member takes over leadership.
- 2004 Company surpasses $3 billion in annual revenue.
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