Independents need to focus on profits, not volume

Though recent upticks in freight volumes are viewed as good news for long-suffering owner-operators, one seasoned veteran warns that profitability must be the watchword of the independent community in the days ahead. “One of the reasons Consolidated Freightways went bankrupt a year ago is that it went after market share growth through volume discounting at the expense of profitability,” Kenton, TN-based

Though recent upticks in freight volumes are viewed as good news for long-suffering owner-operators, one seasoned veteran warns that profitability must be the watchword of the independent community in the days ahead.

“One of the reasons Consolidated Freightways went bankrupt a year ago is that it went after market share growth through volume discounting at the expense of profitability,” Kenton, TN-based owner-operator Tim Brady told Drivers.

“For the future, owner-operators have to consider the cost of their operations and the profit they expect to make in their rates – they have to build on rock, not sand,” he said.

Brady’s words of caution come after the American Trucking Assns. reported that its July Truck Tonnage Index increased 5.4% to 155.6, the second consecutive monthly rise in the index.

For the first seven months of 2003, the truck tonnage index was 3.7% higher compared to the same time period in 2002 – numbers that indicate to ATA chief economist Bob Costello that the trucking industry is on a recovery path.

However, Brady contends that owner-operators would have to watch their bottom line carefully because rate increases may not follow rising freight volumes.

“The hardest thing owner-operators are dealing with is companies that haven’t taken into consideration the full cost of an owner-operator's operation in their rates,” he explained. “That’s why owner-operators today have to budget and stick to that budget because so far at least there’s not a lot they can do about the rates they are getting.”

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish