J.B. Hunt Transport Services Inc.

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J.B. Hunt Transport Services Inc.

P.O. Box 130
Lowell, Arkansas 72745
U.S.A.
(501) 820-8395
Fax: (501) 820-8395

Public Company
Incorporated: 1983 as J.B. Hunt Transport
Employees: 11,201
Sales: $1.02 billion
Stock Exchanges: NASDAQ
SICs: 4212 Local Trucking Without Storage; 4213 Trucking
Except Local

J.B. Hunt Transport Services, Inc. is the largest truckload carrier in the United States. Since the passage of the Motor Carrier Act of 1980, which essentially deregulated the trucking industry, the company has grown to become the nation’s leader in providing irregular route trucking services—meaning that it picks up cargo and delivers it wherever the customer wants instead of relying on established routes—to businesses such as Wal-Mart, its largest customer. J.B. Hunt loads most its 17,000 trailers and 7,000 trucks with general commodities: its principal types of freight include foodstuffs, plastics and plastic products, general retail store merchandise, chemicals, paper and paper products, and manufacturing materials and supplies. While the familiar yellow and black J.B. Hunt logo is still most likely to be found on trucks travelling throughout the contiguous 48 states, the company has added new forms of transportation and extended its services to foreign markets, while increasing its capability to haul special kinds of freight. Among the company’s many areas of growth initiated in the late 1980s, its foray into the intermo-dal service market was perhaps the most significant. Expected to generate nearly half of the company’s total revenues by 1995, this hybrid form of transportation unified trucks, railroads, and sometimes cargo ships into one transportation system, so that shippers did not have to pack and unpack their cargo each time the mode of transit changed. J.B. Hunt has diversified into several other important areas of specialization as well, expanding its repertoire of services to include third party logistics management, hazardous waste and materials transportation, flatbed trailer services, and intrastate freight hauling. Through a joint venture with Mexico’s largest transportation company and an alliance with Canada’s largest railroad, J.B. Hunt has been able to offer its customers seamless service across both borders since the early 1990s. An industry leader in customer service, driver safety, and innovative technology, J.B. Hunt has become one of the ten largest trucking companies of any kind in the United States, surpassing the $1 billion mark in revenues for the first time in 1993.

Johnnie Bryan Hunt, the founder of the company that bears his name, reportedly carries a roll of $100 bills in his pocket and routinely offers them to people he meets who are in need: “I was hungry once,” he explained to Forbes reporter Claire Poole, noting that “once you’re hungry, you’re different.” The history of the former $1.50-a-day laborer turned millionaire is unique among the nation’s top executives. Born during the Great Depression, Hunt was forced to quit school in the seventh grade to help support his brothers and sisters by working in an Arkansas sawmill. A budding 12-year-old entrepreneur, he began selling leftover shavings from the mill to poultry farmers for use as ground cover in their chicken coups. After a stint in the army, a brief career as a livestock auctioneer, and a failed livestock barn business, Hunt borrowed $10 from a friend, hitchhiked to Little Rock, and took a job as a truck driver, earning $40 a week while on the road every day of the week, including the day of his first child’s birth. While driving through eastern Arkansas in the late 1950s, he saw that the farmers were burning their rice hulls, and—remembering his childhood experience at the sawmill—he realized that rice hulls could serve as litter for chicken coops. After coming up with a design to grind and package the hulls, he was able to sell enough shares to raise the $85,000 needed to build his packaging plant. While the company failed to make a profit in its first year, Hunt refused to listen to the naysayers and, by the late 1960s, was at the head of one of the largest rice hull operations of its kind.

In 1969, one of Hunt’s customers complained about the service he was receiving from the trucking company that hauled his dressed chickens and encouraged Hunt to buy the trucker’s five tractors and seven refrigerated trailers and take over the contract. J.B. Hunt Transport was born; the former driver was now an owner. As had been the case with his former ventures, though, the early years of his trucking business were not profitable. Looking for a way to expand his fledgling trucking company, Hunt tried to gain entrance into the dry goods segment of the industry, obtaining an authorization to do so from an Atlanta company in 1971. At that time, however, the strict Interstate Commerce Commission (ICC) regulations imposed heavy costs on those attempting to enter new markets.

Seven years later, on the brink of giving up his money-losing trucking business, Hunt listened to the advice of Paul Bergant, a Chicago lawyer, who later became the head of J.B. Hunt’s marketing division and chief legal counsel. Bergant convinced Hunt that deregulation was imminent. Hunt followed Bergant’s intuition and expanded his operations, purchasing a trucking company that added 24 trucks and ICC licenses covering 33 states to his business. Knowing that in a deregulated environment the high operating costs of his old-line competitors, who relied heavily on the expensive services of independent truck owner/operators, would no longer be protected by ICC barriers to competition, he looked for ways to increase the efficiency of his own operation. His strategy was simple: replace privately owned and operated rigs with his own nonunion drivers and equipment; lower fuel costs (which generally consumed 16 percent of trucking revenues) by offering monthly incentives to drivers who conserve fuel by driving 55 miles per hour; increase load ratio (the number of miles a truck runs loaded); and decrease driver turnover by offering higher wages and better working conditions.

Bergant’s prophecy was fulfilled in 1980 with the passage of the Motor Carrier Act. Numerous route and commodity restrictions were lifted, and Hunt was in position to take full advantage. By the close of the following year, he had turned his previous losses into a $2 million profit on sales of $30 million. Encouraged by his success, he sold his rice hull business to Eli Lilly for $2.4 million and went public in 1983, selling 11 percent of his shares at an estimated $18.5 million. While other trucking companies were losing money, J.B. Hunt continued to expand its operation and set revenue records. Just four years after going public, the company had grown to become the nation’s second largest truckload carrier and the largest publicly held truckload company.

Through the mid-1980s, having posted yearly profit margins that routinely exceeded ten percent—roughly twice that of its larger, unionized competitors such as Consolidated Freight-ways, Yellow Freight System, and Roadway Services—in the latter part of the decade, J.B. Hunt experienced contracting profit margins and slowed growth. Like its competitors, the company was set back by higher operating costs and declining tariffs in the Middle East, resulting in increased fuel costs. The most significant factor contributing to this decline, though, was the onset of an industry wide shortage in qualified drivers, which forced J.B. Hunt to keep many of its trucks parked.

In an attempt to combat the problem, Hunt constructed a strategy to recruit more drivers—and retain them. In 1990, the company increased the wages of its drivers with three years experience from 25 cents a mile to an unprecedented 28 cents a mile—four cents more than its competitors. J.B. Hunt also took the lead in improving the working conditions of its drivers, building 18 terminals equipped with showers, laundry services, and lunchrooms, by 1994. In addition to serving as homes away from home, the terminals facilitated “slipseating”—the practice of letting a tired driver turn over a load to a rested one. Such innovations helped J.B. Hunt’s drivers to return home every two weeks, while drivers employed by its competitors were getting home an average of once every three weeks. In an attempt to attract more new drivers and cut down on accidents, the company also opened up a driving school in Lowell in 1988, offering its students free tuition and a job guaranteed upon graduation. While such capital expenditures increased operating costs in the short term, they later brought about significant decreases in driver turnover, which was down a record 20 percent in 1993, and accident costs decreased 30 percent that year.

In the mid-1990s, Hunt had no plans to relinquish control of his billion dollar company, but he began leaving the daily management duties to younger executives, such as Kirk Thompson, who was named the company’s president and chief executive officer in 1987. Like his boss, Thompson did not follow the traditional path in gaining a place among the corporate elite. He dropped out of college to work in Hunt’s accounting department and completed his accounting degree part-time, before being promoted to the top management position. Under Thompson’s guidance, the company continued to lead the irregular route trucking industry in developing innovative technology and expanding into new markets.

Perhaps the most important among these developments was J.B. Hunt’s refinement of intermodal transportation services. Formerly known as “piggybacking” since its inception in the mid-1950s, this hybrid form of transportation attempted to combine the cheaper fuel and labor of trains with the faster, more reliable service of trucks. The first major trucking company to cooperate with the arch rival railroads, J.B. Hunt began its intermodal division through a joint venture called “Quantum” with the Santa Fe Railway in 1989, enabling the trucking company to offer its customers door-to-door service in the California-to-Midwest corridor. Since that time, Hunt has built alliances with eight other railroads throughout North America, maintaining hauling agreements and 47 ramp locations with Burlington Northern, Canadian National, Conrail, Florida East Coast, Norfolk Southern, Santa Fe, Southern Pacific, Union Pacific, and Wisconsin Central. “Now we can walk in to a customer and lock in rates for several years because of the stability of the railroad’s cost structure,” explained Tom Williams, head of intermodal marketing, in a 1993 Forbes profile. “There’s so much business out there,” Williams noted, that “we’re limited only by having enough equipment.” To that end, Hunt invested heavily in the research and development of new containers that both attached to the base of a Hunt truck and stacked on a railway car—while having the capacity to carry 1,000 pounds more than average containers. In 1993, 7,500 of these multipurpose containers were added to the Hunt fleet, and Hunt expected to have added them to the majority of its trucks by 1995. John Larkin, a trucking analyst at Alex, Brown & Sons, underscored the significance of these innovations for the rest of the trucking industry, suggesting in Forbes that Hunt “may be ready to redefine the industry by forging relationships with railroads” and “pioneering this new equipment.” Accounting for roughly 30 percent of the company’s total revenues in 1993, and expected to contribute one half of total revenues by the end of 1995 according to some predictions, intermodal services, indeed, promised to play a major role in the 1990s.

J.B. Hunt’s intermodal services, most certainly, were not the only manifestation of the company’s entrepreneurial spirit. In 1990, the company added a flatbed division to its repertoire, expanding its customer base to businesses, such as Reynolds Metals, that wished to ship materials too large for closed vans. Two years later, after negotiating an agreement with IBM, the company also began installing on-board laptop computers in its fleet, eliminating the countless hours its truckers spent looking for a phone or waiting on hold before contacting a fleet manager to find out about the next load. Tests conducted in 1993 on the new “smart communications” system known as “RoadRider,” which linked its drivers via satellite or radio to the company headquarters in Lowell, showed that installation in 2,100 of its trucks—just over 12 percent of its total fleet—brought about a 60 percent reduction in the company’s long-distance phone bill. Encouraged by the test results, J.B. Hunt and IBM began remarketing the new technology to other trucking companies in 1994. “Micromap,” a new software program with the capability to evaluate more than 90 different assignment factors at a time, further simplified the logistics manager’s responsibilities. Since its introduction into the system, the number of miles J.B. Hunt’s trucks run empty decreased by ten percent, further cutting operating costs while enabling more drivers to return home on time.

Just as J.B. Hunt was in position to make the most of the government deregulation of the early 1980s, he prepared the company for the passage of another piece of legislation sure to affect the trucking industry: the North American Free Trade Agreement (NAFTA), which promised to relax trade restrictions between the United States and its neighboring countries of Canada and Mexico. In 1990, after having already acquired the requisite authority to haul freight in Ontario, Quebec, and British Columbia two years earlier, Hunt joined forces with the Mexican trucking firm Fletes Sotelo to form Hunt de Mexico. The bold move, like many of the company’s throughout its history, initially puzzled some investors, who were well aware of the uncertainties, in terms of quality and on-time delivery, commonly associated with such international ventures. J.B. Hunt, however, implemented a plan to silence the critics: instead of relinquishing control of its trucks at the border, transferring freight to Mexican-owned and Mexican-driven trucks, Hunt de Mexico—like its J.B. Hunt counterparts in the United States—relied on the services of its own drivers, maintaining customs clearance all the way through to final destination. In 1992, Hunt de Mexico improved the efficiency of its operations by signing an agreement with Transportación Marítima Mexican, Mexico’s largest maritime steamship company. The following year—while J.B. Hunt was finalizing another intermo-dal agreement in Canada with Canadian National, the country’s largest railroad—Congress passed NAFTA, confirming the company’s remarkable foresight in matters of international expansion.

J.B. Hunt’s commitment to intermodal development, technological innovation, and foreign market expansion—as well as its long-held devotion to customer service—enabled the company to surpass the $1 billion mark in sales in 1993, only ten years after going public. According to the annual report for that monumental year, its goal for the rest of the decade was no less than “to dominate the full-load, containerizable transportation business in North America and to enter and compete in the worldwide distribution business.” In the three years since its 1990 ranking by Business Month magazine as the nation’s 50th fastest growing company, J.B. Hunt Transport Services has watched its operating revenues increase more than 75 percent. While some analysts have suggested that the high costs of making the transition from a dry van, over-the-road truckload carrier to one offering intermodal and other lines of service, may decrease profit margins in the mid-1990s, a 40 percent rise in net revenues for the third quarter of 1994 suggested that the company would continue to make progress towards achieving its expectations. Moreover, the colorful J.B. Hunt himself set an even more challenging goal for his company, promising to make 100 of his employees millionaires before his scheduled date of retirement at the age of 75. While such an ambitious statement may not fall within the boundaries of conventional business wisdom, it accurately reflected the unique entrepreneurial drive behind the bold decisions that brought the company to the top of the irregular route trucking industry. “I’ve developed a lot of things,” Hunt explained to Fortune’s Sally Solo.’ The reason is that if you went to college and you read the book about everything that’s been taught of by man, you go back to the book whenever you have a problem. And when the book stops, you stop. But if you haven’t read the book, you don’t know where the borders are.” With no “book” to follow, J.B. Hunt hoped to lead its competitors into the twenty-first century.

Principal Subsidiaries

J.B. Hunt Transport, Inc.; J.B. Hunt Logistics, Inc.; J.B. Hunt Special Commodities, Inc.; J.B. Hunt Flatbed; J.B. Hunt Transport of Texas; TMM/Hunt de Mexico (45%).